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Intelligence Briefings: Retail Banking Customer Management

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Why credit card companies are more customer conscious than their parents

Credit card subsidiaries of the commercial banks are generally more advanced in customer management than their parents. Of course, they have to be. Customers are more willing to switch, so credit card providers need to know which customers they want to recruit and retain.

Longer established credit card companies, such as Barclaycard in the UK, face competition from new entrants such as MBNA, whose smaller size and newer infrastructure helps them move more quickly to identify and capture new opportunities, such as affinity marketing. Barclaycard is the largest credit card company in Europe, with nearly 10 million customers. It uses advanced analytical techniques to identify which customers it wants to recruit and which to retain.

For example, it has identified that customers can be "good" for one of two reasons:

  1. They take enough credit -- in other words, they do not pay off their entire balance each month.
  2. They are responsive to promotions, particularly profitable products such as mobile phones.

Customers who spend large amounts but pay off their balance each month are generally not profitable, unless they spend enormous amounts. So Barclaycard has developed different marketing and communication strategies for each type of customer. It uses these strategies to retain profitable but discourage unprofitable customers.

These policies are closely tied to Barclaycard branding. This includes not just the basic credit card, but a wide range of support services which are available to customers whenever they use Barclaycard. Barclaycard has also identified its best socio-demographic groups and focuses strongly on developing and nurturing the brand to meet these groupsí needs.

Through intensive use of data, Barclaycard has discovered that it must not use forecasts of customer future value mechanistically. This is because future value depends on what customers feel about the brand and its values, rather than cold-logic calculations about how to finance different kinds of purchase.

The lesson for banks is that marketing strategies must combine a strong branding message through advertising and customer service with precisely targeted customer acquisition and retention strategies. Barclaycard achieves this itself by using psychographic segmentation based on customers' attitude to the brand and their views about their relationship with it, including its quality and likely future.

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