Community-Based Rewards: Local, Loyal, Lucrative

Some credit unions have returned to the good old days of offering reward programs to show member appreciation. Direct rewards can be matched to a specific financial behavior change. Indirect rewards pay interest on balances but require members to jump through hoops to use other credit union products to qualify for additional rewards.

Both approaches have worked well from time to time.  However, there is a new model for a sustainable rewards program that marries your members’ thirst for perks, your community businesses’ need for additional sales and your need for additional revenue.  Sustainable rewards programs need to involve the local business community – one that offers coordinated incentives to encourage spending in your local community.

The five keys to a successful rewards program are:

1) Merchant funded is the path forward.  The local business community is willing to pay for your help in driving new and sustainable revenues to their business. When members receive discounts, your credit union receives more debit card interchange and will be recognized as the “buy local” sponsor. Also, center your reward redemptions on those same merchants, as opposed to cash that goes back into the member’s account unnoticed after the first couple of deposits.  Give the local businesses “another bite at the apple” by having the same customer return to redeem their reward.

2) High user redemption means high profit. Structure your rewards program in way that members will be encouraged to use it. When they earn points faster and can redeem their rewards painlessly, your members’ debit card usage will increase, along with your interchange revenues. Forget about reward breakage—you want redemptions! Redemptions mean engagement, and engagement means more business.

3) Turnkey is king. Your community merchants know how to run their businesses well but not necessarily how to operate and take full advantage of a rewards program. If you want their participation in your rewards program, it will need to be as easy as possible, and it has to be measurable. You have been serving members for years. Let the merchants benefit from your experience.

4) Give tools to the merchant so they love the program. Make certain your program has cost-effective systems so community merchants can promote and monitor the program. By offering them a way to change advertised offers and messaging campaigns on the fly, you demonstrate your interest in making the program work for everyone involved.

5) A mobile app is mandatory. Reward offers, points accrued, merchant descriptions, maps, merchant reviews, and redemption options should all be part of the application.  Remember, we are now in a generation of content consolidation and instant gratification —the right program with instant access on a mobile device will produce revenue growth for your credit union and sales for your community merchants.

Now you have it!  Be the leading financial institution in your community by partnering with local businesses and keep local spending local.  Who knows—your CU could become a hero!