The best way to predict the future, to quote a wise businessman, is to invent it.

While none of us totally controls the business environment in which we operate - and thus the factors that often cause attrition - we have a lot to do with the results.

There are three broad areas to consider as you look to improving retention in your credit card portfolio: key portfolio characteristics, marketing strategies, and competitive environment.

Key portfolio characteristics include the daily, weekly, and monthly statistics on how your portfolio is performing.

In considering marketing strategies, what approaches have you used to build your business and how does that affect retention?

And third, you should ask how competitive developments are affecting your ability to retain your customers and balances.

Porges/Hudson conducted a phone survey in August, talking to senior marketing and credit executives of the top 50 issuers about attrition. Over half of the issuers we surveyed had portfolios ranging from one million to three million accounts, with a quarter over three million and 17% under one million.

One third were under $1 billion, 42% were between $1 billion and $2 billion and one quarter above $2 billion.

We found virtually no correlation between portfolio size and attrition rate.

Portfolios with less than one million accounts had attrition rates ranging from 6% to 11%. Among those between one million and 3 million, attrition ranged from 5.5%-11%.

Even more important than the size of the portfolios are their performance statistics.

First, let's look at account activation rate.

SMR Research reports that since 1991, the industry average of account activation has been declining from almost 70% of all accounts being active to almost 60% in 1995.

Our survey showed that 20% of our sample of issuers were at 60% activation rate or lower, 40% of the sample were between 60% and 70% and 40% of the sample were above 70%. So, our sample skewed high in activity rates.

Activation rate in our survey did seem to be negatively correlated with attrition rate. That is, the higher the activation rate, the lower the attrition rate.

Specifically, portfolios with activation rates of less than 60% had attrition rates ranging from 8% to 12%. Those with activation rates between 60% and 70% had attrition rates ranging from 5.5% to 11%. And those with activation rates over 70% had attrition rates of 5% to 9%.

So, not surprisingly, maintaining a high activity rate would seem to be key to reducing attrition.

As for average balance per account, our survey participants were evenly spread with half below the industry average of $1,206 per account, and half above.

Except at the highest level of average balances, that is, above $1,600 per account, attrition rates were not correlated with average balance levels. In the top balance group, attrition rates ranged from 6% to 8%. Otherwise, they ranged from 5% or 6% at the low end to 11% or 12% at the high end for the other three groups.

Moving to account closure rates, RAM Research Group reports that they have been trending down industrywide in the last few years - from 10% in 1991 to a bit over 8% in 1996.

The majority of our survey, however, reported closure rates well over 8%, which may be due to their relatively high proportion of fee-based accounts. Only one third had rates lower than 8%.

Now let's look at which key marketing strategies for growth were employed by the issuers in our survey and how these strategies affect attrition.

A full three-quarters reported using low prices and teaser rates as a primary growth strategy, with another 17% reporting it as a secondary strategy.

Guess what these same issuers said was their primary retention issue? I quote: "rate shoppers," "irrational competitors who cut rates," and "balance surfers."

It only goes to show that what goes around, comes around. Or to quote Pogo: "We have found the enemy and it is us."

The No. 1 reason cardholders transfer today is for a better rate. And those who do are usually revolvers who take balances with them.

The second most common strategy is affinity and cobranding relationships.

A third of our sample was active in affinity and cobranded marketing and saw them as primary growth strategies. They reported lower attrition in these portfolios.

Only one quarter used product development to grow. And based on what these issuers reported to us, the most common secondary strategy is cross- selling bank cards to bank customers, which is a very effective way to lower attrition.

Had not some in our sample been stand-alone issuers, this cross-sell number might have been higher.

The issuers in our survey were distributed normally around a range of marketing budget levels: one quarter spend less than $5 milliona year; one half spend between $5 million and $25 million, and one quarter more than $25 million.

We asked these issuers how much of those marketing dollars is spent on account management, that is, activation, use, retention, and balance- building programs.

We found that 42% spend from 10% to 20% of their budgets on account management; 17% spend 20% to 30%, 33% spend 30% to 40%, and 8% spend more than half.

There was a slight negative correlation with percent of budget spent. The more money spent, the lower cardholder attrition.

A wide array of tactical programs were used by our sample. All of the issuers used balance transfers and convenience checks; 92% used some other form of account activation; 84% had both retention and balance building programs in place; and three-quarters offered fee-based services.

Less than 10% reported using product development as one of their tactical marketing programs, though this may have been because product development is seen as a strategic effort.

How has the competitive environment affected attrition rates?

There was a slowdown in the introduction of value-added products in 1996. By our count, there were fewer than 50 new introductions by November compared to well over 100 in 1995.

Many of the products introduced so aggressively in past years have been reconfigured. The maximum of points GM Gold cardholders can earn each year was cut from 1,000 to 500; AT&T Universal Card Services reduced its rate from prime plus 8% to prime plus 5.65%, and GE Rewards began charging a $25 fee to its convenience users.

Finally, there has been a dramatic reduction in acquisition mailings. According to BAI Mail Monitor, mailings in the first quarter of 1996 were down 8% from the year-earlier period.

Based on conversations with several issuers, mailings have been reduced even further since then.

All these changes in the competitive landscape affect the appeal of alternatives available to your cardholders.

For the most part, the daily barrage of compelling offers has diminished - at least for a while.

Next: Seven principles for boosting cardholder loyalty

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

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