A recent survey of direct mail volumes and response rates for credit card marketers shows both to have declined. That both these measures would fall in the same period is unusual, analysts said, and may signal that the industry is headed for a slump.

The data, which were provided by the research firm BAIGlobal Inc., were more compelling on the volume side of the equation than on the response side. Volumes were shown to have declined steadily, with fewer credit card solicitations mailed out in the third quarter than in any other quarter in more than two years.

The consumer response rate, 0.9%, topped the second quarter's all-time low of 0.6% but trailed the 1.3% of the third quarters of 1997 and 1998.

Direct mailings were climbing at record rates through last year as card issuers scrambled to keep up the pace of customer signups that had fueled their ample profits through most of the 1990s.

But at 710 million pieces in the third quarter, the mail volume was down 13% from the second quarter and 12.5% from a year earlier.

Historically, declines in mail volumes tend to correlate with higher rates of customer acquisition, because with mailboxes less cluttered, marketing pitches get more attention, according to BAIGlobal, which is based in Tarrytown, N.Y.

The combination of both low numbers and sub-1% responses should be seen as a wakeup call, analysts said, especially amid the kind of general economic strength that would be expected to produce a rise in consumers' use of credit.

"The fact that quantities and response rates are down shows there is a slowdown in the absolute market," said James Shanahan, a partner in the Newark, Del., office of Business Dynamics Consulting. "It's a turning point in the credit card business. They have to add some value to these products."

Julia Beaver, vice president of competitive tracking services at BAIGlobal, attributed the low response rate to a "lack of differentiation among card products, increasingly savvy cardholders who shop around for the card that matches their financial needs, and platinum burnout."

Over two-thirds of the third-quarter mailings were offers for platinum cards, Ms. Beaver said, but people who have taken those offers and the opportunity to transfer balances at very low interest rates "are feeling fairly content for the time being with what they have."

BAIGlobal said a new, more creative crop of products that play off of the Internet, such as the American Express Blue card, may do better than offers solely based on price. The Internet has yet to generate a significant number of new accounts, according to most analysts. BAIGlobal said less than 5% of the consumers it polls have applied for a card on-line. But products that offer help or incentives for on-line shopping may be of value to consumers, Ms. Beaver said.

"It does seem that issuers are starting to go beyond the heavy price competition and saying, 'Let's start thinking about the kind of services and features that are really going to appeal to people and bring in new cardholders,' " Ms. Beaver said. "I'd be very surprised if this is a signal that the market is saturated."

But some industry observers said there is little that card issuers can do to change the downward trends in customer acquisition because of demographic realities.

"I think we'll continue to see a slow down," said Keith Leggett, senior economist at the American Bankers Association. "Look at who is coming along now: the Baby Bust generation. There are not going to be as many people out there who would be as likely to adopt a card."

Card issuers frustrated with response rates that have hovered around 1% for three years are working to better target their solicitations, a tactic that may help to explain the dip in mailings.

With the "drifting south of response rates, the issuers' natural response is going to be better targeting and lower volumes to keep the response rates within a band that is economically justified," said Jerry Craft, president of InfiCorp, a consulting firm in Atlanta. "When you're doing better targeting, more focused targeting, you might not be mailing the same volume, but you're keeping your acquisition costs more within the band you're looking for."

Another reason for the drop in direct mail might be the pullback by Bank One Corp.'s First USA credit card division. Wilmington, Del.-based First USA had been one of the most active mailers in the industry, but recent losses stemming mostly from customer attrition have caused it to regroup and presumably try better targeting techniques.

Kenneth A. Posner, analyst at Morgan Stanley Dean Witter, said First USA's retreat is "benefiting the rest of the industry." The third-quarter response rate may have been under 1%, but it was still better than in the previous quarter.

"We are hypothesizing that reduced marketing activities on [First USA's] part will create a little bit of extra room for the industry," Mr. Posner said.

MBNA Corp., also of Wilmington, stands the best chance to benefit from First USA's woes because it similarly markets mostly to prime borrowers and through affinity-group programs, Mr. Posner said.

First USA declined to comment on its marketing strategy.

PSI Global, a research firm in Tampa, had a more positive industry outlook. It found that in 1999, 18% of households opened a general-purpose card account and 14% closed one. The spread between those numbers doubled from 1998, when 17% of households opened a new account and 15% closed one.

Greg Weed, vice president of card services at PSI Global, said fixed-rate options this year like Capital One Financial Corp.'s 9.9% card, may have been behind many of the new-account openings this year.

"Our research showed that consumers significantly prefer the fixed rates to the low introductory offers that give way to higher "go-to rates," Mr. Weed said. "People prefer the fixed-rate option because there are no surprises."

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