NAFCU Services Blog

Mar 30, 2011

It’s time to give your credit products a face lift.

NAFCU recently held its annual Strategic Growth Conference in sunny Ft. Lauderdale, Florida. I was here in 50 degree DC for that one…nonetheless, I got the scoop from our team on which sessions kept people out of the sun and in their seats. “Integrating Credit Cards into Your Overall Payments Strategy,” was top of the list. The session was presented by the very knowledgeable Stephanie Polen of FTPS. Let me tell you, I’ve seen Stephanie on the big stage before, and she has a brilliant marketing mind (something I admire as a fellow marketer). At the Growth Conference she outlined how credit union marketers can put some simple concepts into action to revamp credit card programs post CARD Act.

I wanted to share some of the action items that you can take to your credit union and impress your peers with your marketing know-how, innovation and ultimately improved success and profitability of your card programs. (You can thank us later).

As we know, the CARD Act brought significant changes to the industry. Credit unions and other issuers have increased fees, evolved pricing strategies, implemented more analytical risk strategies, and have basically done whatever they can and must in order to roll with the regulatory and economic punches. All while still trying to maintain a successful and profitable credit card program – a challenge to say the least.

The resounding message from Stephanie’s session was credit products and positioning need a “face lift.” I mean let’s face it, consumers are smarter now (or we think we are anyway) – we know about the deceptive and unfair practices that took place because it has been plastered all over every media outlet in the country and we know that laws are in place so we don’t have to face that anymore (at least in theory). Yet the stigma still remains and we (consumers) are skeptical – “They were unfairly taking advantage of me then, are they still trying to screw me over now?” And although credit unions were not guilty of the poor behaviors that have been in the public’s eye, few consumers take the time to understand the difference, so can you blame us for thinking this way?

Now, not only are your members now more conservative and choosier about their credit products, you also have to watch your back for the big national issuers that have narrowed their focus and are targeting your best members with a heck of a lot more resources at their disposal. But you’ve always offered a better product, and now is the best time in recent memory to take advantage of it to boost profitability and enhance member relationships!

6 Easy Steps to Take Action, Drive Results and Optimize Revenue

1. Target and Segmentation
  • Review your member database for potential cardholders. How about those indirect loans or share draft account holders? The more products of yours they have, the more sticky your message will be (and the better your results).
  • An existing relationship is a lead in for communication – My point – mentioning your existing relationship in your communications and marketing efforts is going to open the ears of your members to see what else you have to say. Otherwise, you could just be another random piece of junk mail. :-(
2. Acquisition Strategies
  • Direct mail is still an effective channel. Did you know that 30% of consumers earning $75k-$150k compare credit card offers they receive in the mail? (According to a Mintel online survey).
  • In branch is even more effective! We love human contact – there’s nothing worse than picking up the phone and be prompted through 35 automated response messages before hanging up in frustration. When I come to a branch, I’m greeted with smiling faces and look you in the eye fully trusting that you’re doing what’s best for me. It’s something you just can’t convey in an email or postcard and it’s something that credit unions are particular great at so take advantage! Cross-sell, cross-sell, cross-sell (chance are your credit card offering is much better than what your member may have)!
3. Activation Strategies
  • First 30, 60, 90 day touch points are critical. In a case study Stephanie shares, by sending planned communications at the 30, 60 and 90 day mark of new accounts, there was 94% activation in that time frame and it was sustained long term. How many of your new accounts activate in the first 90 days?
4. Usage and Retention Strategies
  • Provide clear, customized offers to encourage ongoing and increased activity. Do it throughout the whole year varying your offers by segment, time of year, etc. to make them relevant and relatable.
  • Focus on your best members based on their payment behavior.
5. Rewards Programs
  • Rewards are still an important part of the credit card product! Just make sure that they’re cost-effective and meaningful.
  • Programs need to adapt to the changing consumer behavior. Let’s be honest, we consumers have been spoiled by rewards – we know a lot and expect a lot in the way of rewards programs. We love cash back, especially in this economy, and we love rewards for our everyday spending like gas and groceries. Give us what we want!
6. Risk Management
  • Regular review of member credit quality is important. You have to keep track of the trends in order to evaluate value.
  • Extend credit lines for high credit quality members. Look at usage versus what’s available – if 30-40% of what’s available is being used, you should think about increasing the member’s credit limit. No one wants to risk hitting that max, so if we get too close, we’ll stop using the card. (DECLINED is so embarrassing).

Now run with it! Take a look at your credit union’s payments strategy and its credit programs. Are you offering credit products in branch? Are you cross-selling whenever you get the chance? (You MUST cross-sell – maximize every opportunity in the member lifecycle to deepen the relationship!) Are you offering a valuable rewards program? Should you be?

In a crazy economic and regulatory climate like this has been and seems to continue to be, you have to constantly keep up with industry changes and modify your product – whether it’s regulated or not!

Listen to Stephanie’s full presentation and download the presentation slides.