Using ‘Key Performance Indicators’ to Improve the Credit Card Customer Experience

In an ideal scenario, credit card issuers would excel at servicing all aspects of the customer experience. However, data from J.D. Power’s Credit Card Satisfaction Study consistently finds that every credit card issuer has both strengths and weaknesses with regards to the level of service provided to their customer base.

And because no issuer has unlimited resources to devote towards improving the customer experience, determining which initiatives should receive top-priority becomes an important piece of strategic planning.

The 2014 Credit Card Satisfaction Study has identified 12 ‘Key Performance Indicators’ (KPI’s) which represent service behaviors that have the greatest individual impact on customer satisfaction. In other words, “if you can’t do everything right, make sure you are doing these things right.”

As a whole, the industry struggles most with educating customers on card terms (i.e. rates, fees, etc.) and simplifying the login process for online account access. Only 50% of credit card customers completely understand their credit card terms, and only 53% of customers report that it is very easy to login to their account. It is also important to note that these are two of the most impactful KPI’s, based on their potential impact on overall satisfaction.

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The KPI performance of each individual card issuer varies widely, and each has a unique set of strengths and opportunities. In order to successfully prioritize any investments towards improving customer satisfaction, it is important for each issuer to fully understand which of their metrics have the greatest room for improvement while also understanding the potential ‘impact’ of each metric.

 

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Customer Satisfaction with Credit Card Issuers at Record High

American Express and Discover—two credit card issuers with very different business models—tie for the highest ranking in credit card customer satisfaction, demonstrating that there is more than one path to satisfaction, according to the J.D. Power 2014 U.S. Credit Card Satisfaction StudySM released on August 26th.

The study, now in its eighth year, measures customer satisfaction with credit card issuers by examining six factors: interaction; credit card terms; billing and payment; rewards; benefits and services; and problem resolution. Overall satisfaction is at a record-high of 778 on a 1,000-point scale in 2014, surpassing the previous high of 767 in the 2013 study. Furthermore, nearly every issuer measured in the study saw an increase in customer satisfaction over the past 12 months:

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American Express, which ranked highest in each of the eight years since the study’s inception in 2007, and Discover each achieve a score of 819. However, the two companies attain the same high level of customer satisfaction using very different business models.

American Express offers 21 cards aimed at different customer segments—some with annual fees and some without—and an array of reward options ranging from cash-back to travel rewards. Its customers tend to be more affluent, spend more and are less likely to carry a balance than customers of other card issuers. Discover’s strategy focuses on a single card with cash-back rewards and no annual fees. Discover serves a broad customer base and offers tools to help its customers manage their spending and debt, and provides its cardholders their credit score free of charge.

“This is really a tale of two very different credit card companies that both excel at customer interactions,” said Jim Miller, senior director of banking services at J.D. Power. “American Express and Discover provide great personal service when customers call in and also make it easy for customers to manage their accounts online as well as by using mobile apps.

“The market is ultracompetitive and credit card companies are using reward programs to make their card more attractive. However, layering on rewards is not the key to satisfied customers, rather it’s understanding your customers, knowing what motivates them and aligning rewards and benefits to their needs.”

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Competition for Credit Card ‘Share-of-Spend’

Data from three fielding waves of the 2014 J.D. Power Credit Card Satisfaction StudySM finds that the percentage of credit card customers ‘switching’ their primary card has increased significantly over the past year. More specifically, there is a significant increase in the percentage of customers opening a new credit card account (46% vs. 41% in 2013).

The increase is driven by ‘revolvers’ (customers that typically pay less than their total monthly balance), who cite ‘rewards’ and ‘lower interest rates’ as their primary reasons for switching.

With the competition for capturing ‘share-of-spend’ increasing, it is important for credit card issuers to improve the customer experience in an effort to improve loyalty. One key focus area is ‘rewards’, which have become a key driver of both acquisition and spending habits. In response, issuers must provide attractive offerings, market them effectively and ensure that their customers are aligned into the appropriate programs and card products. Additionally, the creation and marketing of successful rewards programs may also improve acquisition metrics by enticing competitor customers to switch their primary card.

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The full 2014 J.D. Power Credit Card Satisfaction StudySM, including data from all four fielding waves, releases in August, 2014.

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Satisfaction with Financial Services Providers Continues to Improve

Data from waves 1-3 of the 2014 U.S. Credit Card Satisfaction Study finds that industry satisfaction (776 on a 1,000-point scale) has increased significantly since the 2013 study was published last August (767).

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This continues a trend seen in other 2014 Financial Services studies conducted by J.D. Power – the Retail Banking, Full-Service Investor and Self-Directed Investor studies all saw significant improvements in customer satisfaction.

The complete Credit Card Satisfaction Study, including all four waves of data collection, publishes on August 26, 2014.

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Opportunity for Financial Institutions to Improve Social Media ‘Shopping Experience’

Data from the J.D. Power 2014 Social Media Benchmarking Study (released in April 2014) finds that banks and credit card issuers can improve their social media presence as a potential method of driving new business. When compared to other industries measured in the study, banks and card issuers receive lower satisfaction scores related to the social media shopping experience. Currently, 36% of retail banking customers use social media as a method of gathering information (products, promotions, etc.), compared to 21% of credit card customers.

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It is also important to note, however, that banks and card issuers actually receive high satisfaction scores related to the servicing experience on social media. In fact, customer satisfaction with social media as a servicing channel is higher than all other channels commonly measured by J.D. Power (branch, website, mobile, ATM, call center).

