Category Archives: Payments

10 marketing tips to optimize credit cardholder lifetime value

U.S. credit card issuers are struggling to generate revenue growth, which has been hit by both the decline in outstandings and the impact of the CARD Act and Durbin Amendment on noninterest income. At the same time, issuers are reluctant to invest in aggressive new cardholder acquisition campaigns, as they want to avoid the free-for-all that occurred in the mid 2000’s which led directly to the spike in charge-offs when the financial crisis hit in 2008. As a result, issuers are increasing their focus on optimizing relationships with existing cardholders.

The following are 10 tips for credit card issuers to get the most from relationships with existing credit cardholders:

  1. Build a comprehensive communications strategy: Identify all opportunities for the cardholder to engage with the issuer, and build integrated communications and offers around these “moments of truth.”  These include:
    • Predictable events (such as monthly statements or card expiration dates)
    • Cardholder use of issuer channels (such as visits to bank branches or use of the issuers’s website and/social media platforms)
    • Key life events (such as an upcoming marriage or a child about to go to college)
  2. Create an onboarding program: The first 90 days is crucial to the credit card relationships, so issuers should establish a set series of communications during this period to welcome the new cardholder, highlight key card benefits and handle any problems the cardholder may have.
  3. Provide targeted activation incentives: Rather than offer a bonus following the cardholder’s first purchase, require rewards cardholders to meet a minimum spend threshold within a certain period in order to build habitual use.
  4. Recognize anniversaries: Some issuers offer anniversary bonuses, but there should also be a plan in place to communicate with cardholders in advance of the anniversaries.  The communications should center on:
    • Thanking the cardholder for their business
    • Highlighting card benefits
    • Making special offers (usage, cross-sell and upsell)
    • Providing a forum for cardholders to surface issues
  5. Reward relationships: Incentivize and reward multiple product ownership by cardholders with points, special offers and discounts, preferred pricing, and priority customer service.
  6. Analyze data: Issuers are belatedly recognizing the value in analyzing cardholder spending patterns. The intelligence gleaned from this analysis in turn informs decisioning on both offer and messaging development.
  7. Develop multi-channel customer service functionality: Issuers should reflect cardholders’ diverse channel usage patterns in providing customer service.
    • Social media: create a dedicated Twitter card handle(s) and/or incorporate card service into the bank-wide customer service Twitter handle (it is also notable that some leading banks now have dedicated social media customer service reps).
    • Issuer website: create FAQs, online forms, and click-to-chat functionality
    • Phone: differentiate live customer service for different customer segments
  8. Survey cardholders: Rather than waiting for cardholders to provide feedback on needs/concerns and then reacting, anticipate upcoming trends in these areas by conducting regular customer surveys, and then applying the learnings from these surveys into marketing strategies and programs.
  9. Provide financial management resources: Issuers should publish information and develop resources to enable cardholder to better track and control their spending patterns. This also has the effect of positioning the issuers as a financial partner.
  10. Establish a winback program: An effective winback campaign should focus time and resources on cardholders who are worth winning back, and should involve a combination of direct mail/email and outbound calling. The call center agents or branch staff tasked with making the winback calls should also be trained on how to identify the reasons the cardholder left, and receive systems support on the most appropriate winback offer to make.

Continued improvement in credit quality metrics for leading bank card issuers

All of the leading bank card issuers reported continued improvement in key credit quality metrics for their credit card portfolios in 1Q11, as seen in the following charts.

As a result of these improvement, banks have slashed their provision for credit losses, which has significant boosted profitability.

However, banks’ credit card outstandings are continuing to decline.  In reporting financials, a number of banks reported that they expect outstandings to grow in the second half of the year, and in arecent months, we have seen signs of more aggressive acquisition activity (such as growing direct mail volume and re-appearance of lengthly 0% balance transfer offers).  However, banks will certainly be very cautious in their efforts to grow lending in the coming quarters, as they seek to avoid any repitition of the over-exhuberant lending climate taht prevailed in the middle of the last decade.

7 secrets for smart use of gamification

Enterprise gamification — the application of social gaming theories and techniques in business environments — is taking off, with Gartner projecting that 70% of Fortune 2000 organizations will have at least one gamified application by 2015.  However, Upstream recently reported that, while 78% of marketers believe that customers are more likely to respond to game-based marketing, only 27% have actually deployed the strategy. Reasons for this disparity include a reluctance to embrace new technologies and processes, as well as the lack of a blueprint on how to create and roll out such programs.

However, we are now seeing a broad range of firms from many industries deploying gamified programs to educate customers, train staff, introduce new products or service, as well as building greater engagement with customers, prospects and employees.  Some recent examples of gamification in action include:

  • Health care benefits provider Aetna teamed up with Mindbloom to offer the premium Mindbloom Life Game to improve personal wellness for customers and employees.
  • Extraco Bank of Texas used the Bonus Banking Game to promote benefits and improve conversion rates for a new checking account.
  • GM’s Buick created a series of smartphone games to educate consumers on e-Assist, its fuel-saving technology.
  • Verizon Wireless gamified its online entertainment and lifestyle portal, Verizon Insider, which resulted in significant increases in traffic on the site.

Based on EMI’s experience in developing and deployment gamification programs for our clients, here are a few best practices to guide your success:

  1. Clearly define your game objectives, or you’ll find it gets lost in chutes and ladders. Articulate your goals and make the desired changes in customer/employee engagement measurable. And don’t limit yourself to education…product testing, employee recruitment and customer acquisition can all be addressed with gamification.
  2. Remember the technology baseline and limits of your audience. User experience is key to success; if your audience is all mobile, test on the full spectrum of devices and keep the real estate and graphic limitations of smartphones and tablets in mind. If you’re targeting employee audiences in locations far and wide, download speeds can be a limiting factor.
  3. Make it fun, but not too easy. Everyone loves to win, but make it too easy and boredom will drive users away. Make winning too hard, and the game will also fail.
  4. Positive feedback is required. Who doesn’t like encouragement? Let players see their wins early and you’ll encourage longer sessions, more attention and greater learning.
  5. Mix up the rewards. Choose incentives based on the desired behavior changes and their value to you, and use “soft” rewards like badges and leaderboards to increase ROI. Of course, real incentives like miles, points or virtual currencies up the ante.
  6. Ensure that players understand the ultimate aim of the game. Players may view the knowledge or experience they gain from the game as additional incentive to play. For instance, if the ultimate purpose of your enterprise gamification program is to enhance customers’ financial literacy, players may be just as motivated to play by the education they will receive as they are by the points they earn along the way.
  7. Keep score on user engagement. Get feedback from users on their experience, and use it to improve future programs.