Credit Card Companies Offer Unique Experiences as Rewards
In an effort to compete in a crowded market, credit card companies are moving beyond tangible rewardssuch as airline tickets and gift certificateswhen trying to appeal to their wealthier customers. Now it's all about experiences. Visa offers customers the chance to hobnob with rock stars like Elvis Costello and NFL draftees, American Express sends clients up into space on suborbital jets, and MasterCard invites people to name the experience they want the company to arrange.
"These experiential rewards are becoming more and more popular," says Kelvin Taylor, president of Maritz Loyalty Marketing, which works with card companies on their rewards programs. He adds that they are designed for the top 1 percent of the customer base. In other words, these experiences are for only a lucky few.
The Visa Signature program, for example, is aimed at households with incomes of over $125,000. "They've worked hard for their money, and they look at these [experiences] as a way to differentiate themselves from others," says Jennifer Schulz, vice president of consumer credit products for Visa. Of the recent NFL event, Schulz says, "No money can buy that type of opportunity."
Mark Shipley, who runs Loyalty Solutions Worldwide at MasterCard Advisors, says that while rewards have historically been developed with a one-size-fits-all approach, today companies are willing to personalize their approaches. Sometimes the rewards are even custom-made for a single individual. Shipley says one MasterCard holder recently asked if he could pay for his daughter's wedding with his accumulated MasterCard rewards points; the company said yes, and points paid for the entire wedding.
Experiential rewards have grown in part owing to wealthy cardholders' desire for exclusive experiences, says Ralph Andretta, who manages membership rewards for American Express. "They're seeking not just things but knowledge," he says. "It's increasingly about intangible needs, [such as] becoming a wine connoisseur, being a better golfer or a better cook."
Not that the company is ignoring the desire for pricey stuff. Points can be redeemed for diamonds from Tiffany as well as Piaget watches. The company offers two elite cards: Platinum, which carries an annual fee of $450, and Centurion, which is so exclusive that the company will not discuss its details.
In the case of the suborbital spaceflights, American Express cardholders can sign up after spending $20 million on their card. If they were to purchase the experience on their own through Space Adventures, a private space company, it would cost $102,000. Last year, the company arranged zero-gravity trips with Apollo 11 astronaut Buzz Aldrin, an experience that could not easily be purchased independently. The company would not disclose the number of people who have redeemed points for a suborbital flight.
Andretta says the value of the experience-based rewards is greater than if customers designed and paid for the experiences on their own. "Our people accompany card members and make sure they get the best out of the trip. [Card members] value the personal service and all of the relationships around that experience," he says.
Suzanne Shu, assistant professor of marketing at Southern Methodist University, says rewarding people with luxury experiences gives them permission to indulge in splurges that they might otherwise feel guilty about buying. The risk, she says, is when the experience seems so special that people wait to schedule it and end up putting it off into the future indefinitely.
"People get into the problem where no occasion is quite special enough where they feel like they've earned the right to use the reward," she says, whether it's an expensive bottle of wine or a gift certificate to a high-end restaurant. Her advice is to set a specific date for the reward and then use it. "It's the drive for the perfect occasion that really throws people off."
Shipley of MasterCard says only 40 to 60 percent of all points get redeemed. That's a lot of potential splurges that go to waste.