Credit card issuers sent out a record number of card solicitations this year, but flooding the postal system is not generating large consumer response rates, a survey has found.
BAI, a market research firm in Tarrytown, N.Y., which provides a service called Mail Monitor that tracks direct-mail credit card offers, released the survey late last week.
In the first six months of 1994, card issuers sent out nearly 1.2 billion offers of credit compared with 1.5 billion solicitations for the full year of 1993.
However, only 1.6%, or 19.2 million consumers, mailed back an application in the first two quarters of this year, BAI estimates.
The number of returned applications set a record high, but the actual response rate established a new low.
Traditionally, the industry has enjoyed consumer response rates of between 2% and 2.5%, "so a drop to 1.6% is quite dramatic," said Robert Skolnick, executive vice president of BAI.
BAI reports that response rates have been declining steadily for the past year.
Nevertheless, declines should be expected because, historically, response rates decline as mail volume increases, he explained.
"It is apparent," said Mr. Skolnick "that understanding the nature of the relationship between [mail] volume and response rates is critical as direct mail programs are developed in an intensely saturated marketplace."
Some other observations from the survey include which credit card offers are most popular with consumers.
Credit cards without annual fees reel in the largest number of applicants on a consistent basis. Cobranded cards and low interest rate cards are also attractive to consumers but to a lesser degree.
Initially, cobranded offers have stronger-than-average response rates, said Mr. Skolnick, but over time their edge diminishes, pushing their response rates down more in line with standard offers.
The survey shows that low-interest-rate cards are also bringing in new customers, but only those offers that are below 12% on a long-term basis.
Mr. Skolnick, who does not expect response rates to creep back to their pre-1994 levels, believes that card issuers will become increasingly segmented in their approach to the market to remain competitive.
"Without segmenting it may not be worthwhile to solicit broadly," said Mr. Skolnick, "because it is becoming more costly to [garner] new customers."
