Credit card issuers, tired of recycling solicitation after solicitation to the same pool of people, are starting to cast a wider net by turning to an old trick they hope will increase the anemic response rates to their mailings.
"Invitation to apply" offers have already shrunk the share of mailings going out as preapproved solicitations, an approach that the industry has favored.
However, though invitations to apply - which are sent without a prescreening for credit history - get higher response rates, industry experts say there is little evidence that these offers have a better hit rate for generating new accounts.
Last year preapproved mailings dropped to 57% of the estimated 2.8 billion pieces of mail that card companies sent out, from 61% in 1997, according to BAI Global Inc., a market research firm in Tarrytown, N.Y. In the third quarter the response rate for direct mailings was just 0.9%, the second consecutive quarter it fell below 1%.
"This is just a reaction to the slipping response rate of preapproved solicitations," said Charles M. Hegarty, president of Wachovia Bankcard services and senior vice president of Wachovia Bank.
In general, invitation-to-apply solicitations generate fewer accounts, though they drive up response rates. Mr. Hegarty estimated that Wachovia, which has used this marketing tactic for several years, approves one in five applications that result from invitation mailings. Card issuers rely on these offers to reach people who do not have stellar credit histories. "It's another way to tap into an underserved market," Mr. Hegarty said.
Card lenders identify such people by using lists they buy from a number of companies, including credit bureaus, that track demographic information. These lists are distinct from those used to develop preapproved solicitations because they are not based on credit information. As a result, lenders are not required to offer credit to people who respond to invitations. By contrast, the Fair Credit Reporting Act requires lenders to offer credit to people who receive preapproved solicitations.
Equifax Inc., the Atlanta-based information services company and credit bureau, said its decision this month to acquire R.L. Polk & Co. was driven by the demographic information Polk controls. Equifax reached a definitive agreement with Polk on Feb. 10.
The deal would enable Equifax to sell invitation lists to its bank customers - a marketing strategy Thomas Chapman, chief executive officer and chairman of Equifax, said is increasingly important to card issuers.
"There are only so many folks who qualify for [preapproved] offers," Mr. Chapman said. "Polk can go deeper into the population, to reach a broader market, a huge portion of which may not be credit users."
The other two credit bureaus, Trans Union Corp. and Experian Inc., also offer invitation lists.
Experian of Orange, Calif. has been fielding more requests for these lists in the past six months or so, said Gary Laben, vice president of marketing.
"The prospect pool for invitations is much larger," Mr. Laben said. "It gives credit grantors a fresh look at the pool of prospects."
Experian, for example, relies on public record data such as tax assessor information, as well as information consumers volunteer on product registration or warranty forms. "We can build a model that estimates income based on where consumers live and the cars they drive," Mr. Laben said. But Mr. Laben emphasized that, though invitations may be based on some financial data, they are not derived from credit reports.
Lenders assume less financial risk when using invitation-to-apply lists because they are not forced by law to extend credit.
Mr. Laben said invitations enable marketers to identify people "who would be interested in credit rather than just creditworthy."
