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Credit Cards: Loyalty and Retention in the United States
Mintel, Nov 2007, Pages: 122
About this report
This report focuses on the challenge of customer retention in the credit card industry. We discuss consumer attitudes about rewards programs and outlines opportunities for issuers to maximize profitability by focusing on their existing customer base.
The saturation of the credit card market together with the increasing costs of customer acquisition are leading credit card issuers to concentrate more on existing customers. These efforts reduce “churn rates,” (the number of customers that stop using their cards), increase the profitability of existing customers. Our research has found that card companies are using any of several methods to accomplish retention goals:
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Creating rewards that have “soft” benefits making it easier to use the card, such as payment reminders or cash back for good credit management
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Making it easier for customers to earn rewards, either by lowering the number of points or miles needed or by offering more opportunities to earn points or miles
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Cross-selling products and allowing customers to earn points or miles by participating in or purchasing other products
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Increasing focus on relationship banking, making the credit card one of several products tying a customer to a particular financial institution
Our specialized consumer research shows that retention depends on creating messages and rewards attractive to individual segments. This report identifies divergent behavior among various segments, showing the most potential in teens, students, Hispanics, small businesses, and the “unbanked.” We also outline several strategies to increase reward redemption, critical to customer retention.
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