Credit Card Portfolio Analytics

Not Just About Getting Them ‘in the door faster than they go out'

There was time when Credit Card companies did not care so much about the high rates of customer churn in this segment of the Consumer Credit market. Every year a significant number of Credit Card customers of major banks transfer their loyalties and balances to a different card to take advantage of attractive gimmicks like zero percent APR on balance transfers or rewards programs. Until a few years back, this was not as big a deal, because there were still opportunities to add organic growth and the industry was still growing although at slower rate. With the proliferation of Credit Card offers, opportunities to add organic growth are declining rapidly. Banks ahead of the game are already ramping up their efforts to stem the churn in their portfolio- 1 good customer retained is definitely better than 1 new customer acquired that you don’t know a lot about outside their Credit Report and if they are really that good a customer and you manage to sell them your card, you will most likely be one of an average of 4 cards in their wallet. 

With effectiveness of Direct Marketing programs for Credit Card Account originations on the decline, there is more upside to be had from retaining your existing customers and getting them to direct more of their purchases to your card than going after more and more customers. 

Not All Channels and Customers Are Alike 

Credit card consumers acquired through different channels behave differently and this becomes the first opportunity to segment your portfolio.

Identifying behavioral characteristics of consumers originating from different channels also allows an easier development and implementation of micro-pricing and micro-marketing strategies. You already have a system in place that allows you to differentiate marketing and pricing strategies for customers coming from different channels- you just need to figure out what works for each channel.

Taking Segmentation beyond the Channel

Although you need to understand what works differently for each of your major channels, your consumer segments are not separated by channels. Consumers of profitable segments may not necessarily come from one or two channels and you need to understand how to identify these consumers and market to them across channels using advanced Clustering and Segmentation techniques.

Understand What Drives your Portfolio Growth

Apart from understanding what your profitable segments are, it is also important to understand what tactics work best for you brand. This can be accomplished using econometric analyses that relate key performance metrics like Total Outstanding Card Balance on your portfolio to different tactics you use to drive these metrics.   

Once you have an idea how much each marketing tactic influences your portfolio, you also need to understand how changes in these tactics have impacted you in the past or will impact you in the future.

Overlaying the Segments on to the Drivers

It is not enough to understand how Marketing tactics influence your total Portfolio, it is also important to understand how Marketing tactics influence each Channel or segment of your portfolio. This is because each Marketing tactic influences different channels and segments differently and while creating 1 Million different strategies for 1 Million different customers may not be practical, feasible or even measurable accurately, it is possible to differentiate your strategy for each Channel or Segment.

Lastly, a big part of retention is increasing your Customer Equity and although Credit Cards have become increasingly commoditized, some focus on driving an increased brand focus. Banks need to start trying to understand what drives some consumers to be loyal, what drives them to be ‘revolvers’ and what drives them to be ‘transactors’.