Two pieces of research came out last week that attempted to quantify some of the impact the credit crunch has had on the direct marketing world. Synovate’s Mail Monitor subsidiary cited a 14% year-on-year decrease in credit card direct mail volume in Q4 2007. And Mintel Comperemedia brings in a more nuanced point that the annual decrease in credit card solicitations to non-customers from 2006 to 2007 is 11%, but loyalty-based offers sent to current customers actually increased by 16%.
Obviously, loyalty-based offers are a way for the companies to make more money; not so much from one-off transactions such as balance transfers and convenience checks, but longer term, non-card incentive offers like reward programs. It also speaks to the concept that when a sector is in trouble, it’s more valuable to cultivate existing customers than it is to scrabble for new ones — especially, in this case, those that might default and expose the lenders to bad debt.
The caution to marketers who embrace this strategy is to be mindful of the growing trend among consumers of closing their accounts and cutting up their cards. Many people don’t appreciate the damage that this can do for their credit scores if not managed with care — and for that matter, the credit bureaus have an opportunity here to educate consumers how they can best nurture their scores when their spending habits have been forced to change due to the recessionary climate.
Meanwhile, though, the credit card companies have a fine balancing act on their hands; keeping existing customers profitable and happy, while attempting to bring new customers at just the right level to mitigate the effect of those who are running scared from the credit market as a whole. An educational slant is what’s needed in all cases.
