Drawing Customers With Rewards

“A better reward means more people are willing to take you up on your offer,” says Young America spokesperson. “The key for retailers is to then  continue to market to that customer to ask them to spend that reward  back at their location.”

Customers respond better to retail offers that include general-use  prepaid cards rather than closed-loop gift cards and are more  likely to purchase products at stores that present an open-loop  reward, according to Young America, an engagement marketing, loyalty and incentive firm.

Until now, however, retailers have struggled to get customers to spend back those rewards at  their stores.

“Our comprehensive Spend Back program, which features  consistent customer engagement, targets customer return at 2-4 times that rate, based upon a variety of tools,” said Mark Lockwood, senior vice president of payment services for Young America.

Lockwood said research indicates that open-loop cards are more rewarding for customers than closed-loop cards because they tend to engage the customer after the initial purchase.

“A better reward means more people are willing to take you up on your offer,” Lockwood said. “The key for retailers is to then  continue to market to that customer to ask them to spend that reward  back at their location.”

According to recent research  by Mercator Advisory Group, open-loop cards are gaining favor among  both businesses and consumers, and are taking market share from  closed-loop cards. In 2009, open-loop card load increased 37%, while closed-loop card load declined 8%, the data found.

However, offering an open-loop card alone is not enough to engender loyalty, said Lockwood. “A typical open loop rebate card in the industry  will bring about 12-15% of customer spend back into the store,”  he said. “Our comprehensive Spend Back program, which features  consistent customer engagement, targets customer return at two to four  times that rate, based upon a variety of tools.”

 The difference, he said, is in the continuum of the campaign.

“Young America is committed to building customer acquisition programs  that optimize the whole process for our clients — from the initial  offer, to the purchase, to the reward offered and to the spending of that reward,” said Lockwood. “Too often we see programs in which the retailer sends out the card and considers it a cost of acquisition only.  Our mission is to work with our clients through the entire process to  drive that reward recipient back to their store to use that reward.”

By using multiple points of contact to entice the customer to use the  card at the store, retailers can dramatically increase spend back rates, sometimes doubling or tripling revenues attributable to those reward dollars, he noted.

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