(New York, NY) Co-brand credit cards connect cardholder spending to exclusive benefits and rewards at their favorite brands. The fierce competition to capture everyday spend and increase cardholder acquisitions continues to push brands, issuers, and networks to evaluate which value propositions resonate best. Auriemma Group’s latest issue of Cardbeat US found that rewards—points, miles, or cash back for applying and for ongoing spend—are the top driver of card acquisition and usage.
The challenge for brands, issuers, and networks is crafting a compelling value proposition that optimizes their objectives and delivers a product that resonates with customer enough to stand out in a crowded marketplace. The card program’s benefits and rewards must be differentiated enough to speak to a brand’s unique customer base, while valuable enough to rival the competition, which includes proprietary bank cards in addition to other co-brand cards.
Auriemma Group’s latest issue of Cardbeat US determines the drivers of value proposition success by asking existing co-brand cardholders to compare potential co-brand rewards and benefits. Surveying opinions on the relative value of rewards, card design, tolerance for annual fees, and more, the issue confirms that card rewards are the primary driver of co-brand card success.
46% of co-brand credit cardholders indicated that their desire to earn ongoing points, miles, or cashback rewards for spend would motivate them to apply for a co-brand credit card, more than any other single factor across all types of co-brand cards (e.g., airline, hotel, retail). Attractive sign-up offers also play a role–29% of cardholders say they would motivate them to apply for a co-brand, the second-most cited factor.
And when considering potential motivators for increasing co-brand spend outside the partner brand, roughly eight-in-ten co-brand cardholders say their co-brand delivering double points for online (82%), grocery (81%), and/or restaurant purchases (77%) increases their likelihood to use it.
“Card acquisitions are powered by attractive sign-up offers and strong ongoing rewards,” says Gary Rezak, Managing Director at Auriemma Group. “Then the value of the rewards and benefits, as well as the cardholder’s ongoing relationship to the brand, continue to engage cardholders and unlock the programs’ full potential.”
In addition to rewards value, brand affinity is a significant driver of cardholder engagement, especially for retail co-brand cards. 34% of retail co-brand cardholders cite frequent purchases at the brand as their reason for applying. And hotel co-brand cardholders have their own unique motivations, with improving loyalty status as an especially powerful motivator of ongoing engagement for that category. While other co-brand card characteristics, such as the card’s design or APR, should be thoughtfully considered, far fewer cardholders say these factors have a major impact on their card usage.
“Many value proposition elements make an incremental difference in the success of a co-brand and cannot be ignored, but strong rewards value is a must,” says Rezak, “a co-brand without valuable sign-up and ongoing rewards risks never getting a prospective applicant’s consideration in the first place.”
To get full access to this special co-brand issue of Cardbeat, Auriemma’s syndicated research publication studying the debit and credit card industry, or to discuss a custom research study on cards and payments topics, contact Jaclyn Holmes, Director, Auriemma Research.
For assistance assessing, evaluating, finding partners, and negotiating your co-brand and private label partnership, contact Gary Rezak, Managing Director, Auriemma Group.
Survey Methodology
Cardbeat US
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in June 2023 among 1600 adult credit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
About Auriemma Group
For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise, and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London.
(New York, NY) Co-branded hotel credit cards earn consumers exclusive benefits and rewards tailored to brands they love. They function similarly to proprietary rewards cards, but there are several unique factors that inspire hotel card acquisition, usage, and loyalty. Auriemma Group’s latest issue of Cardbeat US delves into co-brand credit cards and loyalty programs, uncovering that experience-based perks and brand affinity are key to a hotel co-brand’s success.
60% of credit cardholders say experience-based benefits would make them more interested in applying for a hotel card. Room upgrades have the largest impact, followed by complimentary food and beverage, the occasional free hotel stay, early check in/check out options, and free Wi-Fi. In total, the desirability of these experience-based benefits outweighs that of spend-based rewards, which 49% of credit cardholders cite as driving factors for hotel card application.
“To cultivate guest loyalty, hotel card issuers must emphasize the unique experience their cards provide,” says Jonathan O’Connor, Senior Manager at Auriemma. “Issuers should not underestimate the value of a tangible perk, which is often more accessible to cardholders than calculating points. While rewards remain an important piece of the puzzle, experiential benefits are stronger drivers of pre-acquisition interest in hotel co-brands.”
Loyalty status also factors into hotel card acquisition and usage. Though ongoing rewards and attractive sign-up offers drive hotel co-brand applications, 31% of hotel co-brand credit cardholders say improving loyalty status also plays an important role. This is particularly pronounced for Marriott cardholders, 39% of whom say they applied to improve their loyalty status with Marriott.
Loyalty perks also have an incredible impact on off-brand spending. 83% of hotel co-brand cardholders say enhanced loyalty status upgrades motivate them to use their card for off-brand spend. Access to VIP experiences also motivates 51% of these cardholders.
“Envisioning an upgraded room, amenity, or enhanced service because of card spend is a significant motivator,” says O’Connor. “Knowing that greater card engagement can lead to an elevated hotel stay gives cardholders a north star to build towards.”
