Rewards Programs: The Economic Factor

Post by
The Kard Team
Rewards Programs: The Economic Factor

Rewards and loyalty programs are usually considered table stakes for credit and debit cards, but all seem to look the same. This is not for lack of effort, though; internal conversations about rewards often start with excitement towards creating something unique. Economic realities make themselves known soon after; you're left disappointed at what could have been done differently - why? Rewards can be expensive to run internally, as they require financial, operational, and analytical resources to maximize outcomes.

However, it's not all doom and gloom, as there are means of achieving a unique reward offering without sacrificing the creative integrity on which your brand is built. In this blog series, we'll dive into each of these factors, starting with the economics of rewards programs.

The Economic Factor

Now that you and your team have decided to implement a rewards program, you also need to determine whether or not the cost of the program will come out of your own budget to self-fund this implementation. If you decide to go this route, there are a few things one needs to consider before moving forward. The biggest challenge: setting up rewards usually lies in the economics and, specifically, balancing customer value without cannibalizing customer acquisition budgets.

Let's take a look at some of the economic disadvantages of self-funded rewards programs.

Generic rewards aren't good enough anymore - Custom and personalized rewards will cost you money and time. Keeping your customers engaged can be challenging, especially in an overcrowded market. Your program needs to offer something that people actually want. Beyond the actual cost of the item or service, you'll have to track the cost and time dedication of running the program and whether it will positively impact your business's bottom line.

Operations cost isn't an option - If you're managing the program yourself instead of using a partner, you'll need to budget for the time that running a program takes away from your other duties. To actually gain insight from customer data, you'll likely need to spend a great deal of time analyzing the numbers. Some of the most successful customer rewards programs require dedicated teams that carefully pore over statistics and patterns.

What happens when you run out of budget - Over time, you may decide to shift gears or scrap the project altogether due to financial reasons. When this happens, customers will go to a competitor, and those that relied on your program will separate from those who truly cannot live without it - leaving you with an undeserved reputation for being unreliable.

Cultivating a harmonious relationship between the bank and customers is a tough nut to crack. Thankfully, companies like Kard have taken a new approach to this conundrum with our unique merchant-funded rewards API, making it incredibly easy for any card issuer to implement an entire network of rewards with just a few endpoints.

Interested in what Kard can do for you? For more information, visit, like Kard on Facebook, and follow us on LinkedIn.

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