After talking with a friend who's helping some marketers in the credit card world, I decided to delve into the depths of this interesting space. Like many of the industries and sub industries we cover, it's pretty interesting as it's a very different model (in terms of revenue generation) than the traditional marketing and sales models that we're are usually discussing.
What makes this space so different is its take on the concept of risk and reward. On the reward side, there is tremendous potential for revenue. In 2013, the total revolving debt in the US was over $880 billion and since interest charges on this debt is the primary revenue generator for credit card issuers, that's some respectable reward. On the risk side, there's always the potential for a customer to default on their payments. Over the last few years, credit card issuers have been sitting around 3-4% for their charge-off rate. That's the percentage of dollars owed that issuers have written off as uncollectable.
The trick, for these companies is to find (and keep) customers who tend to carry a balance, yet pay their bills. However, there are definitely some challenges marketers need to overcome in order to succeed. Let's cover some of the top challenges.
Shrinking budgets are making traditional channels less feasible - Traditional channels such as direct mail have become more expensive, while marketing budgets for many issuers have been declining. Marketers need to increase their efforts in alternative, less-costly channels such as digital (email, display, social) and in-person branch/store offers.
Targeting low-risk, high-value prospects while still keeping acquisition costs low - Typically, marketers are given low target COA goals which generally tends to result in targeting lower-value, high-risk prospects, rather than the low-risk, balance-carrying customers they are really looking for.
Presenting relevant and attractive offers to target prospects - Far too often prospects are targeted with offers that do not fit their needs in a credit card. Most often these offers are simply irrelevant but can at times be offers for products they already own. It's 2015. There's never been more available data on customers and prospects. Smart issuers with leverage digital body language to gain valuable insights and present relevant offers.
Cutting through the clutter of competitive marketing to be seen by prospects - In today's marketing landscape, the noise that marketers have to contend with is at an all-time high. Getting a compelling offer in front of a prospect can be daunting - especially through traditional channels like direct mail. But even with digital, it's so difficult to be heard above the din. Marketers can find more success with super-tight targeting and segmentation while presenting relevant, personalized offers.
Leveraging Big Data for Intelligent Cross-Sell Opportunities - For many financial institutions, there is immense opportunity for cross-sell into credit products. However, presenting the right offer to the right existing customer at the right time can be difficult if not impossible for marketers due to the lack of connectivity between their disparate, internal systems. Smart issuers will do what it takes to make integrations happen from their MAP, CRM, ERP, LMS and other systems in order to take advantage of cross-sell opportunities.
To sum up, credit card marketers are challenged with identifying ideal customers and targeting them with relevant content and offers that stands out above the noise. Unless they're leveraging today's modern marketing strategies and tools, they'll have little chance at success.
I'm sure there are many other challenges that credit card marketers are facing. What other important challenges have I missed?