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Andrew Davidson 
Susan Menke 
Susan Wolfe 
Lisa Hronek Posts Tagged ‘Credit Cards’
Are you preferred?
The word “preferred” seems to be catching on when it comes to credit card marketing. Using “preferred” to convey a higher level of status isn’t new; however, the increasing number of recent product launches that have the word baked into the card name suggests that a trend is emerging.
Here is a list of preferred cards hitting U.S. mailboxes in 2011. Note that five of these seven products were launched/re-launched since the official end of the recession.
- American Express Blue Cash Preferred
- American Express Blue Sky Preferred
- American Express Starwood Preferred Guest
- Bank of America Business Preferred World MasterCard(charge card)
- Chase Sapphire Preferred
- Citi ThankYou Preferred
- Citi Diamond Preferred
Some history…
There was a time when owning a gold credit card meant something. In the 1990’s, if you owned a gold card, you had financial clout and the cache that went along with it. Then, Visa removed the $5,000 minimum credit limit requirement for gold cards and suddenly they were being offered to the masses. Platinum cards followed the same path – most subprime credit card offers these days are for platinum cards – prompting Visa to launch its Visa Signature card and MasterCard to launch its World and World Elite products, to distinguish premium cards from traditional offerings. These network platforms haven’t disappeared but their use in a marketing campaign is less obvious in today’s environment.
Given the ongoing economic uncertainty, most issuers continue to focus on premium cardholders and competition for new premium cardholders has become particularly intense. Issuers have been looking for new ways to differentiate themselves and the result has been a shift towards a tiered approach, based upon a single product, available with multiple pricing options. For example, there are four versions of the Citi ThankYou card: ThankYou, Preferred, Premier and Prestige, each offering different benefits and fees. Similarly, there are three versions of the new Bank of America Business Charge Card. Both Chase and American Express use the term “preferred” to distinguish the fee-based versions of their products from the no-fee based cards.
A tiered approach to card marketing is becoming more popular, as issuers attempt to carve up the premium segment. As a result I expect that we will see more issuers use the word “preferred” in their marketing materials in the coming months (or at least until something else becomes more popular).
Will Canada’s postal strike lead to the end of credit card direct mail in Canada?
Credit card direct mail in Canada has not rebounded from the recession in the same way that it has in the United States. In Canada volumes plummeted in 2009 and have remained flat ever since. Any hope of a recovery in 2011 has been severely delayed by industrial action that has crippled the Canadian postal system. Industrial action began on June 3, when almost 50,000 Canada Post employees commenced a series of rotating strikes, after the union and management failed to hammer out a new contract. The National Association of Major Mail Users (NAMMU), which represents the direct mail industry in Canada, is projecting 15,000+ layoffs as a result of Canada Post’s estimated 50% reduction in mail volumes during the strike. Factor in the growth of emerging channels, such as online advertising, and it is understandable that some might predict the demise of credit card direct mail, particularly for acquisition. However, it is my view that there will still be a recovery at some point. Here’s why:
U.S. issuers
Credit card direct mail in Canada has always been fueled by the presence of the U.S. monolines. Back in 2000 Canadian banks were forced to respond to the threat from MBNA and Capital One and the result was an expanding mailbox that eventually peaked in 2008. In 2011, in the lead up to the strike, Capital One and MBNA, along with American Express have been dominating the mail. I doubt the Canadian banks will sit back and allow their customers to be tempted by these competitive offers in the long term.
Duality
The new rule allowing banks to issue both Visa and MasterCard branded credit cards has added a new competitive element to the market. Both CIBC and RBC have been promoting MasterCard branded cards and MasterCard accounts for the majority of card offers in the mail in 2011, up significantly from prior years. Visa will be looking to redress the balance by encouraging card issuers to promote Visa over MasterCard.
Cobrand cards
Cobrand cards have not traditionally been big Canada. However, recent partnerships suggest that this might change as issuers seek out new strategies to gain an advantage. In the past year we have seen card issuer’s partner with WestJet, Delta, Costco and Sears to name a few of the more notable launches. Capital One acquired the HBC portfolio and recently announced that it would be launching a card in partnership with Intercontinental Hotels. All of these cards need to be promoted and direct mail remains a key channel for bringing them to market.
The personal approach
Direct mail is now competing with emerging channels for the marketing dollar. The great strength of direct mail is its ability to offer a personal message. Comperemedia has been tracking the decline of non-personalized mail as a proportion of total mail volume. It appears that some of the Canadian issuers that still rely on mail are realizing the benefits of the personal approach. It is the ability to offer a personal message that will sustain direct mail in the coming years.
So, despite the strike, there is evidence to suggest that we are not seeing the end of credit card direct mail in Canada. Direct mail will continue to be a valuable part of the credit card marketing mix for some time to come.
