Loyalty HAS ITS REWARDS.

• Author: Mangum, Mylle
• Position: Brief Article

Incentives in the form of merchandise, travel awards and cash are an effective way to keep your customers coming back.

Strong customer loyalty is important to a bank's health. Research has shown what we know instinctively--that building lasting customer relationships translates directly to bottom line profitability. Conversely, losing customers leads to loss of employees and investors--and lower earnings and stock prices.

In the past, most banks built their customer relationships on the foundation of face-to-face meetings. Today, thanks to technology advances, customers can communicate and do business with banks without ever setting foot in a branch. With the recent phenomenon of frequent bank mergers, many customer have been left confused, their traditional sense of loyalty under strain.

One way that banks can build trust and loyalty with their customers is by implementing loyalty and performance management programs. Through such programs, financial institutions can increase sales while continuing to build customer loyalty. Loyalty programs allow banks to reward their customers with a promotion currency for successfully accomplishing certain goals, actions and transactions. Rewards can include such things as merchandise, travel and cash.

Travel is a motivator

Travel and merchandise are effective motivators that have lasting, high perceived value to award recipients and are effective marketing tools for program providers. Everyday customers are rewarded with incentives such as cruises, trips, cars and even unique items such as grand pianos. By simply awarding incentives for volume increase and quality service, banks can stimulate loyalty.

Prior to offering an incentive program, a bank needs to determine which incentive package fits best with the target audience and the budget. The bank should work with its incentive-program consultant-vendor to develop direct-mail programs, statement stuffers and bank signage informing bank customers of the offer. Often, the bank will set a loan amount for a certain type of loan (such as mortgage, second mortgage, car loan) and offer the incentive based on the consumer taking out that loan within a specified time period (usually 90 to 120 days).

Vacation trips, particularly three- and four-day vacation packages, are popular incentives for banks to offer. The advantage of a travel incentive is the scope of resorts from which customers can choose from and the flexibility of scheduling travel within a 12-month...