You Complete Me: How Marketing Can Boost Change Management Outcomes

In previous blogs, we highlighted six questions common to successful marketing and change management initiatives and common communication requirements across the five stages of audience journeys in adopting change. Now we want to go into the tactical implications of those communication requirements for change management.

There is a trope in love stories and RomComs of one character professing love for another through the words “you complete me.” Like many clichés, it has currency because it’s grounded in an experienced truth: In successful relationships, each partner possesses attributes that shore up weaknesses in the other so that together they are both stronger. That’s how it is with marketing and change management.

As we discussed previously, the similarity of the audience journey in the ADKAR framework to the customer decision-making journey is in the key communication considerations within each framework. Based on this foundation, marketing can help “complete” change management by offering communication best practices and ideas for each stage.

AWARENESS. Communications must highlight the need, bringing to light the pain that needs to be addressed. To be compelling, communication of that pain must be both credible and empathetic.

Examples of marketing communications at this stage:

  • Emails and presentations that explain the change in terms of its impact on all team members, coming from executive leaders
  • FAQs that capture and provide honest answers to real questions likely on the minds of team members

DESIRE. Communications must define the proposed change as the solution to the need, i.e., the best way to relieve the pain. To be successful, these communications must reach the “heart” and the “mind” of the audience by appealing to emotions and logic.

Examples of marketing communications at this stage:

  • Case studies of early, quick “wins” that highlight the benefits realized through the change
  • Infographics presenting the need for change and its potential benefits in simple, visual terms

KNOWLEDGE. Communications must create a solid understanding of the world after the change, in contrast with the current state. To be effective, these communications must make the case that the future state is close at hand and that the path to get there is very simple.

Example of marketing communications at this stage:

  • How-to videos and one-page quick-reference guides that make the path to implementation seem easy; brevity and visuals take priority over words and detailed use cases

ABILITY. Communications must minimize the perceived effort involved in change and reduce friction to take the first step. Successful communications at this stage offer a helping hand—not condescending but by providing clear, simple guidelines that encourage the audience to move down the path.

Examples of marketing communications at this stage:

  • Training materials and tools that provide comprehensive information about how to accomplish current tasks in the new state and instill confidence that change can be achieved
  • Gamification that turns mundane change into activities that confer status or create excitement for team members

REINFORCEMENT. Last, but definitely not least, communications must continue to celebrate the benefits delivered. Many change initiatives fail because they are thought of as a “one and done” proposition in which a single, intense effort suffices. Instead, the initiatives need to be promoted over an extended time period to bring along laggards and solidify the changes already made by early adopters.

Examples of marketing communications at this stage:

  • Success stories/testimonials highlighting the benefits achieved and improvements gained, not only in quantitative terms but in human, emotional terms
  • Awards to bring attention to change-driven achievements and, in the process, elicit feelings of aspiration and potentially competitiveness

Here’s the bottom line: if you’re not thinking about change management like a marketer and marketing like a change management leader, you probably missing something that could elevate the impact of your efforts.

Credit Card Issuers Increase Focus on the Subprime Market

The American Banker Association’s September 2015 Credit Card Market Monitor found a 28% y/y rise in new subprime accounts, indicating that issuers are expanding their focus as they seek to grow revenues. An analysis by EMI Strategic Marketing of the FICO composition of credit card outstandings at the end of 2Q15 finds that many leading card issuers are accelerating growth in sub-prime and low-prime outstandings.

  • In recent years, Wells Fargo has reported strong y/y growth in all FICO categories.
    • In its <600 FICO category, growth has accelerated to double-digit rates in the past three quarters.
    • Its 600-639 FICO category has grown by double-digit rates in six of the past seven quarters.

wells_fargo_subprime_outstandings

  • Among national credit card issuers, Bank of America’s subprime outstandings declined 9% y/y in 2Q15, but the rate of subprime loan decline has been steadily slowing in recent quarters.  However, Citi’s subprime outstandings growth performance is less consistent, with y/y growth from 4Q13 to 2Q14 followed by declines for the past four quarters.

