Tag Archives: co-brand credit card

Understanding Customer Needs — Change Is Hard

By: Jonathan Gelfand

Change is hard.  It is true across almost every aspect of life.  Convincing your customer to switch from their first in wallet credit card to yours is difficult at best.  Your customers are invested in their rewards program and understand what they are earning, although probably not in detail.  Even if it isn’t the richest option, the incremental benefit from a change is likely to be relatively small.  Given this hurdle, it is important to really understand your customer and how to overcome inertia through a combination of product, promotion, and channel.

When you’re trying to understand your customer, there are many research tools that can help provide insight into both realized and unrealized needs.  Selecting the right tool is necessary to getting the job done correctly and efficiently.  The converse is not benign, but rather can create disastrous results by developing a product or campaign that isn’t relevant and hence isn’t accepted in the market.

There are three key customer feedback areas that you should focus on as part of the process:

  • Understanding the incumbent credit card behavior
  • Determining compelling value propositions
  • Measuring whether behavior changes are compelling

Incumbent Credit Card Behavior

Almost all, if not all, of your prospective cardholders will have a credit card account already.  You can ask customers from today until tomorrow what they prefer, but at the end of the day their current preferred credit card is probably the best indicator of preferences.  In addition, understanding their incumbent card will enable you to identify the hurdle your offer needs to meet, but it is important to remember that you are competing with their perception of their card, not the actual card.  Many credit card customers only have a cursory understanding of their credit card terms and rewards.

For example, if your customer is using Fidelity’s 2% cash back card, offering 2% for your purchases and 1% for everything else just won’t work.  On the other hand, if they have a World Points card from Bank of America, then the 2% value proposition might work.  Your customers will have a mix of different accounts; you just need to make sure that you are realistic with respect to the opportunity and feedback.  You aren’t likely to get 100% adoption, 5% – 25% is more likely and you need to identify the relevant competitive set for your target, if you can.  In future research you might want to consider looking more carefully at feedback from World Points customers vs. Fidelity customers.  This is only possible if you have sufficient sample size, which is often difficult to gather, but you can aggregate similar types of cards.

It is also important to understand the currency that your customers value in their incumbent card, although it might be different from their preferences in a future card.  Some customers really like points while other like dollar denominated rewards.  This is a key insight.

In many cases your non-credit card loyalty program doesn’t have competition.  If they are buying from you, then they can participate in your loyalty program and double dip with their credit card rewards.  With your credit card, you need to displace the incumbent credit card and that additional rewards currency.  Even if your members love your non-credit loyalty program, the decision to switch to your credit card involves a trade-off that you need to consider.

This interaction between non-credit and credit loyalty from a new account acquisition perspective is central to customer preferences and research can be helpful in understanding.  Many airline programs use miles across both credit and non-credit loyalty offers. In contrast, Ace Rewards uses points for their non-credit card loyalty program and % back for credit card although it is one rewards bank.

Survey research is the best tool for understanding incumbent credit cards.  Focus groups can provide some insight, but they tend not to be representative enough of customer behavior. Also, it’s important to capture the specific details of the card, not merely payment network or issuer, to fully understand the real value proposition. For example, Chase has many varied card offers like Southwest, Chase Freedom, and Sapphire with very different customer value stories.

It is more helpful to provide an open ended question around product name and put in the work to code the products from the responses.  There are always gaps around what a customer thinks their card value proposition is and the actual value proposition.  For example, Chase Freedom isn’t a 5% card despite the fact many customers would describe it that way.  If you ask what they receive in rewards without knowing the product, you can end up with inaccurate information.

Determining Compelling Value Propositions

If you ask someone what they want, they will ask for everything.  To get the best results, it is important to provide your research respondents with trade-offs between reasonable items in the potential offer mix.  Here comes the rub: you need to make sure that you provide reasonable choices, but also choices that push the limits.  If you don’t push the limits and provide trade-offs that push expectations, then you will end up with pedestrian feedback.

Make sure that you have enough permutations to create some variation within the results.  If you don’t test enough different variations, then the results won’t accurately tell you preferences and trade-offs, since there just aren’t enough to work with.

The first type of variation is making sure you have the right categories which include rewards earning, rewards redemption, benefits, features, interest rate, and fees.  In some cases they might be combined or broken into multiple categories.

Within each of these categories you also need to determine the right variants for testing that include enough options, but not too many options, so that you can create meaningful trade-offs.  In some cases, it is possible to extrapolate between different values, but be careful since not all responses are linear.

There are many conjoint tools as well as optimization engines that can help you to do this exercise.  The actual trade-off is best done using a survey instrument.

Not all providers use the same tools or have the same capabilities.  Selecting the right partner, for the right project, is very important.  For example, the sophistication and flexibility of business rules about which items can be shown with other items vary widely by provider.

The cardinal rule of research:  If you don’t put in the right questions, you won’t get the right answers.  Make sure you do this carefully and correctly.  No shortcuts here.


The trade-off exercise helps to provide insights into the relative preferences between different constructs, but doesn’t answer the question of how well it works.  It isn’t possible to assess all permutations, so either as part of the same survey or an additional survey it is important to get feedback around whether the preferred or representative product constructs would appeal to respondents.  This data can be matched with the trade-off analysis to better understand alternate responses.

The measurement phase needs to really get feedback around application as well as usage intention.  In most cases, the goal is to gain the first in wallet position.  Open ended questions provide important insight into the why customers have certain preferences and many help give context to why concepts are working or not.

A survey tool is the preferred methodology to gain enough scale to determine statistically representative feedback.  Although a focus group can provide some interesting perspective from responders, generally the feedback isn’t representative enough to provide significant value and I don’t recommend using focus groups.