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Using Rewards to Drive Increased Credit Card Spend

Early 2014 performance indicators are encouraging for credit card issuers, as customer satisfaction is on track to reach its highest level since the inception of the J.D. Power Credit Card Satisfaction StudySM in 2007. And while the Target data breach may have impacted consumer willingness to make electronic purchases, data finds that issuers can use ‘attractive’ rewards offerings to drive higher levels of personal credit card spend.

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As expected, customer perceptions of reward attractiveness vary based on their preferences, which are driven by customer demographics and psychographics. For example, comparing two airline co-branded credit cards may show significantly different demographic profiles. One of the cards may frequently attract customers that are younger, less affluent, and less educated, while the other tends to attract older customers that have multiple children living in their household.

Understanding these segmentation differences (i.e., life style, life stage, hobbies/interests, spending habits, etc.) can help issuers design more appealing reward programs. If an issuer determines that a specific airline credit card attracts customers who frequently travel internationally, the issuer could add rewards associated with foreign travel or potentially partner with a hotel chain to allow additional earning opportunities. Another example is a bank-branded card that attracts sports enthusiasts, in which case a credit card issuer could add access to sporting events as a redemption option or partner with leading online ticket retailers to allow customers to pay for tickets using rewards.

Lastly, educating customers on the details of rewards programs is critical in order to maximize the impact on spend. And while it is important to inform customers about all program terms (as indicated in the chart below), lack of awareness regarding the types of rewards available has the greatest individual impact.

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Maximizing the ROI of Credit Card Communications

Credit card issuers need to ensure that proactive outreach campaigns directed at current customers fit the evolving ‘digital world’. Failure to do so may not yield a positive return on the resource expenditures associated with customer communications.

Data from the 2013 Credit Card Satisfaction Study finds that nearly half (46%) of credit card customers did not read/use the most recent proactive communication they received from their issuer, thereby pointing to a potential ‘waste’ of resources spent by card issuers.

However, study findings show that the method used to deliver communications may have a positive impact on whether customers choose to read/use the information. For example, customers are most likely to read/use information provided electronically (emails and text messages), and are least likely to read/use information delivered by standard mail.

Issuers should consider revisions to their communication strategies, focusing on digital delivery of messages. This may also require issuers to rethink the content of their messaging and focus on delivering information in a more concise manner.

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Financial Impact of Reducing Problems among Credit Card Customers

Problem prevention should be a focus area for all credit card issuers. Analysis of data from the 2013 Credit Card Satisfaction Study finds that when customers experience a problem, overall satisfaction and customer retention metrics decline significantly.

Preventing the occurrence of problems may also help reduce operational costs. For every 1-percentage-point reduction in problem incidence, issuers may be able to save nearly $230,000 for every 1 million cardholders.

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Issuers should consider the implementation of a problem tracking or problem management systems. Problem tracking provides continual analysis of problem-related customer contacts, potentially helping issuers identify and prioritize processes that can minimize the occurrence of problems. Problem management may include multiple inputs, such as problem contact data, survey data and employee feedback, and is designed to guide issuers on the development of systems to both prevent problems from occurring, and to maximize the effectiveness of resolving problems that do occur.

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Improving Satisfaction Among Credit Card Customers

opportunitiesAlthough credit card satisfaction continues to improve, a large percentage of customers indicate they do not fully understand their card’s terms, benefits and rewards program, according to our  J.D. Power 2013 U.S. Credit Card Satisfaction StudySM released today. 

Satisfaction in each factor has increased, as have ratings for Brand Image. However, it is important to note that opportunities for further improvements remain. Recommendations for additional focus areas for credit card issuers include:

Deepening customer awareness and understanding of terms, benefits, and rewards, potentially through proactive communication campaigns. Issuers should use consistent messages via all available channels to deepen understanding and awareness of offerings.

Continuing to invest in functionality of self-service interaction channels. Given the continued shift toward digital interaction channels, customers areconsistently looking for advancements in technology. Therefore, websites need to be maintained and upgraded as necessary to ensure easy navigation and availability of clear and concise information. Mobile apps are becoming more widely used; thus, the focus on improving functionality will become increasingly important going forward. Finally, clear processes for handling customer questions/requests submitted via email or online chat must be developed. Issuers must provide the same level of service courtesy and knowledge that is delivered through personal channels, such as the branch and call center.

Maintaining focus on delivering a high level of service during every interaction, given the importance of call center. Although customer contact via this channel is infrequent, every interaction carries a larger weight in overall satisfaction compared to the other interaction methods. Issuers must implement a customer experience framework that addresses customers’ needs and expectations by focusing on employee recruitment, training, coaching, and recognition in order to achieve the desired experience levels.

Preventing problems, as well as eliminating barriers for resolution. Analysis of problem data and determination of problem root causes may help banks adjust policies and procedures.

The 2013 Credit Card Satisfaction Study includes responses from more than 14,000 credit card customers and was fielded from May through June 2013
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Optimizing the ROI of Customer Satisfaction

Do you understand the connection between customer satisfaction and financial performance?

In case you missed our J.D. Power and Associates complimentary webcast last week, we examined how the links between customer experience and business results – and their drivers – vary by product.

We explored the revenue drivers in retail banking, credit card and mortgage, and revealed answers to some of the most frequently asked ROI questions like:

  • What is the impact of problem reduction on costs?
  • What are the biggest reasons for attrition, and what can you do to avoid it?
  • What is the relationship between satisfaction and switching?
  • What improvements in satisfaction will have the biggest impacts on share of wallet and retention?

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