Session #4 Marketing, Segmentation Member …...Timothy Kolk (603) 924-4438 [email protected]...

Timothy Kolk(603) [email protected]

2017ONLINE CARD SCHOOL

Session #4

Marketing, Segmentation& Member Expectations

September 2017

TRK ADVISORS

TRK ADVISORSTRK ADVISORS

The Online Card School Purpose

• Provide market intelligence including performance trends, competitive events and market evolution.

• Build staff skills and expertise in managing your credit card program to growth, profitability and member value.

• Share proven tactical approaches and specific action items which you can use immediately.

• Design and provide fair and competitive products that your entire organization can deliver with pride.

• Put you in a position to demonstrate your program’s future potential and advocate for the resources you need.

2

CO-OP Financial ServicesStrategic Vision: Your Growth Is Our Growth

SEAMLESS SECUREGreater

Integration

Simplified Client Experience

Business Intelligence

One CO-OP

Ease Of Expansion

Better Authentication

New Tools

Consultation

Business Intelligence

Reporting

TRK ADVISORSTRK ADVISORS 4


Logistics

• We target 45‐60 minutes, and will stick around for Q&A longer if people keep asking questions

• Feel free to ask questions via the Questions box during the session. We’ll try to get to them on the fly if we can.

• Slides were sent to all registrants before the session. They are also available to download from the Handouts section.

• Sessions are being recorded and you will have access to the library throughout the year. Upload in about a week.

You need to register to get your password!www.onlinecardschool.com

• Anyone from your organization can listen in: one subscription covers all of your colleagues.

5


2017 Sessions

March 30 CARD MARKET OVERVIEW

May 18 CALCULATING PROGRAMPROFITABILITY

June 29 MATCHING PRICING & PRODUCTVALUE TO RISK LEVELS

Sept 7 MARKETING, SEGMENTATION & MEMBER EXPECTATIONS

Nov 16 LOYALTY TODAY: STAYING RELEVANT

6


What We Covered Last Three Sessions

1. Strong but difficult market• Several years for strong growth & low risk• But: much of the credit union growth rate and credit risk advantage has eroded• Profitability still strong, but declining with competition.• Reward propositions are driving marketing, acquisition, and usage.

2. Profitability under pressure• Rewards are increasing expenses, but if you don’t meet the market….• Issuers grappling with trade‐offs between profits and member value• Critically important to have reliable (and relied upon) profitability reporting

3. Aligning risk‐levels to APRs is a core skill• Ensures you are being fair to you, cardholders, and all of your members• Can decide how much you have to offer for rate, rewards and other value!

Happily, we see ever increasing skill levels at many credit union issuers (but maybe the unskilled just, kind of…go away).

7


THIS SESSIONWith a strong set of performance measurement tools in place, it is nowtime to ensure that card products are properly matched to member andmarket expectations. The competitive market has proven over the pastfew years that one size does not fit all! Understanding cardholders’perspectives, the types of behaviors that demonstrate their expectations,and ultimately matching value propositions and communication themesto those segments will define go‐forward performance for all card issuers.The large banks do this as a matter of course, and we need to developthese skills to keep pace, protect our programs, and defend our overallmember relationships.

This is all‐star territory!

8


In Today’s Discussion

• Review of last year’s detailed segmentation case study

• Survey of how large issuers are communicating their card value propositions

• So, what’s a credit union to do?

9


REVIEW OF 2016 SEGMENTATION EXERCISE

Maybe go back and review the recording?

10


Segmentation, Not One Answer

It’s Simple, Really• Credit cards are a financial tool

• Like any tool, different people use it different ways

• Unfortunately, they aren’t always honest about how they use it (even with themselves)

• It is up to you to figure out how they use it

• Only then can you develop your own ‘set of tools’ to meet those varying expectations.

For Credit Card: 20% creativity and 80% execution.11

TRK ADVISORS

50%? 25%? 25%?

Understand: Different Purposes for Card

High Risk Low Risk

Convenience Users(Transactors)

What are your #s?

