There are several reasons cardholders transfer their loyalty. In part one, we discussed these factors; now, we will focus on ways to boost cardholder loyalty.

Porges/Hudson Marketing has developed a set of principles to help issuers hold onto customers. We call them "the Seven Habits of Highly Effective Account Managers."

The habits are to establish a new mission, manage "info-motion," be proactive, establish financial bonds, establish social bonds, build structural bonds, and learn from the leaders.

A new mission should guide every marketing activity from acquisition to activation to balance building to cross-selling to product development.

"Manage Info-motion" describes the dynamic nature of the information you need to grasp, recognizing that you have migration between accounts, often in response to your marketing initiatives.

Whether it is a cardholder upgrading to gold or converting from a personal card used for business to a commercial card, you need to recognize that these cardholders are, in fact, not being lost even though they may be voluntarily closing an account.

Secondly, you need to recognize changes in behavior. By now, most of us understand we need to recognize when a profitable revolver is paying down, or has paid down, a balance and take effective action. We should also recognize when a zero-balance account activates or when a formerly consistent transactor begins to revolve, and reward this behavior.

Third, recognize changes in segments. Almost 80% of the respondents in our survey of top card issuers said they do some form of segmentation. The challenge of segmentation is how often do you adapt your segment definitions to current customer behavior?

The better you are able to do this, the more effective your targeting can be, which leads to the next point: accessing data on a real-time basis. The credit folks in your organization know how critical it is to be current on customer behavior before issuing or extending lines.

Marketers should similarly be in touch with a customer's current credit behavior to assess that individual's likely needs at any particular time.

Finally, responses from direct mail and telemarketing are but a few of the inputs you can and should use to manage info-motion. As important as these are, don't ignore information from ongoing business activities that can be leading indicators for credit needs: things like an address change, an inquiry about a paydown amount, or a customer service issue.

These are all parts of managing "info-motion."

Being proactive is perhaps the biggest opportunity we have, given where most of us already are.

Again, the use of "real-time" information gives you the ability to address customer needs before someone else does. If your cardholder is approaching 80% line utilization, don't wait for someone else to offer him/her more credit.

Another aspect of being proactive is anticipating a customer's life cycle needs. For example, most student cardholders do eventually graduate and then typically need and qualify for more credit as they begin their careers. As the students graduate, so should their cards. This is but one of many life-stage changes you can be anticipating.

Finally, there are also "card life cycle" developments, such as expiration of a teaser rate or fee waiver. These key events, too, can and should be anticipated.

Let's move to establishing financial bonds. The first key to establishing effective financial bonds is to price for profitability. This means going beyond risk-based pricing to performance-based pricing. That is, everything from charging transactors a fee to varying the interest rate paid by total interest revenue earned to reward revolvers.

Taking advantage of changes in the competition is not something most issuers do effectively. General Motors' cutting its rewards to gold cardholders offered an opportunity for Ford to take advantage of the disenchantment of GM's customers. Why not offer double rewards from their GM balances? Both Ford and Citibank, the issuer of the Ford Visa card, could benefit from that.

A third key to building financial bonds is to focus rewards on your best customers. After years of rewarding unprofitable behavior, issuers are waking up to the fact that rewarding cardholders who revolve or have the potential to is the only sane and profitable way to build loyalty.

Last, but certainly not least, is leveraging one of the new forms of currency. No, I don't mean "E-cash," but airline miles. The only more potent form of financial reward than miles is cash itself. But there is no leverage in rewarding with cash as there is with miles. And miles can be used to reward every type of activity - from card usage and revolving to retention of the card product itself.

Going beyond financial bonds to establishing social bonds is an area more issuers find challenging.

How can you establish social bonds with your customers?

First, give them something to feel good about.

Citizens Financial Group in Providence, R.I., does it with its Good Citizens card. With this card you get to choose your favorite charity and 25 cents per transaction goes into an account - up to $300 per year. At the end of the year, a check is written to the charity in your name, so you can get the tax benefit for the donation. Now that's something to feel good about.

The second key to building social bonds is to make it fun.

The underlying appeal of the mileage cards is that the reward is usually redeemed for vacation travel that would be often otherwise unaffordable.

Vacation travel is one form of fun; so are airline and hotel upgrades; a chance to go to the Olympics; or entree to any of a group of exclusive golf clubs around the country.

Third, associate with a name your customers respect.

Advanta's stunning announcement that it was issuing Visa and MasterCards that offer American Express Membership Rewards is just such an association. (Marketing of that card has ceased at least through February).

Which brings us to the final point, build a brand. It is our contention that you cannot build sustainable preference without building a brand that stands for something the customer wants.

For most of you, Visa and MasterCard have done the job for you. Most cardholders will tell you that their Visa or MasterCard allows them to make transactions just about anywhere. The problem is, they see most bank cards as interchangeable - commodities - which is why you have attrition and low- usage problems. If all Visa cards are created equal, why not switch when you are offered a better rate?

You may disdain American Express, but there are still 20 million people willing to pay a substantial fee to carry that card.

Building structural bonds adds to what you have done in creating financial and social bonds. The strongest customer ties are forged when structural bonds are also used.

These are bonds, built into the structure of your product offering, which create a barrier to exit for your customers. For example, use rewards that are earned over time. Airline mileage is a perfect example. It takes most people months if not years to actually earn a free ticket.

Using rewards that are redeemed over time is another way to build a structural "barrier to exit."

Unlike the Shell MasterCard, which is redeemed on the purchase after you earn the rebate, Advanta's Edvance Card, which can be redeemed in the future. Cardholders earn U.S. savings bonds for the college education of a their child. For the millions of baby boomers anticipating this critical event, the Edvance Card combines financial, social, and structural bonds to maximize customer loyalty.

Finally, tying the card to other products is the most basic of structural bonds. It's not a new idea, but it continues to be one of the most effective for customer retention. For example, offering the card account as an overdraft line for a checking account is still one of the best credit card retention devices available to a retail bank. Other ties could include tying the card to a home equity line or business checking account.

The seventh and last habit is essential.

There are some basic characteristics of all leaders not just in the credit card industry.

First is implementing a "learning loop" to ensure that learning from one part of the organization is transmitted so that all parts benefit.

Second, it is critical to speed up your ability to take action. Just as access to data needs to be "real time," so does response. For example, a decline in usage or in balances should trigger automated letters to address the behavior change, just as a delinquent payment would.

Third, it is an axiom of business today that the "low-cost provider" has the advantage in any competitive situation. The low-cost provider can redirect resources not used for ongoing operations to anticipate and react to changing competition.

Finally, and in a way most important, we see the leaders in our industry are superior customer managers. Whether you are looking at MBNA Corp. and its cult to satisfy the customer or Capital One Financial Corp. and its customer information-based strategies, it is clear that the leaders know their customers and use that information to serve them better.

No single organization we know has mastered all seven habits, but the more you master, the stronger your customer loyalty - by whatever measure.

Ms. Porges is chief executive officer of Porges/Hudson, a credit card marketing and consulting firm in San Francisco.

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