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.
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.
Data from J.D. Power’s 2013 Small Business Banking Satisfaction Study finds that Product Offerings satisfaction declines significantly as a customer’s tenure with the bank increases. Customer perception of product-related communication (or lack thereof) is a key driver of the satisfaction differences noted across different customer segments.
Analysis of customer verbatim comments may indicate that banks are more focused on communicating with newer business customers, in an attempt to ensure satisfaction and ultimately increase loyalty and cross-sell potential. Conversely, longer-tenured customers may feel ‘forgotten’ as the level (or quality) of communication received from their bank decreases over time.
It is important for financial institutions to stay in-touch with their business customers, particularly those with longer tenures, as those customers appear to be more critical of their bank’s attempts to communicate with them. And it is especially important to focus on engaging tenured business banking customers that DO NOT have an assigned account/relationship manager.
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.
Data from J.D. Power’s retail banking study finds that 34% of Big Bank customers are within the Generation Y age segment, which is significantly higher than the percentage of Generation Y customers at Regional/Midsize/Community Banks.
And while the Generation Y segment is currently less-affluent than other segments, they do present potential bottom-line growth as their income levels increase and they enter the market for mortgages, education plans for children, loans, etc.
The ability of Big Banks to provide functional ‘digital banking technology’ (website, mobile, advanced ATMs) is attractive to tech-savvy younger customers, and smaller institutions need to be competitive in this space in order to ‘steal’ younger customers from Big Banks.
Best Banking Blogs of 2012
The Financial Brand, the premier online publication for bank and credit union marketers is conducting the second most important election this week; Best Banking Blog “2012 Readers’ Choice” awards.
Our J.D. Power and Associates Banking Blog, as part of having received the prestigious “Editor’s Choice” award, is now nominated for the “Reader’s Choice” award for Best Banking Blog of 2012. Your vote counts, and we would be grateful for your support!
To be recognized alongside our friends and distinguished bank bloggers Jim Marous, Ron Shevlin, Brett King, Bradley Leimer, Matt Wilcox, JJ Hornblass, Liz Lum, Chris Skinner, Serge Milman, Christophe Langois, Jim Bruene, Randy Smith and Jim Van Dyke is an honor in itself.
Congratulations to all of our fellow nominees for your continued dedication and delivery of superb insights to our banking community.