Catalysts for Growth: Reimagining Consumer Incentives

Community financial institutions (CFIs) often have all the same challenges

as big banks—engaging customers, driving revenue, achieving strategic

goals—but almost none of the same resources. For today’s CFIs, keeping

up in a highly competitive field requires a new way of thinking about

consumer behavior:

Executive Summary

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· What’s the best way to attract new customers?

· How do you keep existing customers engaged and loyal?

· What can you do to drive more business to your institution?

In many cases, the answer is incentives, like rewards or points.

Unfortunately, CFIs often view different solutions—like specialty

checking or other loyalty programs—in isolation, leaving

opportunities for a more holistic approach on the table.

Integrating incentives into every strategic area can help CFIs achieve their business goals, even without the resources of a big bank.

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Integrating incentives into every strategic area can help CFIs achieve their business goals

In analyzing the key functions and necessary competencies of a successful

financial institution, it becomes clear that incentives can play a powerful role

in nearly all of them. The Customer Incentive Lifecycle uses a rubric to break

down common organizational goals into the component parts—from cross-

selling to customer service to financial education—where incentives like

rewards or points can help push an institution toward success.

The Lifecycle is a visual rendering of the influential power of incentives,

beyond simply increasing debit card swipes or making a credit card product

more attractive. As such, institutions should be asking themselves how incentives can be used to maximum effect, furthering strategic goals across the organization.

The Incentive Lifecycle

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Engage employees & influencers

Enhance relationships

Acquire new customers

Maximize utilization

Engage customers

Re-engage customers

The Power of IncentivesEvery customer interaction presents CFIs with

an opportunity to build loyalty, strengthen

relationships, and improve profitability.

Through low-cost incentives, CFIs can attract

and retain not only new business, but more

importantly, quality business – which can

increase overall profits.

For example, Ohio’s Directions Credit Union uses incentives to

provide more value for its target market: younger and middle-income

consumers. Directions structured its rewards program so that users can

redeem points quickly and for everyday items, allowing them to stretch

their budgets and access products they really need, like basic groceries.

Over the last three years, the program has resulted in 13,000 points for redemptions worth over $161,000, representing a significant loyalty boost for the credit union.

Build loyalty As the Lifecycle proves, incentives can be a useful tool in

attracting new customers and retaining existing ones. CFIs can

use incentives to encourage customer referrals, for example, or to

make opening an account more attractive.

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ONE

Acquire new customers

Create a Differentiator

Build Community Reputation

Incentivize Account Opening

Target High-Potential

Customers

Reward Customer Referrals

13K points $161,000

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Take, for example, Wisconsin’s Fort Community Credit Union (FCCU).

FCCU was seeing decreased auto loan revenue as more of their

members were choosing to finance through their car dealerships.

The credit union’s direct mail and email campaigns had done little to

reverse the trend, so instead, FCCU tried an incentive campaign.

Over a 48-hour period, it offered 2,000 points to members who applied and were accepted for an auto loan. The campaign resulted in 63 new or refinanced auto loans and new interest revenue of $23,500—at a total cost of just $630 for FCCU.

Improve profitability Almost all the incentive activities outlined in the Lifecycle can help drive

revenue and increase profitability for CFIs. An analysis conducted by

Forrester found that incentive programs produced substantial financial

benefits for CFIs, often at very little cost.

Participating institutions saw increases in revenue not only from the non-

interest revenue they earned by increasing card swipes, but also because

the incentives were used to draw in new customers, encourage consumers

to take out loans, and drive cost-reducing behaviors, like the adoption

of e-statements.

Over three years, the composite CFI saw benefits of $1,190,039 from its incentive program. What’s more: the incentive programs cost just $375,681 over the same three-year period. That’s a return on investment of 217 percent.

Strengthen relationships Incentives are not only useful for attracting new customers and

keeping them around. They can also be used to increase the value

of those customers, encouraging them to do more of their business

with a CFI. Using incentives like rewards or points, CFIs can drive

customers to maintain higher deposit and balance levels, to open

business accounts, or to take out loans.

THREETWO

Cost $375K$1.19M

Return on investment of 217%$23.5K in revenue63 Auto loans $630 total costBenefits

Maximize utilization

Target Profitable Behaviors

Reward Product

Adoption

Gamified Transaction Campaigns

Drive Upsell & Cross-Sell

Reward Local

Business Referrals

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Are we using incentives to maximum effect?

Forward ThinkingThe power of incentives to drive customer behavior and assist with

organizational goals has long been underestimated. Going forward, financial

institutions must keep the Customer Incentive Lifecycle in mind, consistently

asking themselves: Are we using incentives to maximum effect?

This requires a comprehensive, thoughtful approach to deploying incentives.

Scattering incentives across non-aligned programs or platforms can

counteract progress, silo customer data and even raise the cost of doing

business for CFIs. Institutions that integrate incentives into the annual

planning process will be better positioned for success and able to achieve

their visions for growth.

FI Strategies

Define Brand, Segmentation,

and Product Drivers

Integrate into Product Plans & Go to Market

Evaluate Lift &

Impact

Maximize Yield Across

Programs

Building strong communities, one point at a time®

855.499.2899 | buzzpoints.com | rewards@buzzpoints.com

Buzz Points is the only incentive-based customer engagement and revenue platform that connects consumers, local businesses, and community financial institutions.