Pulling a credit card out of your wallet is practically an unconscious act for many - we give it as much thought as we do blinking.
But the habit is one banks are increasingly focused on, as they find more and more sophisticated ways to entice consumers to swipe their cards over those of their rival banks. Part of that effort involves examining consumer data more closely, and putting that data to use when it comes to launching promotions and offers designed to ensure consumers will continue using a card, or perhaps consider picking up a different one next time they are at the register.
Dana Traci, the vice president of rewards at Discover Financial Services (DFS), says the issuer is using analytics and segmentation to do deeper dives on customer behavior and tailor its marketing accordingly.
"If spending is sliding, we might offer them a targeted incentive to continue to use Discover as their primary card," she adds. "An example of that might be a double cash-back promotion we might be running, targeted around a certain category that might offer customers 2% cash back," instead of the typical 1%.
The credit card company is also able to use what they learn from such targeted offers and apply them across a wider base if they are successful.
"Analyzing results helps inform future strategies. If it drives the consumer base, it could become part of our mass strategies over time," says Traci.
It can be difficult to pinpoint whether an uptick in consumer spending on a card is spurred directly by a targeted bank promotion, but analysts say that banks are getting better at drawing meaning from customer data that can be used to send better offers to specific cardholders. Bankers from Discover, JPMorgan Chase (JPM) and Bank of America (BAC) also say they've been able to improve customer engagement and better design their card programs by talking to customers and drawing lessons from data on customer spending and behavior.
Matthew Friend, a senior executive in the payment services division at consultancy Accenture, says the number of issuers who are applying analytics to have more targeted offers has picked up over the last year.
Improving tracking methods — and follow-up communication — is critical, bankers and analysts say, because almost three-quarters of consumers have at least one credit card, with the average cardholder having between three and four credit cards, according to a 2009 survey conducted by the Federal Reserve Bank of Boston. That means the typical cardholder already has a lot of choices each time he reaches into his wallet.
Sean O'Reilly, a general manager for JPMorgan Chase's Sapphire card, says that the timing of communication — particularly in the first three or four months after an account is opened — is critical for engaging a cardholder.
"We put a lot of effort into explaining to them that they made a good choice," says O'Reilly. "That's been a big area of focus at Chase in last couple of years, and we see results in level of spend and level of engagement."
"I think what we see is that customers are extremely savvy today, and there's no shortage of promotional deals in this category," he adds. "We use everything from qualitative data to understanding trends in spending. … It's based upon what our customers' needs are and where we see them taking advantage of the card."
Titi Cole, Bank of America's retail products executive, says that in addition to strategies designed to focus on consumer demographics and spending — like including cardholders in a back-to-school promotion if data suggest they have younger kids — the bank has also benefitted from rewarding customers for their other relationships with the bank.