Credit Card Marketing (R)evolution—From List Based to Customer Centric

by: John Vance and Jim Delbridge

Today, credit card marketing revolves around traditional database approaches that involve a long and analytically intensive process of mass sending offers to customers.  This process lacks an efficient way to track, tailor, or monitor those communications without a considerable amount of effort and labor intensive statistical analytics.  The rise of the digital age has created a shift to a more real-time, customer-centric approach, which has caused marketers to rethink the way they do business.

Is there anybody out there? Today’s approach.
Traditional database marketing requires significant preparation time, and the results are only predictable in direct proportion to the quality of your statistical analytics capability.  This means you need to have plenty of specialized resources on hand, lots of preparation time available, and abundant capital to purchase the latest statistical analytics software. You start by developing a strategy for your marketing campaign and then stir in the most attractive, market-based offers you can afford to give away. These offers are typically determined through detailed predictive and profitability based analytical models that use response data from previous campaigns and that can take many hours to process.

Once you are comfortable that you have the right offers, you turn your attention to your population–figuring out who is most likely to respond to the offers you are going to serve up. You exclude from your population all those who don’t meet the criteria for the offer and hope that you have enough of a population to which to send to the promotion; otherwise, you may have to go back to the marketers to rework the offer.  Once you are happy that you have a reasonable number of potential customers, you sort them into offer cells to balance the right offers with the right customers, as determined in the analysis step earlier. You apply quality control to the cells and the files produced. If you take too long to do this, your deadline is in jeopardy. You may have to start the process all over again, as your data will be stale and out of date.

So, you’ve made it through the process outlined above and are ready to launch your campaign. Go ahead and fire the offers at your customers via email or direct mail, or both!

Next, sit and wait... Once the offers have reached their expiry date, run more analytics to see how successful your campaign was, figure out the rewards you now owe your customers, send the details to your outsourced payments processor, and assess just how many people responded to your campaign. If you managed a response rate north of 1.7 percent you did really well1.

You repeat this process after a reasonable period of time so that your customers have digested your last set of messages and are now hungry for more. Because this process requires significant manual activity, you hope other parts of your organization have not been sending conflicting messages (for example, about credit risk) to your customers–but if they have, you may not know about it until customers complain, or worse, the regulator makes you aware of it.

Perhaps this is an extreme scenario, but it is one that is all too common in banking today–one that is sure to make you ask, “Is there a better way?”

Let’s connect – Today’s changing.
For many years, database marketing has been the de facto way for any large B2C business to reach individual customers with targeted offers. There is still a vibrant industry in place to service it, and it will surely be around for some time to come. But the world has gone digital. The universal, constant connectivity that comes through the Internet, smartphones, and social media enables organizations to dialog with customers one-to-one, in real time.  Add in location based services and knowledge of customer behavior and history, and real customer intimacy is an achievable vision. Consider the following example:

Jane, an avid Apple fan and loyalty card holder, opens the app on her iPhone requesting offers available to her right now… “Hi Jane, we see you are close to the Apple Store on Washington Street. Spend over $1,000 on Apple products using your Apple Card and start paying back in 12 months. Click here for terms & conditions.”

Companies no longer have to be the only ones initiating the conversation, or if they do, it can be much more relevant and timely. Ever more demanding customers can initiate the dialogue based on certain preferences or actions. So now the brands that win are the ones that can respond in kind–providing offers relevant to the customer’s requirements, right now!

Let’s dialogue – Bridging the gap.
Building and sustaining relevance is indelibly linked to customer experience. And the prize is wallet share; being the customer’s card of choice.  But how do you stay relevant? The gap between today’s environments of manually intensive, error-prone and push-based campaigns and the promised land of digital strategy, location-based offers, and cross-channel integration is but a chasm. Lean and “run-the-engine” focused organizations can see the opportunities, but they often can’t mobilize to get there on their own.

We helped an “existing customer” marketing team of a large financial services company to develop a marketing automation program that will allow the business to achieve incremental change while building the necessary automation and process improvements to transform the business from list-based push marketing to multi-channel, real time dialogue-based marketing.

Having defined a vision of “Lights Out” marketing, the institution’s challenge was to articulate a roadmap that enables the business to transform processes, data, and technology to take advantage of the new capabilities. West Monroe Partners developed a three-phase approach:

  • Fix the basics – reengineer processes for existing programs and campaigns, plus quick win improvements.
  • Perfect the model – select and implement campaign management software that automates today’s outbound campaigns and enables new event–triggered campaigns while preventing communication collisions2.
  • Break away from the pack – Innovate around digital channels and add real-time capability, enabling a one-to-one dialogue with the customer via the customer’s preferred channel(s).

Our approach provides scalability, efficiency, revenue growth, and the ability to deliver true customer contact strategies. Our clients have already benefitted from significant reduction in campaign cycle time, fewer errors, and fresher, more accurate data as they build a solid platform to fully leverage digital channels and strategies.

Notes:

1 The Direct Marketing Association statistics for 2010 indicate that email sent to a database list had an average 19.47% open rate, 6.64% click-through rate, 1.73% conversion rate and unsubscribe rate of 0.77%. Meager pickings indeed.
2 A communication collision occurs when positive and negative actions are in close proximity, for example sending balance transfer checks one week and executing a credit line decrease the next.

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