Impact of credit card legislation on the Marketing Mix

Marketing 101 teaches us about four P’s of the Marketing Mix: Product, Price, Place and Promotion, with Positioning thrown in for good measure.  The passage of new credit card legislation means credit card issuers will have to do a refresher course on these elements, in order to figure out how to market credit cards in a radically changed environment.

Positioning: Credit cards have become a tarnished product category in recent years, having been associated by many with the excessive availability of credit. Issuers will need to figure out how to position credit cards as a useful and flexible source of credit. The largest issuers have traditional run their card units as standalone operations, but we also envisage this will change radically, with credit cards increasing integrated with other financial products and services.

Product: The restrictions on issuer’s ability to generate interest and fee income may lead to the emergence of stripped-down cards with fewer features and rewards. In addition, concern over defaults could lead to growth in secured cards as well as a hybrid cards with secured and unsecured components.

Pricing: The card offer is expected to change significantly with annual fees, less attractive introductory offers and higher APRs.

Place: Banks’ desire to go “back to basics” and focus more on a relationship banking approach means that the branch and online banking platform become increasingly important cross-selling tools.

Promotion: Comperemedia reported in DM News that credit card direct mail fell 72% year-over-year in 1Q09. While an economic recovery could lead to some issuers increasing their DM volume, there is little prospect of DM reaching the historic high levels of 2006. According to Cards and Payments, credit card advertising did increase in 2008, but with most issuers cutting back on acquisition activity and reducing  noninterest expenses, we expect a decline in ad spend in 2009.