Credit Card Marketing in Canada: An Evolving Landscape

By Bob Coles

Direct Marketing News

JANUARY 2009 - The first decade of the new century has been an exciting time for many credit card marketers in Canada. The proliferation of new offerings, in tandem with the seemingly ever-increasing demand for consumer credit, has created a robust market for both incumbents and new entrants.

However, the recent economic downturn brings significant additional stress to credit card marketers in what has become a highly saturated and fiercely competitive market. As such, they must become increasingly sophisticated in order to secure and maintain profitable long-term customers.

Changing Data Needs Fuel New Trends in Credit Card Marketing

Credit card marketers still use direct mail extensively for acquisition. However, the nature of direct mail activity is changing. With increased competition in the marketplace, credit card marketers are employing a range of different strategies in order to stay competitive.

Over the past 5 to10 years credit card marketers have tended to use big compiled files rather than vertical lists. This has been driven by both a need for an ever larger prospect universe and by a desire to reduce acquisition costs. Despite this, there are still some credit card marketers who continue to use vertical lists to access unique names that are not available on compiled files. The best strategy for direct mail acquisition seems to be a blend of the two.

Another significant trend among credit card marketers has been a move towards using unaddressed rather than addressed direct mail. While response rates for unaddressed admail are much lower than response rates for addressed admail, the significantly reduced mailing costs of the former can deliver respectable short-term ROI. It remains to be seen whether the lifetime value of customers sourced from unaddressed admail will reach that of customers sourced from addressed admail.

Impact of Privacy Changes on Go-to-Market Strategies

The use of telemarketing, which has been a staple acquisition tool for many credit card marketers, is currently in decline. Many of Cornerstone’s Clients are reducing their telemarketing campaigns in 2009 - some by as much as 50%. This is due in part to the reduction in the number of callable names since the introduction of Canada's National Do Not Call requirements along with a rise in telemarketing costs.

Increasingly, credit card marketers are being asked by customers and prospects alike to respect their preferences when it comes to marketing channels and offers. As a result, many marketers are looking at managing customer privacy preferences through the use of integrated, Web-enabled privacy databases. This allows telemarketing vendors and internal call centres to easily manage privacy requests. In these privacy sensitive times, those companies who respect and invest in consumer preference strategies will gain trust, and a competitive edge.

The Move to Market-ready Database Environments

In conjunction with these considerable changes in data strategies and requirements, the very methodology of credit card marketing in Canada has undergone a significant transformation.

Over the past 5 years, there has been a broad-based move among Canadian credit card marketers toward more sophisticated database-driven approaches. Most major financial institutions have invested in new technology and infrastructure in order to take part in the race for new customers – many of them by building powerful, integrated prospect and customer database solutions.

These solutions offer unprecedented speed-to-market, tactical flexibility, scalability and data accuracy by automating data processes and facilitating intelligent segmentation and campaign management strategies. The result is smarter, more targeted direct marketing campaigns.

The application of technology and the use of data that enables more intelligent selection will become increasingly important in 2009 due to a variety of factors, including the current economic downturn. Those marketers who continue to evolve their ability to reduce credit risk, marketing cost and time-to-market stand to gain – even in the current economic climate.

Looking Forward: Predictions for Credit Card Marketing in 2009 and Beyond

As we look at 2009, we are likely to see a number of different responses by credit card marketers to the economic downturn. There will be those who benefit from good management under crisis, and who will use their "downtime" to invest in technology and infrastructure that will enable them to get off to a quick start when the economy picks up. Some credit card marketers may in fact go forward aggressively in the belief that Canadians are good targets for credit card offers at the moment, given that it is harder than ever to secure other means of credit. Still others may act on direction from US head offices to scale back on certain programs based on changes in the US credit marketplace. Lastly, some marketers who enjoy the relative stability of the Canadian banking sector may make no immediate changes and adopt a wait-and-see approach.

Looking still further ahead, speakers at the recent National Center for Database Marketing conference in Florida emphasized that the true evolution of database marketing is in facilitating complete digitalization. While direct mail continues to be a significant channel for credit card marketers, the web obviously continues to grow in importance as a marketing channel. Today's database solutions must be channel agnostic and completely integrate offline and online activity. Leading marketing services providers must enable the use of all channels by offering modular software solutions that integrate with existing systems. This ensures that as marketers move to more integrated, intelligent campaigning, they have easy to use and powerful tools at their fingertips.

In summary, forward thinking credit card marketers who employ careful and considered growth strategies in 2009 will reap the rewards in the predicted bounce-back in 2010 and beyond.

Bob Coles is Chief Operating Officer at the Cornerstone Group of Companies. Bob oversees Cornerstone's Marketing Database Services, Data Products, List Processing Services, List Brokerage and List Management Services units, all of whom work extensively with credit card marketers. Bob has more than twenty years' experience in direct and database marketing, and has been closely involved with the Canadian Marketing Association, both as a former vice-chair of its Ethics and Privacy Committee and as a former member of the CMA's board of directors. Bob is a graduate of Concordia University, holding a bachelor of commerce degree with a major in marketing.

He can be contacted at bob@cstonecanada.com, 416-932-9555, Ext. 103.


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