In the past three years, there’s been a surge in major brands adding multi-tender programs to their existing credit card-only programs, including Nordstrom, Kohl’s, Macy’s, and J. Crew. Clearly a multi-tender program increases the reach of a program which in turn enables the retailer to access more data for more of their customer base. When Seattle-based retailer Nordstrom extended its rewards program to include all shoppers, not just those who held its credit card, enrollment jumped from 4.1 million members to 7.8 million active members in the first year and by 2017, membership rose another 35 percent to 10.5 million members.
Gap Inc. has seen huge enrollments from its cross-brand multi-tender program currently being tested in several markets and Target is piloting its own multi-tender program, too. These programs enable all customers to reap benefits and rewards regardless of how they pay. Gap, Inc. sees offering their rewards program to all shoppers regardless of payment type “as a way to give customers more reasons to love us” according to Claudia Angulo, former Director of Loyalty Strategy. “We have a successful Gap, Inc. credit card program where cardmembers can earn points and redeem rewards across our portfolio of brands. With BRIGHT Rewards, we’re extending these benefits to customers who love shopping with us, but might not be ready for our credit card.”1 In the case of Gap, a multi-tender program facilitates a view of the customer across multiple brands in a way that is transparent to the customer – having a program explicitly lets the customer know they are being tracked as they shop at multiple brands.
Conversely, brands like Starbucks and Amazon who have had thriving multi-tender programs, are now adding private label and co-branded credit cards to further monetize the success of their existing multi-tender programs.
Below we’ll examine some of the factors a program needs to consider before asking, “Are you a member of our loyalty program?” or “Will you be putting that on your {Insert your brand here} card today?”
Historically, Retail Credit Came First…
Long before the loyalty programs we know today, U.S. department stores and oil companies offered their own proprietary charge cards, the precursor to what we now call private label credit cards. These cards were introduced to encourage customer loyalty with improved service. So, it stands to reason when today’s retailers are building a loyalty program, many start with private label credit cards (PLCC) or co-branded credit cards (CBCC). These are the customers who already have an affinity for the brand and retailers enjoy a revenue stream from their issuing banks, so it is seemingly a winning proposition.
However even retailers with strong private label card portfolios find that cardholders will not use their private label card every time they shop – sometimes less than 50 percent of the time. Even though your credit card may offer a strong incentive to choose your card for every transaction, it can be counter-productive based on the customer’s credit profile. You don’t want your customers to feel less connected to your brand because they can’t earn points for the times they need to use another form of payment for entirely personal reasons.
The New Age of Loyalty
Credit may have once been the entry into loyalty and there’s no question that the credit card industry continues to be a booming business, but Millennials and Gen Z appear to be adding credit more deliberately than previous generations and there is significant anxiety about credit ratings, especially given the growth in student debt. In Kobie research about what keeps customers from joining a program, Millennials were twice as likely as Gen X and FOUR times as likely as Boomers to say, “I’m worried about hurting my credit score.” That means that brands can no longer assume that credit cards are the default form of payment. Instead of credit cards, customers are more likely to be using a mix of debit cards and reloadable cards.
With concerns about credit, it makes sense to offer benefits regardless of payment type and use credit as an opportunity to create even more value for your best customers and return to the original idea of using credit to encourage customer loyalty and improve service.2
If Not Fries With That, What Should You Be Asking?
A customer approaches the checkout counter, arms brimming with products, what’s your next move? “Will you be using your {Fill in the retailer} credit card today?” risks the customer refusing the credit offer up to 80 percent of the time and possibly shutting down the conversation entirely. The question, “Are you a member of our loyalty program?” is very likely to lead to a yes and
an opportunity for conversation. This puts customer value ahead of payment preference. If a program has both a credit card and a multi-tender loyalty program, offering the multi- tender option ensures everyone who agrees to enroll is a winner. Multi- tender programs are usually free, allow the most frictionless capture of personal data to enroll without any dependency on credit-worthiness. Getting someone in the program opens the door to communicate and drive program value, later offering the incentive to use credit for greater earn and access. Likewise, if a customer is a member, the associate has the opportunity to further educate them on the additional value or benefits they receive if they use the retail credit card over other forms of payment. Customers like to feel they have choices and are in control—this is a great way to “get your foot in the door” and reinforce choice and value.
Likewise, for customers purchasing through EComm and mobile apps, showing them how much they could earn at checkout with multi-tender compared to retail credit is often a great motivator to apply for a retailer’s credit card or choose the retailer’s credit card over other payment options.
In the end, consider your audience, consider your end goal—always try to consider how to leave the door open, keep the communication flowing and find the best way to encourage loyalty and make your customers feel like they’re receiving great service.
Read more insights about financial loyalty in our Kobie Review: FI and Fraud Magazine.