BofA_subprime_outstandings

  • There are also mixed trends when analyzing subprime outstandings performance of regional bank card issuersPNC reported a 6% y/y decline in <620 FICO outstandings in 2Q15, compared to a rise of 1% in 1Q15.  Regions reported strong growth in <620 FICO in recent quarters (double-digit y/y rises between 2Q14 and 1Q15), but this fell to just 2% in 2Q15.  However, it should be noted that Regions’ total subprime outstandings were just $49 million, so variations in growth rates are not unexpected.  SunTrust reported double-digit y/y increases in subprime outstandings for three of the past four quarters.

regional_bank_card_subprime_outstandings

EMI’s analysis also shows that subprime outstandings growth continues to trail prime and superprime outstandings growth for several reasons:

  • The large national issuers continue to deal with legacy issues following the financial crisis.
  • For issuers in general, underwriting standards continue to favor superprime consumers.
  • And even though many issuers are ramping up subprime account production, it will take some time before it translates into strong growth in subprime outstandings.

BofA_citi_credit_score_2Q15

regional_bank_card_issuer_credit_score_2Q15

Meanwhile, an analysis of FDIC data for the 2Q15 shows strong outstandings growth for subprime credit card specialists, including Comenity (+23% y/y) and Merrick Bank (+16%). As the card industry in general increase its focus on the subprime market, it will be interesting to see if the acceleration in subprime outstandings growth among some regional bank card issuers is replicated by the large national issuers.  In addition, growth in subprime credit card outstandings should result in delinquency and charge-off rates rising from their current historically low levels.

5 takeaways from leading credit card issuer 1Q15 financials

An analysis by EMI of the latest quarterly financials from the leading U.S. credit card issuers revealed the following trends:

  • Growth in average outstandings.  Of the 13 leading issuers studied, 11 reported y/y increases in average outstandings.
    • The two exceptions were Bank of America and Citi, two of the top four issuers and this continues a longstanding pattern
    • Capital One—another top four issuer— reported a strong growth rate of 7%, driven by origination programs and line increases.  However, it should be noted that Capital One retains some of the credit card monoline heritage, with card loans accounting for 40% of its total loan book.
    • Strongest growth was reported by SunTrust, although it should be noted that this comes from a low base, with average card loans accounting for just 0.7% of SunTrust’s total loans, a percentage that is significantly lower than its regional bank peers.  It is also worth noting that SunTrust’s credit card yield was below 10% in 1Q15, lower than regional bank peers like Fifth Third (10.22%) and Regions (11.73%), as well as larger issuers like U.S. Bank (10.81%) and Wells Fargo (11.78%).
    • Wells Fargo also reported very strong y/y loan growth of 16%, although this included the acquisition of the Dillard’s private-label portfolio.  Its credit card penetration of retail bank households rose nearly four percentage points y/y to 41.8%, although the rise in penetration slowed sharply in the most recent quarter, increasing just 28 percentage points.

average_card_loans_1Q15

  • Outstandings starting to come into line with volume.  Since the 2008 financial crisis, the card industry has focused more on increasing cardholder purchase volume rather than outstandings.  As you see in the following chart, volume growth continues to outstrip outstandings growth.
    • Of the 7 issuers below reporting y/y changes in both volume and outstandings, only American Express and Discover reported higher growth rates for outstandings than volume.
    • Ideally, issuers would like outstandings and volume to grow at similar rates; American Express and Wells Fargo were most effective at achieving this in the most recent quarter.
    • Some issuers reported that lower gas prices had a depressing effect on volume growth.

card_volume_card_growth_1Q14-1Q15

  • Charge-offs remain at historic lows. 12 of 13 issuers reported credit card net charge-off rates below 4% in 1Q15, with 5 issuers below 3%.  In addition, 10 of the 13 issuers reported y/y declines in charge-off rates.  Although most issuers reported growth in charge-off rates between 4Q14 and 1Q15, this is a normal seasonal pattern, and there is little sign of significant upward movement in charge-off rates.  Some issuers are revising downward their future charge-off rate expectations: Capital One reported that its rate may fall to the low 3% range in 3Q15 (although it does expect rates to rise in 4Q15 and 2016). And Chase expects that its full-year 2015 net charge-off rate will be less than 2.5%.

credit_card_charge-off_rates_1Q15

  • Delinquency rates continue to fall.  Of the 8 issuers who reported 30+ day delinquency rates, all reported y/y declines.  This indicates that there is little upward pressure on charge-off rates, as delinquencies tend to be leading indicators of future charge-offs.
  • Signs of revenue growth. in recent years, issuers have reported low/no revenue growth and have instead generated profits from low provisions for loan losses.  As issuers have now begun to target outstandings growth, revenues have started to increase.  Of the 6 leading issuers providing credit card revenue data in 1Q15, 5 reported y/y growth.  In addition, 4 of these 5 issuers reported growth in both net interest and noninterest income.

credit_card_revenue_1Q14-1Q15