The credit card industry broke all records last year in pursuing new customers the old-fashioned way.
Despite a boom in Internet marketing and concerns about credit quality, card issuers sent 3.45 billion solicitations through the mail, shattering the 1997 mark of three billion.
Also continuing a pattern, the annual response rate on mailings fell-to 1.2%, according to statistics compiled by BAIGlobal Inc. That was the lowest since the firm began tracking such numbers, in 1992; the rate in 1997 was 1.3%.
But the increase in mailings was so substantial that it offset the percentage decline, and the number of responses rose by two million, to 41 million.
In an average month, 75% of U.S. households received a solicitation, up from 69% in 1997. That went as high as 86%, a record, in November.
Issuers are "still aggressively pursuing new card business, going deeper into the population and selling to more segments than they had historically," said Christopher Batenhorst, vice president of competitive tracking services at BAIGlobal.
The Tarrytown, N.Y., research company-which calls its solicitation- tracking service Mail Monitor-is being called on more often by card companies seeking to reach lower-income households.
Kathleen Knight, president and chief executive officer of BAIGlobal, said dwindling response rates are prompting credit card issuers to rely more heavily on target marketing.
"With universal penetration in credit cards and an enormous amount of direct mail arriving at everyone's house, it becomes more and more important to say something the consumer will respond to," Ms. Knight said. "It's much easier to do that with a research vehicle."
One popular method is to test direct mail pieces with small customer groups and gauge participants' responses against industry norms.
William F. Keenan, president of De Novo Corp. in Wilmington, Del., said BAIGlobal's Mail Monitor is particularly helpful to small and midsize card issuers.
"Large players can calculate their share percentage (based) on their own (results) without using third parties," he said. But for other companies, "it is nice to have an estimate of their competitors' share."
Aside from Mail Monitor, perhaps its best-known business, the company also conducts market research in a variety of industries including telecommunications, technology, health care, pharmaceuticals, and consumer goods. Citigroup and AT&T Corp. are among its clients.
Demand for increasingly accurate and precise market research has been a boon to BAIGlobal, a 70-person firm founded in 1969 as Behavioral Analysis Inc. In August 1997, it was bought by Market Facts Inc. of Arlington Heights, Ill.
Revenue at BAIGlobal grew about 30% last year, to $16 million, and is expected to reach $19 million this year. In February, it named six new vice presidents, including Mr. Batenhorst, who was previously with Capital One Financial Corp.
Following the card industry and several major U.S. issuers internationally, BAIGlobal last September did its first study of credit card solicitations in Canada and the United Kingdom. BAIGlobal may add other English-speaking countries-such as Australia and South Africa-if U.S. card issuers venture there.
"Companies in the U.S. are looking abroad to develop their products and services," said Robert Skolnick, executive vice president at BAIGlobal and head of credit card research. "The research industry needs to adapt."
BAIGlobal has trademarked a number of research techniques, including MarketTest 2000, which forecasts sales for new products, and BehaviorScope, which gauges potential uses of products and services.
Ms. Knight, 58, joined BAIGlobal as vice president in 1975, became president in 1989, and was named chief executive officer in 1994. Mr. Skolnick, 46, joined the firm nine years ago from Market Facts, before it became BAIGlobal's parent company.
Although BAIGlobal uses the Internet to gather research and transmit it to clients, it does not track on-line credit card account acquisition in depth, Mr. Skolnick said.
In 1998, only 2% of new card accounts came from on-line applications, while direct mail contributed 76% of new accounts, according to BAIGlobal. "Take one" brochures brought 9% of new accounts, telemarketing 8%.
"On-line applications generally come from people looking for credit cards, and people who shop for credit cards certainly aren't the first prospects for issuers," Mr. Skolnick said.
Despite low mail response rates-they fell as low as 0.8% in last year's second quarter-this method is still a good bet, Mr. Skolnick said.
"Direct mail allows issuers greater flexibility with precisely targeting customers," he said. "It allows issuers to get into the homes of individuals without being asked."
BAIGlobal said responses to mailings rose in the fourth quarter. Issuers did a better job targeting their offers, the firm found, and sent a spate of offers with low, fixed interest rates.
"Over the last few years, consumers have started to look around for cards with better pricing or new features," Mr. Skolnick said.
As interest rate competition has intensified, customer retention has become the greatest challenge for credit card issuers, Mr. Skolnick said. The question becomes, he said, "What do you do with a cardholder once you get him or her?"
