By Steve Heston, Acxiom Global Marketing Services

Why segregating prospect and customer marketing might be bad, how to “change channels” without the remote control and how to fundamentally transform card marketing in a challenging environment.

“If we mail it, they will come.”

Granted, card marketing, even in its 20-plus-year heyday, was never that simple. Still, with direct mail solicitations tumbling across most of the industry, and delinquencies and regulatory changes rearing their heads ominously, the challenges facing card marketers today are unprecedented.

“All I know for sure is that we’ve never been here before,” said the chief marketing officer at one top 10 card acquirer who requested anonymity. “And while I’m pretty sure I don’t like the neighborhood, we have to find a way to put down some roots.”

Focus has shifted from wholesale acquisition to retention, market share and risk management throughout the marketing cycle, all with a white-hot intensity around ROI and overall cost awareness. Note the use of the term cost awareness versus cost management. The rigor to manage costs has certainly been ramped up, but a more urgent need to understand which costs contribute to the most desirable outcomes is shifting marketers’ focus. So where is the new focus for an industry that has always taken comfort in knowing that “x” million pieces mailed created “y” in new accounts and that the math was both fairly simple and somewhat predictable?

There are three primary shifts in strategy that will determine the long-term winners in this changed market. The most successful card issuers and acquirers will be those who outpace the competition in:

1. Creating and rewarding broader and deeper customer relationships
2. Consolidating business functions to drive more efficiency into the marketing process
3. Blurring and even blending the lines between risk management and marketing throughout the customer lifecycle
   

Understanding the Customer

Segmentation and profiling of prospects has long been a fundamental tenet of card marketing, and now is the time for companies in this market to radically sharpen the focus on this key area, but with a unique and significant twist.  “Since organic growth has become the primary target for most of the card companies, we’re seeing a dramatic shift on the part of our clients toward applying all the analytics and segmentation they’ve historically used to evaluate prospects to their current customer bases,” said Randy Watson, industry executive for financial services at Acxiom Corp.

While the walls between customer and prospect marketing have been somewhat sturdy, due to internal politics or operational realities, the realization is setting in that most card acquirers have historically known their prospects much better than their customers. “The need to cross-pollinate these teams and functions to maximize the historical strength on the prospect marketing side has led some companies to combine those teams and functions into a single group,” said Watson.

Streamline for Clarity and Efficiency

Some of the primary approaches to broaden and deepen customer relationships can drive the consolidation of functions for the marketer willing to look with an open mind at the challenge of the day. Marketing teams that have historically been partitioned by channel can be blended, for example, to enhance the customer brand experience. “The ability to know, with a high degree of certainty, which channels are preferred by a certain class of customer not only cements the existing relationship but also adds value to the brand,” said Tim Suther, Acxiom’s senior vice president for multi-channel marketing services. “This further feeds the customer insight-gathering process, which is actionable today and creates even more competitive advantages once aggressive acquisition strategies come back into vogue.”

In fact, some firms are reconsidering the role of their general advertising and marketing agencies, leaning more heavily on their direct marketing teams and partners to prescribe strategy and execute media buys and channel strategies. “We’re open to a lot of strategic discussions with different partners, or at least a different mix of partners at the table than we were in the past,” said the chief marketing officer of a top 10 U.S. bank, who requested anonymity to protect the bank’s strategies. “If I can do with one vendor what I’ve historically done with three, and if I can deploy a single team internally to work with that single partner, I’ve taken several layers of complexity out of my execution, increased my leverage and enhanced my speed-to-market, all the while removing break points for key elements like brand/message consistency and channel confusion.”

The ability to leverage multiple channels and to change or alter the mix — not just across segments but also according to the preference of specific clients — will become even more critical as technology and channel strategy evolve. This results in a holistic approach to marketing wherein prospect marketing expertise and customer intimacy break down internal barriers, likely leading to increased innovation, lower expenses and better customer relationships — with obvious positive impact on retention and cross selling.

The importance of effective loyalty programs (see “When Times Get Tough, Bolster Loyalty Rewards” by Kevin Lewis in the fall 2008 issue of n>genuity) and the accuracy, cleanliness and “freshness” of data can’t be overstated in this consideration. Integrating new and emerging sources of data with customer insight and channel strategies further speaks to the trend toward more efficient marketing models — both in how the acquirers and issuers structure their teams and in how they can lean more heavily on the direct marketing expertise that helped create their market dominance.

Risk and Marketing: So Happy Together

Finally, the role of risk management will become dramatically more prevalent in the marketing operations for these firms. During the past few years, the prevailing idea was that if the FICO score was acceptable and the data suggested reasonable risk, you were good to go. As recently as a year ago, most campaigns were executed with the primary focus on “hitting the new account numbers” or simply driving growth via acquisitions. As such, the lines between risk and marketing tended to follow more traditional norms — hard-line separation was the rule.

With fraud and delinquencies at historic highs, there’s been a shift to redefining “customer lifecycle” and to committing to the new definitions. Overall marketing strategies now encompass not just who to attract and how to retain them, but also retention and collection strategies previously positioned only toward the latter stage of a relationship. Those traditional walls between risk and marketing are being torn down, creating an opportunity for the successful card marketer to more dramatically than ever integrate data, analytics and customer insight from the very first outreach to create a compelling customer experience.

According to the senior vice president of eStrategy at another top 10 card marketer who requested anonymity, “We used to think of risk as part of the problem. Then we appointed several members of the marketing team to risk committee roles, and vice versa, and now we’ve been able to consider how we might use a variety of analytics to predict when a relationship might turn; how we should communicate with that customer before, during and after the change; and what channels, offers and approaches give us the best odds of retaining the relationship on terms that are positive for everyone in the equation. We no longer see a line between risk and marketing. They function together, and our customers are the primary beneficiaries.”

Cliché has dictated that “the more things change, the more they stay the same.” That thinking just doesn’t fit the market reality facing card marketers today. The clear trend in card marketing is “the more things change, the better we should know our customers, be efficient in communicating with them and avoid and mitigate risks so that we can consistently build long, mutually rewarding relationships.”

Embracing these three strategic shifts, and executing against them, will determine just how successful the card marketer of the next several years will become.

About the Author

Steve Heston is an account executive with Acxiom’s financial services and government organization. He has experience in profitable growth in companies ranging from start-ups to market leaders in industries both evolving and mature. As a senior executive and change agent, his strategic leadership and team development skills have contributed to consistently excelling in diverse industries.