When Shell introduced its Shell MasterCard through issuer Chemical Bank in 1994, it used the simple message of "The Card That Earns Free Gasoline," which convinced more than 1 million consumers to sign up.

Banks need to deploy that same strategy today to cut through the complexity of the modern card rewards market, a new study from Auriemma Consulting Group says.

Even though the Shell program featured "a horribly complicated explanation" in its disclosure notice about how to earn gas rewards, the oil company and bank crafted a message that was simple enough to understand, says Scott Strumello, payments analyst with New York- and London-based Auriemma.

Auriemma surveyed 417 credit card users in the U.S. during March and April to obtain viewpoints on how card rewards programs influence spending.

"The consumers weren't bothered by the details in the case of Shell," Strumello says. "They just knew they could use that card to get free gas."

Other companies had similarly complicated rewards programs. "The GE MasterCard in the early 1990s was very complicated, and it did not succeed. They couldn't get their arms around how to explain it to customers," Strumello adds.

The Shell example is worth remembering now, Strumello says, because banks find themselves in a peculiar spot when it comes to rewards programs.

Cash rewards resonate with consumers, yet banks struggle with how to differentiate their offerings from others because giving back cash is fundamentally the same concept across all products, the report says.

Nearly three in five consumers, or 59%, say cash rewards cards are the most appealing. Because of their simplicity, cash rewards programs rate higher than other programs that may offer higher returns within certain merchant categories or at certain times of the year, the report says.

Cash rewards were most popular in all age groups, while cards providing points (14%) or free gasoline (9%) ranked a distant second and third, respectively.

Approximately 41% of consumers say the rewards offered by a card are the primary reason for using it. Nearly half say they enjoy the rewards, but do not consider them as the main reason for using the card.

Banks should align themselves with strong merchant-funded rewards programs, while using a rewards accelerator program strategy, the report says. Those programs encourage consumers to make purchases at specific merchants or merchant categories for a limited time, which can prompt increased spending, it says.

Consumers say they would spend more on the largest monthly expenditures — groceries, discount stores and gasoline — with a card providing a rewards accelerator program. They said they would increase spending on groceries 44%, to $186 a month from $169 a month.
The programs have value in the eyes of consumers, but banks have to explain that value in straightforward terms, Strumello adds.

"You may be under legal obligations to explain all of the details of these reward programs, but that's not what is going to sell it," Strumello says.

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