Global economies have not ceased to slow down, that is why retention of existing customers is a priority of businesses. One such business is that of credit cards, a constant in any portfolio of the banking and financial institution sectors.
Customer satisfaction in the credit card business translates into profitability. With recession a given in world economies, the environment in which credit cards operate has become more challenging. Consumer habits determine what new products to launch and regulatory changes must be synchronized with the reduced consumption of customers.
How to Maintain the Hold
Mature markets have all but turned their backs on debit and cash spending and the credit card business is in the midst of significant modification as a source of revenue for its stakeholders and as a provider of products and services for its customers.
New-fangled payment channels have been introduced to consumers and noteworthy legislative measures to reduce consumption of credit cards have impacted on the credit card industry to refocus on how it can maintain its hold on their captive market.
Since 2012, 30% of online payments are being made by alternatives such as PayPal, Skrill, Bill Me Later and Google Checkout, steadily decreasing the share previously held by credit cards in the market.
Scrimping, Splurging, Saving
Take a look at the strategy of credit card companies in the United States (US) which have now increased their fees for transferring balances to other providers, significantly reducing their cooperative relationship with similar providers of financial services. While this strategy has been in place since 2008, US credit card companies admit that this is only a stop gap action, and not a retentive move, in keeping with the prevalent economic climate.
Successful retention of credit card subscribers requires an overall approach, not just an improvement on marketing or advertising tactics. Debit and online space are real threats to credit card use, so a holistic view has to be taken in identification of what specific actions to undertake in brand advocacy, profitability and loyalty and how their roles in the credit cardholder relationship affect scrimping or splurging or simply saving.
Mindset and Purchasing Habits
Market segmentation is critical in credit card customer retention. The old maxim that says the most satisfied and loyal of customers are those that spend more and frequently is no longer applied because these same customers have grow accustomed to switching payment channels and reducing their usage of their credit cards for the past two years.
The mindset and purchasing habits of customers are priorities that credit card companies now find indispensable when planning retention strategies, from the acquisition of the customer to activation of this customer’s card, among other levels. The increased competition heaped upon credit cards from alternative payment channels and shorter product life spans drive companies to implement aggressive strategies to be able to come up with returns of up to four times the cost of equity in their markets.