The distinguishing factor between hotel cards (and co-brand cards in general) and their proprietary rewards counterparts lies in the loyalty perks they offer. The ability to highlight experiences and a clear path to perks is what separates hotel cards from programs that have their cardholders doing the math.
“The key to unlocking a hotel card program’s full potential is the benefits that standard credit cards cannot provide,” says O’Connor. “Hotel co-brand issuers that look beyond the table stakes of a viable credit card program and emphasize experience-based perks and brand affinity will win over those that strictly focus on monetary rewards.”
Survey Methodology
Cardbeat US
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in June 2023 among 1600 adult credit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
About Auriemma Group
For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jonathan O’Connor at (+1) 1-646-437-6116.
Cardless, an emerging co-brand credit card provider based in San Francisco, recently announced it secured a three-year, $75 million credit facility from i80 Group. The company stated that the credit facility will enable Cardless “to fund customer receivables, growth, and continue its work with large, globally recognized brands.”
Additionally, Cardless announced that Brian Kelly, founder of The Points Guy, which tracks and ranks credit card value propositions and redemption options, is an investor and advisor.
The entry of Cardless, along with Imprint, Deserve, and Tandym, in recent years is beginning to altered the co-brand and private label credit card competitive landscape, which has been historically dominated by a set of incumbent banks, many of them household names.
Research suggests that incumbents do have significant advantage, as cardholders place a premium on their preferred banks issuing their co-brand cards. Recent Auriemma data indicates that 72% of cardholders say it is somewhat or very important for their preferred issuer to issue their ideal co-brand card.
Nonetheless, co-brand and private label credit cards are in high demand, with 36% of cardholders saying they are likely to apply for one in the next 12 months. The number rises to 56% among Millennials. If new co-brand and private label providers can offer cards for previously unserved brands and deliver valuable product innovations, they should find plenty of room to grow.
(London, UK) Perceptions of loyalty points and miles redemptions has shifted in the wake of COVID-19. The lack of opportunity to travel since the beginning of COVID-19 is eroding the appeal of travel-related benefits from UK loyalty programmes. According to Auriemma’s latest research, 76% of credit cardholders enrolled in a loyalty scheme prefer to use their loyalty rewards for non-travel benefits. Meanwhile, only 35% of programme members intend to use their points or miles for travel-related benefits in 2021.
But how has this change in behaviour been impacting loyalty programmes, and how quickly, if at all, will these patterns return to previous norms?
The large volume of unused loyalty points mean high levels of financial exposure for brands on their balance sheets, which can cause a serious headache for company CFOs. Brands with loyalty programmes which are modelled heavily around offering travel redemptions, such as British Airways, Virgin Atlantic, Hilton Honors or Marriott Bonvoy, are at the highest risk in this scenario. As evidenced in April and May 2020 when Hilton Honors sold $1 billion Honors Points to American Express, and Marriot Bonvoy sold a similar $920 million points to American Express and JP Morgan Chase to build up much needed cash flow and reduce their points liability. This is only a temporary fix, however, and with travel restrictions still in place one year later, the problem of over-exposure persists for brands.
Some loyalty schemes have expanded their partnership approach to maintain member engagement and relevance. IAG Loyalty’s recent partnership with Nectar in January 2021 allows the direct transfers of points between the two schemes providing low value redemptions to BA Executive Club members, also demonstrated with the launch of Virgin Red in November 2020 and its partnership with Greggs. Despite the apparent strengths of these partnerships, they can present poorer value to consumers which will test the theory as to how viable they are in the longer term, once travel restarts.
There remains hope as Auriemma found that 55% of consumers still enjoy earning travel rewards through their loyalty programme or credit card, many with plans to redeem these for travel-related benefits as soon as possible. With the continued effectiveness of UK’s vaccine rollout and the subsequent easing of restrictions, a return to travel could be around the corner.
“Now is the time for issuers and loyalty programmes to focus on member and cardholder engagement,” says Kate Morgan, Head of International Partnerships at Auriemma Group. “As consumer confidence in the ability to travel rises, the appeal of redeeming hard-earned points for bookings should, too. We have seen that delivering relevant, personalised offers and marketing is key, along with cancellation options that give customers the assurances they need to complete the booking process.”
While foreign holidays remain less of a certainty than domestic travel this summer, the airlines face a larger challenge than hotels who have a greater ability to turn the focus inwards on UK stays and vacations. Premier Inn owner Whitbread, UK’s largest hospitality company, is bracing for strong summer demand. Nevertheless, as most hotel programmes exist without the cushion of commercial partnerships with non-travel-related loyalty schemes, the reopening of UK hotels might be the only opportunity for a profitable 2021.
“The nation eagerly awaits more clarity on the government’s foreign travel policy beginning on 17th May 2021,” says Kate, “and fingers crossed it is good news for the travel industry and the thousands of employees within this sector.”
Survey Methodology
Cardbeat UK
This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in November 2020, among 845 adult credit cardholders. The number of interviews completed is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification. The average interview length was 21 minutes.
About Auriemma Group
For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call Kate Morgan at +44 (0) 207 629 0075.