Are Incentive Schemes the Icing on the Cake for Private Banking Clients?

Emma Rees

31 May 2007

This week Coutts launches "Courtesy of Coutts", a new points scheme linked to its Gold Card and exclusive World Card. The scheme enables clients to collect one point for each £1 spent, with which they can buy either travel with ebookers or easyJet, or choose to donate to one of three selected charities – the Alzheimer’s Research Trust, the Rainbow Trust Children’s Charity or the Woodland Trust. The launch sees Coutts withdrawing from the Air Miles programme. Perry Littleboy, head of marketing and business development for Coutts, says: “We canvassed the opinions of 5,000 of our cardholders to ask what they wanted from a card loyalty scheme. Their response was that they wanted the greatest choice possible, and that there should be no restriction on travel. Clients will now have access to long and short haul flights with a choice of 400 airlines through ebookers, and can also use their points to book both hotels and car hire. The second highest spend on flight carriers amongst our client base is with easyJet and clients now also have access to almost 300 European routes with the carrier.” Traditionally, loyalty schemes have tended to be linked to mass-affluent, rather than private banking offerings and are often part of packaged accounts or linked to credit cards. HSBC for example offers a packaged account for those with £50,000 investable assets of £75,000 or more income, which includes Premier Points which can be exchanged for champagne or wine or high street vouchers. Ted Wilson of wealth management consultancy, Scorpio Partnership finds it hard to imagine a prestige private bank offering incentive points for using their services: “I don’t think a high-end private banking client would find it particularly appealing to be offered loyalty points for investing their money. Loyalty schemes for the wealthy are very much a mass-affluent play linked to credit cards. You could liken them to prêt a porter for the private bank’s couture line.” Ian Ewart, marketing director for Barclays Wealth thinks it is interesting that there seems to be a resonance for loyalty schemes in the high net worth space: “Clients are always keen to get something explicit and tangible for their loyalty over and above the basic banking relationship. In the high net worth space, it is more about added value such as automatic upgrades or privileged access, rather than getting something cheaper.” Jacqui Brabazon, the global marketing director for American Express Private Bank carried out some research around incentive schemes in Singapore: “Incentives are viewed as the icing on the cake by high net worth individuals. It’s a bit like Maslow’s hierarchy of needs. You have to satisfy the client’s basic needs, but if all things are equal, a loyalty scheme can provide a tipping point when choosing between one service and another.” “It is not about loyalty in a traditional sense to an individual or institution. It certainly cannot replace commitment to a valued relationship manager”, says Mr Ewart. “I see it as something more experiential - about gaining share of mind and client empathy and engendering a warm and friendly feeling. I think it shows commercial awareness, but there are other ways to reward loyalty, such as extending exclusive invites to client events, which are a proven way to build and defend your business.” Mr Wilson says that the quality of incentives offered are of paramount importance: “I can’t imagine wealthy clients being impressed by a free toaster but they might well be incentivised by free champagne or wine for spending money on their credit card.” Ms Brabazon agrees that incentives offered have to be appropriate and add value: “Ultimately, clients prefer us to stick to the knitting. However, if you want to offer an additional service, that’s fine, as long as it’s relevant and integrated well. Incentives that particularly appeal to high net worth clients include charitable donations and travel.” Ms Brabazon goes on to point out that in a situation where you enable people to accrue points, it is important that you enable them to redeem them easily: “Big spenders are likely to earn a massive amount of points and it is important that spending them is perceived as a benefit – a straightforward, pleasant experience. Otherwise it can become quite traumatic”, she says. Mr Wilson points to the trend of offering charitable donations in lieu of loyalty scheme points, describing it as “appealing to the ‘you too can be a philanthropist’ ethos.” Coutts anticipates that offering charitable donations will encourage greater participation of the "Courtesy of Coutts" loyalty scheme: “Over a third of our cardholders did not register for the previous loyalty scheme and therefore we have now given clients the ability to donate their points to one of three charities, if they do not wish to use them for travel. And with the sums that clients spend on their cards, the points are likely to amount quickly, providing valuable support to those causes.” And if HSBC’s experience is anything to go by, it might well prove a great success. Its Premier service has a "member get member scheme" where clients can choose a £50 charitable donation when they recommend a friend. Over 50 per cent choose to donate, perhaps because HSBC match the donation. Coutts has announced that it intends to expand its loyalty scheme even further, expanding the choice of charities to which clients can donate points and also by giving clients access to exclusive luxury goods that they can purchase with the points that they collect. It will be interesting to see whether loyalty reward schemes for high net worth individuals are the shape of things to come and whether wealthy individuals like a deal and a bargain as much as the next person. Ms Brabazon shares a final thought on the subject: “It is a way of deepening the relationship with clients, but investment product, performance and business philosophy will always be more important to clients than any incentive scheme.”