What does the back of an envelope say about strategy?
We often talk about the messaging on the front of the outer envelope (OE) and its ability to make a campaign stand-out amidst a crowd of competing offers. However, messaging on the back of the OE can reveal more about a company’s targeting strategy, particularly in the credit card industry.
Competition for credit cards is heating up – just over 1.4 billion offers for new credit cards were received by US consumers in Q1 2011, according to Mintel Comperemedia, up from 826 million in Q1 2010. Card issuers are increasingly using bold and creative messages on the front of the OE in order to gain attention. After all, for a consumer to accept an offer the first step is for him/her to open the envelope. There are many strategies, but typically, issuers might promote their most attractive benefit on the front of the OE e.g., 25,000 bonus miles, a $200 gift card or a 0% introductory APR. Alternatively they might leave the OE completely blank so that consumers think the mail piece is a bill or other important notification.
The back of the OE, if used at all, is sometimes reserved for second tier benefits that don’t, by themselves, justify space on the front. However, the benefits promoted on the back of the OE can reveal some additional insights about the targeting strategy of a particular offer. Take the following examples from Chase:
Chase has been ramping up its efforts to promote its Disney Rewards Visa card. The front of the offer is saved for the $200 Disney Gift Card incentive and a window reveals a glimpse of Mickey Mouse. Displayed on the back of the envelope are eight miniature images of Disney card designs along with the message to “Choose your card design. See details inside.” In other words, if Vintage Mickey doesn’t encourage you to open the envelope then maybe Finding Nemo or Tinker Bell or Toy Story will – either way it’s more about Disney than it is about the credit card.
The Chase Freedom card which promotes 5% cash back and an additional cash incentive after first purchase (ranging from $100 to $300) on its OE is clearly targeting a different crowd. On the back of the OE Chase provides a list of additional benefits including text message alerts; customizable account alerts; 24/7 account access and fraud protection. Chase is targeting consumers that value round-the-clock access and flexibility, echoing the “freedom” theme.
Contrast the Disney and Freedom offers with an offer for Chase Sapphire, which promotes 25,000 bonus points on the front of the OE, but on the back states that “when premium services matter to you, Chase Sapphire makes sure you get them,” emphasizing direct access to expert advisors; worldwide acceptance and no caps or points expiration. Here, Chase is targeting consumers that value service and the status that comes with premium card ownership.
The challenge, for any credit card offer, is to stand-out in a mailbox already stuffed full of credit card offers. As a result, the front of the OE often grabs the headlines. However, credit card marketers can gain additional insights into competitor strategy by paying attention to the second tier benefits that can sometimes be found on the back of the OE.
Consumer Financial Protection Bureau Gears Up For a Flying Start
On February 22nd, the government’s new Consumer Financial Protection Bureau (CFPB) welcomed leaders from the credit card industry to the Treasury for a conference on the CARD Act. Last week, presentations from the conference were published on the CFPB’s new website (consumerfinance.gov) where you can also watch Elizabeth Warren’s Key Note address. Mintel Comperemedia was honored to kick off the conference with a presentation on “The Supply of Credit in the Card Market.”
The CARD Act conference – called “The CARD Act: One Year Later” – signified an effort by the CFPB to establish a starting point for dialogue that is based on fact, and to set the tone for the CFPB moving forward. Attending the conference were CEOs, CMOs and senior executives from the major card issuers and credit unions as well as credit bureaus, consumer advocates, regulators and academics.
Presentations covered the cost of credit for consumers, the supply of and demand for credit, and industry profitability. The CFPB summarizes the key findings on its site and you can now download the presentations. Here are the key points from my presentation:
- Competition is increasing – credit card acquisition mail volumes are up for the fifth consecutive quarter and we are starting to see subprime offers back in the mail.
- The landscape has shifted – rewards are the norm and plain vanilla cards (with no rewards and no annual fee) represent a niche market. A no-fee rewards card is the new “vanilla” of the credit card market.
- APRs are higher; BT and Cash Advance Fees have increased – revolvers and subprime consumers, in particular, have been impacted by rising fees and the difference between subprime consumers and the rest of the market is more polarized than before the recession.
- Most offers promote 0% teaser rates; teaser rate terms are also becoming more favorable for consumers with an increasing number of introductory balance transfer offers extended for thirteen months or more. In a competitive environment with improving terms – and many offers loaded with features and benefits – we are, arguably, seeing some of the best offers for new credit cards that we have seen at Comperemedia.
Understandably, with the competition in the room, many of the senior executives attending the conference gave little away regarding their post CARD Act strategies. The senior executives I spoke with were quick to praise the CFPB for proactively reaching out to them for their perspective and for promising a balanced approach. Under the Dodd-Frank Act the CFPB receives its full powers on July 21st, 2011. It is gearing up for a flying start.