Activation and Usage Essentials
Account usage is crucial because an active account is a retained account. Activation is the first step to regular usage. Early activation is the key to a profitable portfolio. Usage tactics can take the form of rebates, discounts, or lower interest rates on particular transactions.Key factors in usage strategies
Product Upgrade/Limit Increases
Balance Transfer Promotion
Convenience Checks
Visa/MC Sponsorships & Promotions
Activation/First Time Usage Campaign
Merchant Offers/Coupons
Usage Sweepstakes
Cash Rebate/Charitable Donation
Extra Awards (travel and/or gift cards)
Retention Reminders and Education
Key factors in usage strategies include:
- Provide more purchasing power.
- Price the product right for maximum usage and profitability.
- Use merchant category data to make the appropriate offer to your cardholders.
- Educate cardholders on usage in alternate categories (charity donations, travel, taxes, recurring payments).
- Identify high opportunity spending events (major life changes, key seasonal events).
- Reward frequent usage with incentives.
Product Upgrade/Limit Increases
Goals:
- Increase purchasing power.
- Increase usage and income.
- Add prestige to cardholder
- Reward cardholders/members
Considerations:
- Tie both pricing and credit lines to each cardholder's credit score rather than to a product.
- Stimulate card usage through credit line increases.
- Tie increase to significant life events for more effect.
- Give cardholders the option to accept, defer, or decline your limit increase.
Examples:
Amer 1st Upgrade and Increase Letters (PDF)
Amer 1st Visa Portfolio (PowerPoint)
Balance Transfer Promotions
Goals:
- Build balances for existing or new card program
- Introduce a reduction in rate for an existing card program
- Maintain increased balances past the promotional period by offering a lower rate until paid off
Considerations:
- May attract rate jumpers, not loyal cardholders if lower rate is only for a specific timeframe.
- Can your DP system offer different rates for balance transfers?
- 0% are no longer commonplace.
- What is the appeal/offer? Most common is a lower APR then cash rebate/gift or points for reward cards. Keep the process simple and easy to understand.
- Offer a variety of ways to transfer balances (postage paid mail, Web, phone, and/or convenience checks).
- Can keep balance transfer tool on Web site all the time.
Best times of the year:
- Beginning of the year to pay off holiday purchases
- Summer for holiday planning
- Pre-holiday with credit line increase for current cardholders.
Examples:
Amer 1st 2002 Take Us Shopping Promo (Word)
Amer 1st Transfer Rebate Direct Mail (PDF)
Amer 1st Transfer Rebate Stuffer (PDF)
Amer 1st 2004 Transfer News large (PDF)
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Convenience Checks
Goals:
- Increase balances by encouraging using the checks to transfer balances from other cards.
- Increase balances by using card's credit limit for typical cash/check type transactions.
Considerations:
- Best to offer two times a year (holiday time and summer time).
- Give an opt out option for future mailings.
- Best to mail to accounts in good standing with available credit limit of = or great than $1,000.
- Delete users of offer initial from second mailing of the year.
- If your offer has a promotional rate, apply payments to the promo balance first.
- Place an expiration date on the promo rate offer.
Examples:
California Bear Convenience Checks (PDF)
Convenience Check Presentation 05 (PowerPoint)
JDCCU Conv Check Newsletter Article (PDF)
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Visa and MasterCard Sponsorships & Promotions
Goals:
- Increase usage and income.
- Add perceived value of the financial institution's card.
Considerations:
- If using Visa/MC campaigns you'll need to work around their timelines and program specifics.
- Many are sweepstakes-style that all cardholders are eligible to win.
- Many campaign images are available only while supplies last--on a first come, first served basis.
- National promotions coincide with events like NASCAR, Disney, Super Bowl, MLB, etc.
Visa Online
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Activation/First Time Usage Campaign
Goals:
- Activation and usage.
- Encourage non-users to use their card for the first time.
- Block cards for future reissue if member does not intend to use the card.
Considerations:
- A welcome package can help educate and encourage new cardholders to activate and use the card right away.
- After the first use, cardholders are more apt to use the card again.
- Tracking--who will be tracking activity (Payment Processing Solutions, Visa, Financial institution)?
- Extend teaser rate if the card is used immediately or a minimum number of times within the first three months.
- What will the offer be? What's the cost of the offer to the financial institution and perceived value to the cardholder?
- Incentives can be sweepstakes, cash rebates, gift cards, lower interest rates, etc.
Reports:
Visa Online & Payment Processing Solutions Reports and tracking system.
Activation plan:
Visa Activation Plan (PDF)
Merchant Offers/Coupons
Goals:
- Incentives for usage.
- Increase income.
Considerations:
- Discount coupons from participating merchants.
- Ususally offered through Visa/MC but can be from local merchants.
- Offers should be for things cardholders used in their day-to-day lives.
- No gimmicks. Simple offer.
- Smaller, simpler savings for relevant products are more appealing than larger savings for something that is limited or hard to redeem.
- Visa Instant rewards are coupon offers available three times a year in the form of statement inserts.
Example:
Dinner & a Movie (PDF)
Usage Sweepstakes
Goal:
Increase usage and income.
Considerations:
- Promo period should be short for momentum.
- Have a plan to promote winners at the end of promotion.
- Will the campaign have several small winners or one large winner?
- Monetary prizes are usually the most popular.
- Other sweepstake ideas: "Win your purchase" or "Pay your balance."
- Check with your legal advisor on state and federal sweepstakes laws. Many require "no purchase necessary."
Win a Gas Card - California Bear (PDF)
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Cash Rebate/Charitable Donation
Goal:
- Increase usage and income.
Considerations:
- Will this be a permanent feature to the card or used for a single promo period?
- Issuing checks for payout has more impact then transferring funds into their accounts.
- Charitable donations have a broad appeal especially for regional issuers.
Extra Awards (travel and/or gift certificates)
Goals:
- Increase the number of transactions.
- Increase interchange income.
Considerations:
- Extra Awards is a permanent feature on the card rather than a one-time promotion.
- Point system can be used to tie in other products and promotions.
- Most often used for premium card programs.
- JHA Payment Processing Solutions can provide you with a cost projection to help evaluate the impact travel and gift certificates would have on your card.
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Retention Reminders and Education
Goals:
- Change cardholder behavior to increase usage and income.
- Encourage cardholders to continue using the financial institution's card rather than be swayed by teaser rate offers they receive.
Considerations:
- Need to show cardholders new ways to use their cards (charity donation, recurring payments, health care, insurance, gas, fast food).
- PIN versus Signature and plastic versus paper (check).
- Statement messages and inserts work best for this type of campaign.
- Reminder of benefits.
- No cash advance fees, no default rate, low fees.
- Not a targeted promotion and is difficult to track results.
- Often tied into special spending times of the year, back-to-school, holidays, tax-time.
- Has no offer.
- Best for lobby messages, statement inserts, newsletter copy.
- Share the sneaky tactics of big issuers.
- Security features can be packaged to look like a benefit.
- Offer Skip-a-Pay opportunity for good will.
Examples:
FAA Summer Insert (PDF)
Skip a Pay Content (Word)