Transaction-driven marketing not only provides financial institutions with a proven way to monetize their digital banking platforms (online, mobile, SMS, e-mail, ATM), but also enhances member relationships by providing secure, targeted, relevant offers that help members save money on everyday purchases.
Consumer engagement is reinforced by real-time geo-targeting and real-time alerts. A recent study for a large national retailer demonstrated that more than 86% of sales reported by legacy merchant-funded rewards programs are actually driven by other marketing campaigns or simply attributable to walk-in traffic.
On the other hand, transaction-driven marketing has significantly grown in adoption. Retailers are willing to fund offers because of the precise targeting capabilities, presentation of highly relevant offers to members in their statements (places that, until recently, have been off-limits to retailers), and the precise performance tracking of campaigns.
"The integration of merchant rewards into the daily banking experience is a highly relevant proposition (providing) a unique marketing opportunity for financial institutions and enhance the banking relationship for the consumer," aid Jacob Jegher, senior analyst with Celent. "This type of value-added convenience has the potential to become a key component of online banking."
CUs present offers that are funded by local, regional and national merchants, and are personalized using an accountholder's actual spending patterns to ensure the offers are relevant to each recipient. For example, a member who ate at a fast food restaurant earlier this week might be presented with an offer to earn rewards from the same or another fast food chain. Offers are presented directly beneath relevant line item transaction records when customers view their transaction history online or through a mobile device.
More specifically, institutions create an arbitrary Account ID for each account holder. Only the CU knows the correlation of Account IDs and Account Numbers. The "Offer Placement System"-loaded on the CU's hardware, behind its firewall and entirely under the control of credit union personnel-matches retail offers to suitable transactions associated with that Account ID.
Questions To Be Asked
As digital banking rises, targeted rewards programs are a must. To that end, selecting the right solution is critical. You should ask very specific questions about the targeted rewards programs to ensure it yields results, such as:
* Do you require members to re-enter card number or account user name and password to take advantage of your services? A successful program should not and should fully protect members' personally identifiable information.
* Where is the transaction data stored? Is the transaction data within the CU's secure data facilities and under the control of your personnel? Privacy is critical. Again, the golden rule is that no personally identifiable or transaction level data should ever leave the security of the credit union without the express permission of the consumer.
* Are you able to accurately target offers to members based on whether they've previously done business with a particular merchant?
* Do you have the ability to deliver different offers and messages to different segments based on the member's history? It should.
* Does your platform require that members "activate'" or accept the offer? If not, how do you know that members even know the offer is loaded on their card? Implementing a solution that requires the consumer to activate the offer, thereby showing specific interest in that specific offer, is crucial.
* How do my results compare to a random, correlated control group? And what is the impact of the program over time? Measurement is perhaps the single biggest advantage to Transaction-Driven Marketing and its precision of measuring the program's ROI.
Transaction-Driven Marketing programs are a viable option to achieve market differentiation, new revenue and improved member relationships. But to be successful, credit unions need to truly understand their solution, and evaluating these questions can be the key to their success.
Lynne Laube is co-founder and COO of Atlanta-based Cardlytics.