Four Trends Changing the Co-Brand Card Landscape

How to drive loyalty and spend through high-value cardholders

Co-brand credit card partnerships continue to serve a vital purpose for companies looking to ignite loyalty from their customers, particularly their “up-and-coming” and most loyal. These card partnerships provide an anchor to member engagement when the winds of economic change and competing brand messages create noise and misdirection that can threaten to steer committed consumers away from their favorite product or program.

So, what are top-of-mind principles and tactics marketers need to hold sacred as they navigate the prevailing winds of co-brand consumer behavior? That question—and much more—was addressed at this year’s Ai Connect Event for Co-Brand Card Partnerships, where the focus of keynotes, panel discussions, and invaluable networking was on one primary objective: driving loyalty and spend through high-value, co-brand cardholders.

This objective becomes more intriguing as industry-wide loyalty and financial product trends continue to emerge that are impacting credit card programs. “What changes,” you ask? Four factors are contributing to the increased attention on co-brand card spend:

1. Economic model evolution

It’s no secret that financial models for co-brand programs are in a constant state of change. Bottom line: travel programs have experienced unprecedented financial results in recent years, with portfolio valuations at all-time highs. Delta, Southwest, United, and Alaska have all reported program growth beyond norms. As airlines gain greater leverage with ongoing mergers and renegotiated contracts and loyalty programs continue to experience rising profits, two questions emerge: First, how sustainable are the current models and the merchant/issuer relationships with thinner pricing and rising profits competing against each other? Secondly, what impact will recently rising consumer APRs have on these travel programs?

2. Acquisition offer normalization

As a period of big mergers, increased profitability, large bonuses, and a shifting, diverse co-brand marketplace settles down, acquisition offers for co-brand cards are normalizing and issuers are becoming more selective in the customers they acquire. In turn, with price being driven down, merchants are required to become even more creative in communicating card value, ensuring cardholders clearly understand the overall value of their reward currency and what they can do with it.

3. Devalued program currency

With more and more loyalty program operators feeling pressure to reconfigure their currency earning structures to a lower cost-per-point, merchants are strategizing how to make the card itself the most important point of entry into the program for consumers. Again, card benefit clarity and relevant redemption options are the laser-focused objectives necessary to keep cardholders engaged and their respective credit card top of wallet. This must be a shared vision within the entire merchant organization, ensuring the direct link between the co-brand program value proposition and projected revenue are just that—firmly connected.

4. Consumer economic outlook

Multiple factors point towards continued strength and stability in consumer spending: ongoing housing industry growth, declining credit loss rates, increasing interest rates, and rising consumer credit rates all indicate continued recovery and growth from the “great recession.”

Additionally, as technology innovation and adoption grow in both their abilities to seamlessly integrate with card programs and provide real, desirable value to members, consumers will embrace those relevant—and often experiential—rewards with card spend.  (Innovation examples include real-time account issuance, instant point earning and redemption capabilities, quick read card design, and integrated consumer experiential tracking, to name a few.)

Although the technological environment, cultural trends and preferences, and personality traits of various generations change over time, the behavioral tactics that incentivize and drive loyalty remain much unchanged. No matter the era, the question remains: How do we stop consumers in their tracks with effective, engaging, and engendering tactics that enable them to extract immediate value and status from their brand connections? Strategically adapting to the changes outlined above is one way to start that exciting journey for your co-brand program.