Is There Only One Solution?

Often we like to believe there is only one right answer, yet the world we live in often has many right answers.  Sometimes the best answer is a single product, but in other cases we need to use a mix of products to drive the right business results.  Different products can meet different business needs or different credit card needs.  With multiple products there is also complexity.  Balancing these can help to drive strong business results.

It is All About the Customer

At the end of the day you will only have success if you create an offering that appeals to prospective cardholders.  It is essential not to market to yourself, but rather understand your customers.  Research, if executed well, is a great tool and poorly executed research can quickly send you into a quagmire of failure.

Getting the right feedback is the solution. Don’t short shrift the process.

In the next article, I will discuss different types of promotions for acquisition and ongoing engagement. If you have any questions, please don’t hesitate to contact me at jgelfand@partneradvisors.com.

Partner Advisors’ Sean Collins Weighs In On Rogers Communications’ Co-branded Credit Card Program

A Perspective on Rogers Communications Launching a Co-branded Credit Card Program

By: Jim Tierney

Launching a co-branded credit card program may not be a big deal in the U.S., but in Canada it’s a bit different especially when a non-bank – Toronto-based telecommunications company Rogers Communications – is involved, according to Sean Collins, Managing Member of Wellesley, MA-based Partner Advisors.

Rogers Communications recently cleared the final regulatory hurdle on its path to entering the financial services business and plans to start offering credit card services in conjunction with its new loyalty program – Rogers First Rewards — next year.

Rogers Communications had been seeking a bank license since September 2011 and the Office of the Superintendent of Financial Institutions has granted authorization to “commence and carry on business.” Rogers officials have said a subsidiary will begin offering credit card services with a pilot program for select customers first, and general commercial availability will occur sometime in 2014.

Collins told Loyalty 360 that Canada has had co-branding for some time.

“I think the nuance here is that a non-bank has applied for and will receive permission to actually issue,” he said. “That is something the states have really backed off of.”

Collins cited Walmart’s failed bid to enter the financial services market.

“Basically, Walmart wanted to do banking and had secured a type of banking charter that looked as though they might actually do banking as a Walmart entity,” Collins explained. “There was a hue and cry around that from the banking community as you might imagine, and there was a great deal of pressure applied in Washington to prevent that from happening. There is some concern among regulators that non-bank banks might skew the system, and of course the branch bank down the street is loathe to compete with the likes of Walmart for bread and butter banking.”

What’s interesting, Collins added, is that with the financial crash and subsequent bank regulations applied in the U.S., “bread and butter banking (like checking accounts and debit cards) became a whole lot less attractive and banks could lose money on certain retail accounts – meaning that Walmart may have dodged a bullet.”

Collins discussed co-branded credit card programs in Canada compared to the U.S.

“Canada has a much smaller population than the U.S., and a different payments mix which leads to fewer programs,” he said. “Canadian consumers tend to carry fewer credit cards than their American counterparts. It isn’t so much of a case of longer, but a different marketplace requiring a holistically different strategy.  Generally, the (Canadian) market is less hypercompetitive than the U.S. due to both the consumer differences as well as a different approach to regulations for banks and the payment networks (i.e. VISA, MasterCard, etc.).

Canadian consumers tend to be very interested in large “hub” rewards programs, like Air Miles, that attract a large base of consumers, Collins said.

“They are multi-merchant programs that also tie in manufacturers,” he said. “Those programs have been very successful in Canada but less so in the U.S. In fact, AirMiles came and left in the U.S.  One successful example here in the U.S. would be a program like UPromise, but that is in relative penetration terms a far smaller program that Canadian hub rewards programs.

Collins said what is happening now in Canada is an “ante-upping” of rewards value.

“There are several co-brand programs that are underwhelming from a value perspective and that is changing rapidly,” he explained. “The entrance of far more aggressive issuers from across the border is having a big influence.”

Collins said what Rogers is doing in Canada regarding starting a bank is “much more frowned upon” by regulators in the U.S.

“While it isn’t a slam dunk in Canada and will take a while to get fully approved, it is an area in which Canada is more progressive than the U.S.,” Collins said. “It would be very hard for, say, Verizon here in the U.S. to get approved for a captive bank. There are advantages to such a structure, but more risk.  It comes down to the type of banking and lending behavior that Rogers creates in its marketing and product line. Positive selection for both credit score and usage is important in the lending area and I am sure Rogers is focused on creating a product line that optimizes that.”

Collins said successful co-brand programs require four key factors, no matter where they are launched:

A positively credit selected customer, which is driven primarily by a great value proposition that is truly breakthrough and unique

A co-brand partner that weaves the program into the entire customer experience and underlying rewards program, and treats the product like one of its core offerings — not just a ride-along. That usually means performance measurement, executive leadership and accountability, and incentives to the front line.

An issuer and payment network intimately focused on the partner’s broader corporate objectives, not just the silo of the credit card portfolio

Financial alignment between all parties – meaning the end customer, the partner, and the issuer – to equitably share the program benefits.  This means a value proposition and deal structure that is in alignment with this goal. Much easier said than done.

Collins believes that what Rogers is pursuing to use the co-branded credit card program to enhance its customer loyalty program is a “great use” and most successful programs follow the same path.

“Some of the similar efforts in the U.S. have been less successful in this sector than, say, travel-based loyalty programs, so it will be interesting to see how Rogers makes this an “aha” moment for its customers,” Collins said. “But generally, if there is a successful and widely participated loyalty program, that suggests good prospects for a cobrand card in general.  However, the “must haves” above have to be there.”


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