Family Finance: Card Firms Curb Mailings -- a Bit
From the July 26, 2006 edition, The Wall Street Journal, Eastern edition, Page D3.
By David Enrich
The piles of credit-card offers that clog American mailboxes may start to taper off.
Since the early 1990s, the volume of credit-card solicitations mailed to U.S. consumers has soared, with card companies last year sending out more than six billion offers, according to market-research firm Synovate, a unit of Aegis Group PLC. But the pitches have been losing effectiveness. Just three out of every 1,000 offers generated a response last year, down from about 28 per 1,000 in 1992.
Now, top card issuers such as Bank of America Corp. and J.P. Morgan Chase & Co. are rethinking their marketing strategies and shifting away from mail. Instead, they hope to peddle more credit cards through bank branches, Web sites and even automated-teller machines. The trend already appears to be taking a bite out of mail volumes. After sharp increases in 2004 and 2005, the number of credit-card offerings in the mail dropped by about 20% to 25% in the first quarter of 2006, said Brent Stratford, a vice president in Synovate's financial-services team.
The disillusionment with mail stems in part from the high cost of sending billions of offers. At Bank of America -- which earlier this year wrapped up its acquisition of MBNA Corp., making the company the nation's largest card issuer -- executives say they are turning from mail to bank branches largely for financial reasons.
"The cost to acquire a new customer is dramatically lower" in branches, says Henry Fulton, a card-services executive at the bank. In the second quarter of 2006, mail generated 23% of Bank of America's card sales, down from 30% a year ago.
Broader factors are also at play. Some households get inundated with hundreds of offers a year, and many Americans' wallets already are stuffed with several cards. Banks are scrambling to find new customers in what some view as a saturated market, and they are eager for marketing venues where they can use existing connections to lure potential customers.
Besides relying more on their branches and Web sites, Bank of America and J.P. Morgan are experimenting with ATMs that offer cards to customers who meet credit and other criteria, executives say. And J.P. Morgan is using partnerships with hotel chains, airlines and others businesses to reach potential customers with offers tailored to their interests and spending habits, says Matt Kane, a senior vice president in J.P. Morgan's Chase credit-card unit.
Meanwhile, banks such as Citigroup Inc. are marketing cards via the monthly bank statements they send to customers, while some firms want their customer-service centers to evolve into sales engines, says Ariana-Michele Moore, a senior analyst at financial-services consultancy Celent LLC. A Citigroup spokesman declined to comment.
Yet mail remains the most effective marketing venue for issuers, generating more than 60% of applications for new cards last year, according to Synovate.
Two of the heaviest users of mail promotions, American Express Co. and Capital One Financial Corp., lack the banking presence that would allow them to easily sell cards through branches. A spokeswoman for Capital One -- which recently bought two regional banks -- says the company's mailing volumes haven't changed.
At American Express, mail "continues to be a big part of our strategy," says spokeswoman Desiree Fish. But she says that mailings have become more targeted, and that the company is increasingly turning to promotions at nightclubs, restaurants and other venues frequented by young, urban professionals.
The piles of credit-card offers that clog American mailboxes may start to taper off.
Since the early 1990s, the volume of credit-card solicitations mailed to U.S. consumers has soared, with card companies last year sending out more than six billion offers, according to market-research firm Synovate, a unit of Aegis Group PLC. But the pitches have been losing effectiveness. Just three out of every 1,000 offers generated a response last year, down from about 28 per 1,000 in 1992.
Now, top card issuers such as Bank of America Corp. and J.P. Morgan Chase & Co. are rethinking their marketing strategies and shifting away from mail. Instead, they hope to peddle more credit cards through bank branches, Web sites and even automated-teller machines. The trend already appears to be taking a bite out of mail volumes. After sharp increases in 2004 and 2005, the number of credit-card offerings in the mail dropped by about 20% to 25% in the first quarter of 2006, said Brent Stratford, a vice president in Synovate's financial-services team.
The disillusionment with mail stems in part from the high cost of sending billions of offers. At Bank of America -- which earlier this year wrapped up its acquisition of MBNA Corp., making the company the nation's largest card issuer -- executives say they are turning from mail to bank branches largely for financial reasons.
"The cost to acquire a new customer is dramatically lower" in branches, says Henry Fulton, a card-services executive at the bank. In the second quarter of 2006, mail generated 23% of Bank of America's card sales, down from 30% a year ago.
Broader factors are also at play. Some households get inundated with hundreds of offers a year, and many Americans' wallets already are stuffed with several cards. Banks are scrambling to find new customers in what some view as a saturated market, and they are eager for marketing venues where they can use existing connections to lure potential customers.
Besides relying more on their branches and Web sites, Bank of America and J.P. Morgan are experimenting with ATMs that offer cards to customers who meet credit and other criteria, executives say. And J.P. Morgan is using partnerships with hotel chains, airlines and others businesses to reach potential customers with offers tailored to their interests and spending habits, says Matt Kane, a senior vice president in J.P. Morgan's Chase credit-card unit.
Meanwhile, banks such as Citigroup Inc. are marketing cards via the monthly bank statements they send to customers, while some firms want their customer-service centers to evolve into sales engines, says Ariana-Michele Moore, a senior analyst at financial-services consultancy Celent LLC. A Citigroup spokesman declined to comment.
Yet mail remains the most effective marketing venue for issuers, generating more than 60% of applications for new cards last year, according to Synovate.
Two of the heaviest users of mail promotions, American Express Co. and Capital One Financial Corp., lack the banking presence that would allow them to easily sell cards through branches. A spokeswoman for Capital One -- which recently bought two regional banks -- says the company's mailing volumes haven't changed.
At American Express, mail "continues to be a big part of our strategy," says spokeswoman Desiree Fish. But she says that mailings have become more targeted, and that the company is increasingly turning to promotions at nightclubs, restaurants and other venues frequented by young, urban professionals.
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