By Katie Deighton
American Express Co. executive Rachel Stocks pored over consumer
data in the weeks after coronavirus lockdown measures took hold in
the U.S., trying to imagine what credit-card rewards should look
like in the Covid-19 era.
Cardholders increasingly were cashing in their loyalty points
for items such as hair dryers and golf balls in place of flights or
hotel stays, she said.
"I guess they were having to do their own hair," said Ms.
Stocks, the company's executive vice president of global premium
products and benefits, "and golf was the only sport they could play
while social distancing."
Then she set about helping American Express cards' rewards
programs fit the times.
Credit-card issuers' revenue has been hit by declining consumer
spending during the pandemic and its resulting economic
disruption.
But the card companies also are grappling with a longer term
issue: keeping customers happy with rewards that suddenly look a
lot less enticing, especially in the realm of travel.
The customer satisfaction rate for the credit-card industry fell
1% in May from prepandemic levels, according to J.D. Power's 2020
U.S. Credit Card Satisfaction Study. The drop appears small, but in
the years before 2020, the industry performance had been trending
up by 0.5% annually for some time, said John Cabell, director of
banking and payments intelligence at the data firm.
"There are cardholders who are paying an annual fee who have
experienced a significant drop in customer satisfaction with
rewards, and their perception of the amount of rewards gained per
dollar spent," Mr. Cabell said.
Card providers can't afford unsatisfied customers, particularly
those that pay for cards with hefty travel-rewards programs, said
Brian Kelly, the founder and chief executive of travel website The
Points Guy LLC.
"All these reward cards are based on aspirational perks, like
access to a lounge at the airport, and that rug was pulled out from
underneath customers who were paying like $550 for a travel card,"
he said.
"Travel programs are huge profit centers, so all of the issuers
have made pretty quick moves on rewards to stave off mass card
cancellations, " Mr. Kelly added.
American Express is trying to make customers feel like they are
still getting a good deal while grounded at home.
It has rolled out a number of limited-time offers on some of the
cards it co-brands with travel firms, offering Marriott Bonvoy
Business cardholders 10 points per dollar spent at domestic gas
stations and restaurants, for example.
It also has issued Business Platinum customers with extra
statement credits for purchases from Dell Technologies Inc., and is
giving all U.S. consumer and corporate cardholders a complimentary
yearlong premium subscription to the meditation app Calm.
Other players are taking similar strategies.
Capital One Financial Corp., for example, began letting its
Venture and VentureOne customers redeem their miles on restaurant
delivery, takeout and streaming services from certain merchants
until Sept. 30. These cardholders also can earn extra miles by
ordering through Uber Eats. Meanwhile, Capital One's Savor Rewards
customers can earn 5% cash back on orders through the delivery
platform, and 4% cash back on subscriptions to streaming-video
services such as Netflix, Hulu and Disney+.
Matt Knise, the head of Capital One rewards, said his team made
those moves after analyzing spending data and speaking directly to
customers.
"If we'd just looked at the data, it would have been easy to
say, 'Let's only look at categories that were going up, like
grocery and pharmacy,'" Mr. Knise said. "But what we heard over and
over again when talking to customers was they view their rewards as
something a bit more aspirational -- a bit more 'treat yourself' --
which is why we really decided to home in on things like deals for
streaming services and restaurants."
HSBC Bank USA NA also spoke to customers to figure out what they
wanted benefits to look like in the Covid era, rather than relying
solely on spending data, said Nancy Armand, the bank's senior vice
president and head of cards portfolio management for wealth and
personal banking,
The company runs an online customer community where people post
information about what they are spending money on and, crucially,
what they want to spend money on. The group became very valuable in
helping the company track consumer sentiment around spending and
rewards during the pandemic, Ms. Armand said.
HSBC's midpandemic campaigns have included adding rewards such
as a 20% discount on items redeemed with reward points, and the
opportunity for customers to earn more points back on groceries and
home improvement products
JPMorgan Chase & Co. and Mastercard Inc., meanwhile, are
introducing a new product on Sept. 15 in response to consumers'
demand for rewards, particularly on digital transactions. The new
Chase Freedom Flex card will offer perks such as 5% cash back on
rides from Lyft Inc. and a complimentary three-month subscription
to the premium service from DoorDash Inc., the delivery
platform.
Card providers that move quickly to match their reward programs
to consumer spending will improve satisfaction over time, said J.D.
Power's Mr. Cabell.
They should, however, avoid letting new perks make their rewards
programs too complex, Mr. Cabell added. "Customers tend to get
confused by a complicated rewards program, and dissatisfaction
often follows confusion."
Write to Katie Deighton at katie.deighton@wsj.com
(END) Dow Jones Newswires
September 02, 2020 06:14 ET (10:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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