Citibank is the latest to give its customers a rude awakening. When they received statements in recent weeks describing prizes earned in the No. 1 credit card marketer's Easy Rewards program, many were surprised to discover that instead of qualifying for the premium electronics goods of the past, they merely rated a baseball cap with a Citibank logo.
PRIZES FOR INTEREST-PAYERS
With rule changes, Citibank is now giving its better prizes only to customers who maintain balances on their accounts, racking up interest payments. Thousands of customers who pay their bills in full each month without accruing interest earned-for the first time-few points.
Industry analysts say the move makes sense as major marketers begin tinkering en masse with their rewards programs to reduce hefty costs while maintaining results.
"Credit card companies are obviously weighing the cost of funding these rewards programs vs. making changes and losing customers through attrition," said Bruce Brittain, a credit card analyst with Brittain Associates.
Citibank isn't the only one changing the game on giveaways. United Airlines has become more frugal with benefits doled out to members of its Premier Mileage Plus frequent-flier card. And AT&T Corp. recently scrapped its True Rewards points-based program for long-distance customers in favor of a new program offering general discounts from specific retailers.
GM'S $2 BIL HIT
General Motors Corp. soon will announce changes in its GM Card loyalty program as it faces a potential $2 billion liability on new-vehicle rebates it must fork out to its gold MasterCard customers, who have been racking up points in the rewards program since September 1992 (AA, Jan. 8).
GM hasn't spelled out the changes, but the automaker recently said that in the past 18 months it's been averaging 1,000 new-vehicle redemptions per day from the card.
As some are learning the hard way, rewards programs are compelling marketing lures but, to succeed, they must drive sales and profits-not merely win and retain customers, said Laurie Broderick, VP-management supervisor at Carlson Marketing Group, Minneapolis.
"A lot of companies are trying to get away from points-based programs that can be very expensive to administer in terms of keeping track of points and mailing out rewards," she said.
HALLMARK DRIVES SALES
Ms. Broderick said one points-based reward program that drives additional sales for the sponsoring marketer is Hallmark Cards' Gold Crown Card, a program that she runs.
The card gives customers points for each purchase made at Hallmark's Gold Crown stores and the points are redeemable for Hallmark merchandise.
"I think we'll see more companies making changes in their rewards programs to make a better connection between the giveaways and the company's goals and its bottom line," Ms. Broderick said. "Otherwise, they don't make sense."
But before making changes, others warn, consider the possible impact.
"Customers have come to expect, and almost demand, rewards programs these days," Mr. Brittain said.
Contributing: Jean Halliday.