When it comes to cross-selling products and services to credit card holders, merchandise is a lot easier to peddle than financial services and products, bank executives say.
Cardholders particularly younger ones who revolve their balances are more receptive to pitches for such goods as luggage or magazine subscriptions than they are to solicitations for deposit accounts, insurance, or other financial products, these executives say.
Moreover, executives at card-issuing banks with branches say that it is particularly hard to cross-sell to cardholders who live outside their banks branch network.
I think its fair to say weve found it more difficult to sell other bank products to single-service credit card holders, especially if theyre outside your market area, where you have a strong brand, said Brian Collins, a senior vice president and the manager of bank card services for First Tennessee National Corp. of Memphis.
That was one reason that First Tennessee sold about half of its card portfolio to MBNA Corp. last December, Mr. Collins said. The portion that First Tennessee sold had $270 million of receivables from about 200,000 cardholders, none of whom had any other relationship with the company.
We cut ourselves almost perfectly in half, and now about 90% of First Tennessees cardholders have another relationship with the company, he said.
First Tennessee considered mortgages and deposit accounts far better products in which to build a multiple relationship with customers than credit cards, Mr. Collins said. The company also cross-sells merchandise, but it does so sparingly, he said. We tend not to inundate our customers with those kinds of offers.
American Express Co. sells a broad mix of products to its cardholders through direct mail, e-mail, and telephone solicitations. The company usually loads its cardholders statements with merchandise offers, and people who mail payment checks to the company usually have to tear off an offer for magazine subscriptions or thank you gifts in order to seal the envelope.
Desiree Fish, a spokeswoman for American Express, said that when it pitches another product to its customers, the offer is generally related to the customers interests. Were not just cross-selling just to talk to ourselves. Were cross-selling to meet those customers needs.
Amex tries to sell financial and travel products to cardholders who contact its call center, she said. We do look for opportunities to upgrade your card. If youre calling us and we realize that its someone who travels a lot, we may invite them to look at the next best product.
Metris Companies Inc. calls its cross-selling efforts or, as the company calls it, enhancement services business essential to its bottom line. Mike Smith, a spokesman for the Minnetonka, Minn., company, said that 40% of its cardholders have purchased at least one other product from Metris, and 20% have purchased two or more.
The company considers itself a marketing firm as much as a credit card issuer, he said.
Metris sells magazine subscriptions and luggage, but that operation is outsourced by an outside vendor, and the company takes a commission on those sales, Mr. Smith said. Those sales are a small percentage of its cross-selling business, he said.
The company says it makes most its cross-selling money with in-house products and services, such as RoadSaver, a club similar to AAA that offers 24-hour emergency roadside assistance, consultation for auto repairs and shopping, discounts, and trip planning.
Metris also sells bank-related products and services, such as DirectAlert, a monitoring service that gives members unlimited access to their credit bureau report, provides automatic report updates, and sends quarterly informational newsletters, Mr. Smith said. These products and services are developed, marketed, and serviced in-house by Metris, so theyre very profitable, he said.
When Ronald Zebeck, Metris chairman and chief executive officer, founded the company in 1994, he made it very clear [that cross-selling] was going to be a major initiative for the company, Mr. Smith said. Its treated as just as important as our credit card business.
In June and July, Synergistics Research Corp., an Atlanta market research firm polled 1,007 cardholders with at least $25,000 of household income and found that 32% of them had obtained another product or service from their card issuer.
The vast majority of the purchasers, 29% of the survey participants, said they had bought nonbank items such as magazines, radios, luggage, vacation packages, discount shopping services, and telephone services.
Twenty percent of the cardholders said they had obtained other financial accounts or products from their card issuer. The most popular cross-sold financial product was a checking account about 15% of the cardholders said they had one from their card providers but almost half of them got it before they got the credit card.
About 5% of the cardholders said they had purchased financial products other than checking accounts, including money market accounts, certificates of deposit, auto loans, personal loans, home equity loans, investment products, individual retirement accounts, and mortgages.
We wanted to look at the extent the credit card was a cross-selling vehicle, said Genie M. Driskill, the chief operating officer at Synergistics. The conclusion is that the consumer views the credit card as a purchasing tool and a transaction vehicle, as opposed to having a relationship with the card issuer.
Consumers tended to buy products based on happenstance or circumstance, she said.
But even though the survey showed few cross-sales for bank products, the fact that nearly a third of the cardholders were buying something meant that the issuers were off to a good start, Ms. Driskill said. Its not one product that dominates. Theres fragmentation of the different products and services that are being purchased.
The segment of cardholders who were most receptive to cross-selling offers were younger customers and those who carried a monthly revolving debt, Ms. Driskill said. Convenience users, those who use their card and pay off their balance each month, were less receptive to the offers, she said.
