Chang Hwee’s Blog

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Managing Card Usage and Attrition

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Current situation

Like most credit card businesses, most players focus on generating greater card volume which means spending hugely on getting new customers. This strategy is vital especially to a fairly new customer base and where growth is needed before creating exponential value.

But having more cards in circulation does not mean creating value or profit to the business. It’s better to have 10 customers who are actively using their cards than 100 customers who are inactive when it comes to their card usage.

Whilst it is important to continue to acquire new customers, it is even more vital to manage the existing customer base. The beauty of credit card, as a product, is that it is “consumable” which means the same customer can deliver multiple profits each time he uses the card. The key word here is maximising usage and reducing attrition.

Sadly, most credit card players failed to recognise this and continue to spend majority of their A & P budget towards acquiring new customers. This strategy may not be effective especially in a already saturated card market whereby customers are numbed to “free” promotions, direct sales personnel “hawking” in shopping malls and the pending economic slowdown.

Maximising Card Usage

The way forward in maximising card usage is through Portfolio Marketing. Portfolio marketing is more targeted, direct and most importantly, personalised to each customer segment. This means targeted customers will understand our message clearly because it relates to them in various aspect of their life.

One has to understand that today’s consumers is more informed, educated and wants to make decisions on their own instead following the “herd” mentality. Therefore, the best decision to them is a well informed decision and this is the part where we, the marketers play in providing them information and indirectly influence their purchasing decisions.

Portfolio marketing is a process. Like any other process, it has its flaws and strengths but it is measurable and most importantly, helps us identify the flaws. Therefore, it is up to us to continue improving this process to a stage whereby it works autonomously like a Swiss clock. To create a process, one has to identify the key profile of the customer segment. Say, if we want to target a customer group based on profitability, it is best to create high-mid-low groups. Once done, the key elements of marketing actions kicks in. (i.e what marketing programs can we execute that will delight and influence this segment towards achieving our objectives) This is where understanding the customer’s needs are vital in determining the “carrot” of the marketing program.

In the end, our portfolio process will consists of several marketing programs combined but executed differently to test and control. This will also help the marketer to identify flaws and set to improve them better. To customers, it creates a sense of delight and appreciation which in my opinion, is the most valuable asset any one business can have: Loyalty.

Minimizing attrition

General rule of thumb; Customers are most likely to attrite during their 1st year and the likeliness to attrite will decline over the years.

The key of handling customer attrition is identifying the reasons of attrition or the stimulus which drives the customer to cancel their cards. It could be the annual fees charged, unsatisafactory services rendered, competitor’s promotions and many more. It is crucial to list top 3 main reasons of attrition and then develop a “cure” for these “diseases” And unlike the Ebola virus, these diseases are curable.

Once the cure is found, the next step is to develop a curing system with consists of channel support and a process which entails the customer’s journey towards cancelling his card. When it comes to channel support, I strongly believe that there must be a single, dedicated team serving to retain customers. The current retention channel lies with call centres and the issue with call centres is lack of retention focus since their primary goal is to handle and manage enquiries which covers many aspects of credit card.

When developing a curing system, one has to consider seriously on the 1) the cures 2) the process. To determine the cure is to identify the reasons of attrition. It’s a simple as that. But to develop an effective process, that’s another story. Basically, the process must be friendly to internal channels, makes the customer happy and know which customer to retain in the name of profitability. Besides channel support, other factors such as the retention offer and pre anti attrition measures must be taken into consideration.

The logic here is, if our usage and pre anti attrition programs are effective, then there will be no customers wanting to cancel their cards at the end of the day. And that’s the sole objective which every marketeer wants to achieve.


Written by changhwee

January 14, 2009 at 7:16 am

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