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I live, breathe, and occasionally eat miles, points, loyalty programs, and credit card rewards, but usually from the perspective either as a consumer myself, or from the perspective of sharing information about those programs with other consumers…i.e. all of you nice enough to stop by this site. However, I spent the last couple of days at the Grand Hyatt Atlanta Buckhead at the Co-brand Card Partnerships Conference, and boy was it interesting. Very rarely am I in a room full of those who are involved with actually running the loyalty programs, the banks that issue the co-branded cards, or the companies who make that technology work on the back end, but that was my reality this week.
In the event you are curious as to what the current buzz is in the co-branded card space, read on for a few of my personal takeaways from this conference as I found it fascinating.
The Chase Sapphire Reserve is a Game Changer
This specific conference was geared for those who are involved in the co-branded space, so this means products like the Delta Amex Cards or the Southwest Chase Cards as opposed to cards like the Amex EveryDay or the Chase Sapphire Reserve that aren’t co-branded with a specific loyalty program. However, the card I heard referenced more than any other card during the conference by a wide margin was the Chase Sapphire Reserve.
It seems that the success this card had even with a $450 annual fee and without a traditional marketing campaign came as a bit of a surprise to those in the industry, perhaps even to Chase since it ran out of metal cards for a while shortly after the card launched. Since of course all of these cards are competing with each other for your spending dollars, there is some level of concern over whether the trend of the future will be a shift away from specific co-branded cards and towards the proprietary points program cards. From a consumer perspective, I think cards like the Sapphire Reserve do absolutely raise the bar, and while it hasn’t stopped me from carrying co-branded cards like the Hyatt Card, it has stopped me from really putting spending on many of those cards since I will do better earning points I can transfer into those programs on the Reserve Card.
I know that many of us got the Sapphire Reserve when we did because it was offering a staggering 100,000 sign-up bonus points worth at least $1,500 towards travel. Of course that lucrative of a bonus, along with other perks, comes at a very real cost to the issuers. There was talk in the room about the banks now looking at a 5 – 7 year payback period when acquiring a new customer with bonuses such as that. While most of us were happy to pay the $450 fee the first year, 5 – 7 years is a lot of $450 annual fees to pay, so time will tell just how well this card will do for Chase over the longer run.
Loyalty Program Overload, but Without Loyalty
One statistic that was quoted was that the average US consumer is a member of 14 different loyalty programs, though they are only “actively” engaged in about half that number. I don’t think that number surprises me since everyone from United to Nordstrom to my local yogurt shop has a loyalty program, but it does remind me of just how complicated this all is. I certainly don’t know everything there is to know about travel rewards programs and I am an outlier who thinks about this stuff all the time. If I can’t even keep up with it all, how in the world is it reasonable to expect an average consumer who is a member of 14 loyalty programs to know the ins and outs of how all of them work, or even be able to keep up with their points without letting them expire?
No wonder such a decent number of people just don’t feel like rewards programs are worth it…there really is a very tangible risk of over-saturation and the programs have to work hard(er) to make redeeming those miles and points easy and rewarding to keep folks coming back. In fact, that is where I think the programs and products have the most room for improvement.
The Millennials are Coming
If Chase Sapphire Reserve was the card most talked about card, then Millennials were the other most covered topic as they related to the loyalty and banking spheres. Studies have shown that Millennials (or the emerging affluent as they were also referred) are less loyal, less trusting of institutions, less brand oriented, and more reliant on recommendations of their friends, on overall value, and on experiences than previous generations. When you pair that up against something like the American Airlines Advantage program, it isn’t shocking to me that they missed their customer acquisition goals on their co-branded cards.
Not to pick on American here, but there isn’t much about the AAdvantage program right this second that would be attractive to the stereotypical Millennial. This is a group that will notice that there are virtually no Saver awards in many markets and simply move on. They likely won’t remain brand loyal to this large institution just because that “is what they have always done”. They will find a better option for their everyday spending and frequent flyer needs and go with it.
While there was lots of talk about Millennials specifically, I think much of what is attributed to that generation really is just a byproduct of technology and better access to information. With better technology, communication channels, the ability to comparison shop from your phone, and more, consumers simply don’t have to just accept what they may have more readily accepted even 10 – 15 years ago. There are more options in the loyalty space and you can’t expect savvy “emerging affluent” to accept an overly complicated or misleading loyalty program that isn’t really loyal to them. They will demand better, which brings me to my favorite takeaway.
I Think Traditional Loyalty Programs Will Improve
Out of necessity to stay competitive with the demanding “emerging affluent” generation and the growing number of “proprietary products” such as the Sapphire Reserve, I think that the traditional loyalty programs and related co-branded products will improve in the coming years, assuming there isn’t a huge overhaul to how the interchange fees and such work in this country. Devaluation after devaluation after devaluation coupled with crummy award availability simply won’t work over the longer term in this information age.
Now this doesn’t necessarily mean that credit card sign-up bonuses will continue to go up and up as that math may not play out for the banks, but longer term loyalty and transparency within the loyalty programs simply has to improve with some programs or they will (in my estimation) continue to have trouble hitting their acquisition targets with their co-branded products. Not only that, but those who do have the co-branded cards would be remiss to put all of their everyday spending towards earning one mile per dollar in a program where those miles are only worth around a penny each when they could simply use a 2% cash back card. Some folks may be stuck in their ways and continue to display that behavior favoring the same card they always have, but the next wave of consumers is not displaying that same programmed behavior and loyalty.
While this wasn’t a specific takeaway from the conference, but rather my own personal conclusion, I think that the loyalty programs and co-branded products that do a good job meeting the needs not just of a single traveler, but of the whole family, will be the ones that rise to the top as the “emerging affluent” (aka Millennials) that everyone seems to want to attract continue to become parents with young families. Millennials may be having children later, but they are still having them, and children are a game changer. Speaking from experience, a stereotypical Millennial may not be inherently brand loyal, but if a loyalty program takes good care of their whole family on a consistent basis, I can all but guarantee that they will become loyal to that program. Given that, it is not at all surprising we are starting to see more and more frequent flyer programs formalize elite status extensions for new parents.
I’m really glad I was able to hear about the same co-branded products and programs that I think about on a daily basis, but from the other side of the mirror thanks to this conference. I left feeling optimistic about this corner of the world, but there is no question that there is some growing and evolving that needs to happen within the co-branded space as the demographics and demands of the most desired consumer changes a bit.
What do you think the future holds for loyalty programs and the associated co-branded card products?