The saturation of the US credit card market, together with the increasing costs of customer acquisition, are leading credit card issuers to concentrate more on existing customers than ever before, according to a market report distributed by Research and Markets.
The report, entitled 'Credit Cards: Loyalty And Retention In The US', focuses on the challenge of customer retention in the credit card industry, and discusses consumer attitudes to credit card-based rewards programmes.
Aiming for better retention
The report also examines current opportunities for credit card issuers to improve profits by focusing more on their existing customer base. These efforts reduce churn rates (i.e. the number of customers that stop using a specific card), and can also increase the profitability of existing customers.
The authors found that credit card companies are now using any of several methods to accomplish their customer retention goals, such as:
- Creating rewards that have 'soft benefits', making it easier to use the card, such as payment reminders or cash-back for good credit management;
- Making it easier for customers to earn rewards, either by lowering the number of points or miles needed or by offering more opportunities to earn points or miles in the first place;
- Cross-selling products and allowing customers to earn extra points or miles by participating in or purchasing other products;
- Increasing their focus on relationship banking, making the credit card one of several products tying a customer to a particular financial institution.
Segmentation approach
The report's research showed that credit card customer retention depends mainly on creating messages and rewards that are attractive to individual segments of customers.
The report identified divergent behaviour among various customer segments, and found the most potential in teens, students, Hispanics, small businesses, and 'unbanked' consumers. The authors have also outlined a number of strategies to help increase reward redemption, which is viewed as being critical to customer retention.
Credit card companies specifically examined in the report include: Bank of America, JPMorgan Chase, Citigroup, Capital One, Discover Financial Services, American Express, Washington Mutual Bank, Wells Fargo, HSBC Credit Card Services, and USAA Federal Savings Bank.
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