By Odysseas Papadimitriou, CEO of CardHub.com
Constructing an effective credit card marketing strategy isn’t as simple as throwing a precious metal into a card’s name or casting Alec Baldwin for television spots. That’s not to say such tactics cannot be effective, but rather that real success stems from the creation of an environment in which marketing is not a separate function, but an integrated part of all credit card operations, ranging from underwriting to product development and customer retention. In short, the best marketers engage in activities and institute polices that foster the most efficient use of marketing dollars possible.
There are, of course, many ways to do this – some innovative, some tried and true – and a lot depends on your company’s corporate philosophy, structure, financials, etc. However, there are 5 tactics in particular that you would be remiss in not implementing immediately, if you haven’t already done so.
1. Focus each product on a single consumer need
By focusing each credit card offer on a distinct consumer need, you garner both the ability to present more effective value propositions to consumers and a customer base that behaves as predictably as possible, thereby making it easier to forecast card profitability as well as adjust marketing strategies based on early returns.
This is obviously difficult to achieve if the same card is trying to address disparate needs. For example, if a card provides lucrative rewards as well as low introductory interest rates, you’ll wind up with some customers who spend a lot and always pay their bills in full, some who spend and only pay the minimum, and some who transfer balances with no guarantee that they will keep their cards following the expiration of intro rates.
On the other hand, if you offered three different cards – one high-interest rewards credit card, one 0% credit card for new purchases, and one balance transfer credit card – you’d garner three highly-predictable customer groups. That, of course, would allow you to target underwriting and marketing more effectively, better manage risk, and ultimately make more money.
2. Bring together marketing and underwriting
Too often the marketing and underwriting teams at credit card companies are disparate entities that have effectively little, if anything, to do with one another. You know what this leads to? Applicants that do not fit the underwriting criteria used to develop offers and underwriting conservatism that could easily be avoided.
A credit card’s marketing message significantly affects the type of consumer that will apply for it. And if the only direction given a marketing team is that each account cannot cost the company more than $100, for example, they’ll likely meet that constraint, but in doing so may attract riskier, less profitable customers. This would, in turn, necessitate an underwriting adjustment to the point that each account could no longer cost more than $70, which would push the marketing team to rely more heavily on the lowest-hanging fruit – even riskier, less profitable customers than before. The only way to break this vicious cycle is to integrate those two separate teams.
3. Offer secured cards
All credit card companies should offer secured credit cards for two very simple reasons: 1) they provide profitable access to a significant consumer segment without adding any risk and 2) soliciting secured card customers who prove their creditworthiness will become one of your most efficient marketing channels. It’s a can’t-lose strategy made even more essential now that the CARD Act has mitigated both the profitability and popularity of unsecured credit cards for people with bad credit.
4. Appeal to former debit card users
In the past, consumers have gravitated to debit cards instead of credit cards for three main reasons: 1) a desire not to have to pay bills; 2) the urban legend that debit cards provide fraud protection superior to that available via credit cards; and 3) the decreased risk of overspending.
However, recent overdraft and swipe fee regulations have resulted in a mini-exodus from debit cards, driven primarily by the near-extinction of debit card rewards. This means a significant opportunity exists for credit card companies to add valuable new accounts to their rewards portfolios. The key to addressing the aforementioned consumer concerns is a combination of auto-pay plans, customizable limits, and education about the relative merits and risks of both credit cards and debit cards. Marketers can thereby ensure that rewards are the deciding factor in people’s minds.
5. Leave no customer empty handed
When a customer comes to a bank in search of a credit card, you’re seeing the fruits of a lot of time and money spent on marketing. The most irresponsible thing you can do at this juncture is turn the consumer down for whichever card they apply and offer no profitable, attainable alternative. At the very least, a secured card will be fitting, and by exhausting every opportunity to turn potential customers into customers, you’ll drastically increase the efficiency of marketing dollars.
Ultimately, it’s no secret that the credit card company making the most out of every marketing dollar spent generally wins, as that company can simply outspend the competition. It’s therefore key that marketing executives think not only about their advertisements and value propositions, but also about product terms, card profitability, and customer experience. In short, mechanisms like those discussed in this article could significantly increase marketing budget efficiency.
Odysseas Papadimitriou is the former head of online marketing
for Capital One and the current chief executive officer of Card Hub,
a leading credit card comparison marketplace and home to the
largest gift card exchange on the Web.
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