First View: Types of Cardholders

12

Better Credit Union Success Worse

All Consumers

Credit Users(Revolvers)

Declines

TRK ADVISORS

The Institution• $1B+ CU with 200,000 members and 30,000 card accounts

• Overall performance strong

• Looking to to best serve their members

• Card portfolio > $100 million

• Card profits are strong: 5% ROA

• Very fact‐based organization: opinions after facts

• Have internal evaluation and prioritization process

Case Study/Walkthrough

13

TRK ADVISORS

First Step: Define & Gather Data• Internal Card File: data on 30k cardholders

₋ Open date, line, rate, balance, purchase $, cash $ volumes, balance transfer $, interest paid, fees paid, delinquency history, payment rate, status, DQ, other products,…

• Internal Member File: data on 200k members (incl. above)₋ Member date, member duration, other loans, depository balances, debit

transaction velocity, Raddon segmentation, Internal profitability measures, Acxiom segmentation, Occupation, …

• Experian Data: On all members₋ Credit score₋ Income and Debt‐to‐Income estimators₋ Credit Card Use (TAPS & Trendview)


14

TRK ADVISORS

$0

$50

$100

$150

$200

$250

$300

$350

390 440 490 540 590 640 690 740 790 840

Millions

Spend by Score Range: All Members

Bellco Spend Other Spend

First Step: Get the Team Interested

Credit Union

$0

$20

$40

$60

$80

$100

$120

390 440 490 540 590 640 690 740 790 840Millions

Balances by Score Range: All Members

Bellco Balances Other BalancesCredit Union


Showing how members needs are not being met can be pretty motivating!

15

TRK ADVISORS

0%

5%

10%

15%

20%

25%

30%

390

410

430

450

470

490

510

530

550

570

590

610

630

650

670

690

710

730

750

770

790

810

830

Penetration Rates by Score Band

Pen %


And who knows what else…

Every situation has to follow it’s own findings.16

TRK ADVISORS

Total Member Base200,000

Has Credit Union Card30,000

No Credit Union Card170,000

Too Risky?40,000

$200MM in Spend$100MM in Bal.

Risk OK100,000

No Other Cards7,000

Has Other Cards93,000

Credit User40,000

Convenience User53,000

High Use35,000

$1.2B Spend$200MM in Bal.

Low Use18,000

$50MM Spend$40MM Bal.

High Use22,000


Low Use18,000


Continued on next pageNote: 30,000 fall out due to no score or other issue

17

TRK ADVISORS 18

Total Member Base200,000

Has Credit Union Card30,000

Inactive10,000

Long Time6,000

Recent4,000

Active20,000

Revolver12,000

Transactor8,000

No Other Cards1,500


Low Use1,500

$6MM Spend$5MM Bal

High Use3,000

$100MM Spend$80MM Bal

No Other Cards1,000


Low Use1,500

$5MM Spend$3MM Bal

High Use1,500


High Bal.9,000


Low Balance3,000


High Spend2,000

$20MM Spend$3MM Bal

Low Spend6,000

$60MM Spend$8MM Bal

18

TRK ADVISORS

Now You Know• Which members are likely to have balances elsewhere

• Which members have spend elsewhere

• If you product set’s performance is particularly strong or weak in certain market segments

• What risk segments you are doing well with, and which you are not (and if the results are ok with you)

• Who in this mix is a likely revolver, transactor, rate surfer, etc.

• External labels may not match what you see in actual behavior!

Once This is Done…

19

This information can greatly focus efforts, improve results, and ensure strong marketing program ROI.


HOW ARE LARGE ISSUERSPOSITIONING THEIR

PRODUCTS?

20

TRK ADVISORS 21TRK ADVISORS

Large Issuer Positioning Tells a Story

Capital One Travel CardInsert Letter

• Beach!

• Clean, not a lot of reading

• Notice the order of things above

• Repetitive (no annual fee 3x)

• Strong bonus point offer

• Best rate is P+ 8.24% (what’s yours?)



Capital One Cash Back• Clean, but a bit more

to say

• No aspirational picture

• Consumer rating to create trust

• Clear value: 1.5%

• Bottom six icons are clear

• No fee, nothing confusing, easy to understand

• Is your site this easy?



• More small icons. Must be testing well.

• Simple messages

• Clear value

• Consumer rating

Chase Cash Back Card



• Lead with promo

• Re‐emphasize promo

• Go‐to rate nothing great

• What else resonates? FICO scores, no fee, no penalty rates.

• None of the reward products ever talks about such things.

• Different messages for different segments!

