Good alumni relationships help colleges and universities enhance their reputation, source new applicants, and promote contributions. As alumni directors know, providing meaningful ongoing benefits to alumni through affinity programs is an effective way to strengthen these relationships.
Over the past decade, affinity programs have expanded to include credit cards, life insurance, auto insurance, phone service, and travel benefits along with traditional perks such as chapter and campus events, newsmagazines, college-branded merchandise, and career placement services. Layers of symbiotic relationships make affinity programs attractive to alumni who want to support their colleges through product endorsements; to colleges that seek closer ties with alumni; and to product providers.
Affinity credit cards are useful for schools, since they serve as miniature wallet billboards, and for bank partners, since they foster more loyalty than low-rate or rewards cards. Bank partners recognize the value of endorsed relationships and have paid colleges considerable royalties for the privilege.
Finding the right card provider is, of course, essential in establishing or relaunching an affinity credit card program. Before selecting a bank partner, a college should evaluate several card providers strategies, consumer target markets, product offerings, and service philosophies.
This background check can help the school screen out a provider that is not committed to affinity programs, too aggressive with telemarketing, or limited in geographic or demographic overlap with the schools target market. It also can prevent a bad fit in loyalty versus profitability objectives. An example would be that the college wants to offer cards to all alumni, while the provider would rather market only to the most profitable alumni.
Once it has found a good bank partner, a college should carefully structure the arrangement to deliver attractive economics to all three constituents: itself, the alumni, the card provider. Some of the largest U.S. credit card banks, including MBNA and First USA, put heavy emphasis on recruiting and retaining college partners, including schools with alumni bases of 15,000 or less. Consequently, card providers now offer colleges an increasingly handsome package of royalties including signing bonuses, customer acquisition fees of up to $20, and ongoing payments of 0.25% to 0.50% of dollars spent using the cards.
Among the nonfinancial issues to consider are use of alumni lists, restrictions on telemarketing, pricing and risk management strategies, service standards, and limits on cross-selling. We also recommend that colleges conduct provider-paid visits to talk with management face-to-face, examine service operations, speak with employees, and monitor inbound customer calls.
In summary, a college can establish a successful affinity program by:
Selecting a bank partner with similar objectives.
Designing card products that will attract a broad cross-section of alumni.
Developing a royalty structure that encourages active promotion.
Structuring program provisions to ensure long-term success for both the school and bank partner.
Preparing the alumni base for the programs introduction; use all communications channels at hand to promote the benefits and minimize negative reactions to marketing efforts.
Mr Martien and Mr. Mendelsohn are senior consultants at First Annapolis Consulting in Baltimore, a financial services consulting firm specializing in the consumer payments industry.
