As credit card issuers, we dedicate significant effort to driving new account volume. We focus heavily on the success of each marketing campaign based on overall response and the cost to acquire new credit card accounts. However, do these metrics tell us enough about how we should be investing our marketing budget?
It’s important to consider not only the acquisition channels you employ to drive new account growth, but also the channel’s influence on the underlying performance of these accounts. Also, which channels should you leverage against each consumer segment as you finalize your marketing plan and invest your acquisition budget?
The following are key performance metrics to consider when evaluating your marketing channels:
Demographics (the best channels to reach each segment)
Cost per new account
Account financial drivers
Per account profitability
The third and fourth bullets are often overlooked, yet are the most important to creating a healthy portfolio. Have you analyzed the account performance (losses & revenue line items), segmenting the data by acquisition channel? The results may ultimately cause you to shift your marketing strategy.
The following is an illustration of how account behavior may vary dramatically based on the channel:
This graph to the right would likely lead to conclusions that accounts sourced by direct mail are more profitable than those sourced within your branches. However, while direct mail accounts tend to have higher balances, this graph only tells half the story. Direct mail accounts cost significantly higher to source (upwards of $250 per account) and tend to have higher loss rates. It is also important to note that the higher balances are likely being driven by promotional rates or balance transfer offers as part of the acquisition “teaser” to entice the new card member. The key to long-term profitability of these accounts hinges on the percentage of balances that stay on your balance sheet after these promotional rates expire.
Based on the investment and the overall account performance by channel, the actual return, on a per account basis, favors branch-sourced accounts (likely 50% to 70% higher return on a risk-adjusted margin basis per active account).
This is not to say that direct mail and other channels are not to be included in your acquisition plans. Differing segments require consideration for which channels best reach and deliver the message. Your branch may be the best channel to reach new card members and to engage segments that are accustomed to banking in your branch, such as baby boomers, while other channels may best reach other consumer segments. Younger consumers, more akin to banking via electronic mediums, may be best targeted through social media and online channels.
Regardless of what channels you leverage to drive program growth, it is important that your analysis and planning take into consideration investment and return at a per-account level to make sure you’re optimizing your credit card marketing budget.
About the Author:
Elan Financial Services is a leading credit card provider in the industry and offers partners the availability of immediate access to a suite of credit card products that competes with national credit card issuers, technology solutions that cater to audiences across the spectrum, and free access to a marketing engine that helps generate new accounts. Elan has created unique platforms to help its partner institutions compete in the digital space.
For almost 50 years, Elan has delivered exceptional credit card products and service to more than 300 credit unions. For more information, call 1-800-223-7009 or visit www.cupartnership.com.