Chase No Rewards Card



• Travel card: Picture

• Cash Card: Text

• 3‐4 simple proposition highlights

• First: earning value

• Second: more value

• Third: Easy to use

• Man, these consumer ratings are everywhere

Discover Travel & Cash Back


Four Credit Union Pages

TRK ADVISORS

• Two pictures….of a credit card! And they’re boring!

• Reward card text starts with promo rates

• What’s the reward value? Huh. Good question.

• Some real important information*: “Balance calculated as Average Daily Balance”, “Points can be redeemed for ….coffee brewers…”, “designed to thwart would‐be counterfeiters”, “reverts to 2%”, …

• Footnotes! $&^$!%@ Footnotes!

Holy Moley

30

* If you are only reading this and not listening to the recording, please understand this is the speaker indulging in juvenile and cynical sarcasm. A bit of a personal weakness, to be sure. Thanks for understanding.


But It Can Be Done!

31


But It Can Be Done!

32


WHAT’S A CREDITUNION TO DO?

33


No Need to Reinvent the Wheel

• Your member segmentation work creates an understanding of different member segments

• Different segments respond to different value elements

• Copy the approach of the big banks. LESS IS MORE

• Rewards: Value, no fee, ease of use

• Rate: Intro rate, no fee, go‐to rate, maybe FICO score?

• Separate them!

• No one picks a card based on warrantee insurance and the like. Stop talking about it.

34


Reward Cards: How to Fail

• Have a weak value proposition (do you use it?)

• Make redemptions tricky to understand/use

• Don’t make value clear in first 10 seconds

• Send people to a demo web site, point out it’s a third party, make it only semi‐functional (or worse)

• Weak staff training

• Allow CFO to think of rewards as an expense, not an investment (P&L anyone?)

35

Perfect marketing of an uncompetitive product is a waste. If necessary, fix this product first.


Low‐Rate (no reward) Cards!!!

• The large issuers are not good at this segment

• Mainly because most consumers don’t want them

• But many credit unions have significant amounts of rate‐conscious members

• While rewards are driving much of the market growth and new account volume, do not forsake this segment!

• Protect who you have (but make sure they know you have rewards if they change)

• Value = strong credit lines, promotions to gather balances, and fair rates & fees. These are your messages.

36

2017 TransUnion study found that credit union cards have higher average balances than bank cards at every risk level: Subprime through SuperPrime


Then You Get to Have Fun

Matching Proposition to SegmentSegment Examples Proposition (examples)Revolver/Credit User Rate (Intro, BT, Special period); Refund of interest; Points on BTsTransactors Annual bonus, 2x for holidays, 5000 after 20 purchases…Inactives Points, No fee BT with great rate (depends on use elsewhere)Valued demographic 25‐50% point bonus above base level every quarterAffinity College gear, special access, points auctions…Millennial Low threshold rewards; Budgeting/info tools; Local merchantsCredit builder Interest refund with prompt payment; Product graduationNew members Great BT rate and duration if you “Cut up other cards”Mature Promo gift cards for Dunkin Donuts/Starbucks/EtcEmployees Best rate and rewards; pay incentives in reward points

37

Please don’t do the fun stuff first. That’s how Marketing gets a bad reputation.


What Happens If You Don’t?

38

• New account volumes are up 11% from Q2 ‘17. Are yours?

• Total accounts are up 8% from last year. Are yours?

• Balances are up 8% year‐over‐year. Are yours?

• Q2 purchase volumes up 12% from Q1. Are yours?Card can be 25% or more of all credit union net income.

Did you prove that? Did you stress that? Planning season is here…


We’re Getting There…

March 30 CARD MARKET OVERVIEW

May 18 CALCULATING PROGRAM PROFITABILITY

June 29 MATCHING PRICING & PRODUCT VALUETO RISK LEVELS

Sept 7 MARKETING, SEGMENTATION & MEMBER EXPECTATIONS

Nov 16 LOYALTY TODAY: STAYING RELEVANT

Online Card School 2017 Sessions

39


THANK YOU

40

Session #4 Marketing, Segmentation Member …...Timothy Kolk (603) 924-4438 [email protected]...

Documents

Transcript of Session #4 Marketing, Segmentation Member …...Timothy Kolk (603) 924-4438 [email protected]...