As banking executives plan their payment card strategies for the balance of the decade, some key questions may come to mind. Is the institution comfortable with its current product and customer mix and will it need enhanced products for a changing customer profile?

How can the business significantly improve its cost position, retain its best customers, and boost overall financial performance?

For many financial institutions, one answer is to include gold in the card portfolio.

During the last few years, gold card issuance has grown steadily. In 1993, for example, the number of Visa gold cards issued in the United States grew 34% to 38.5 million. And this trend has continued in 1994, with midyear U.S. figures showing that Visa Gold card issuance has increased 40%.

The appeal of gold cards is further confirmed by the findings from a recent survey of U.S. bank card leaders.

The study -- Visa Vision 2000 -- polled industry leaders in the U.S. market to determine where they envision the payment card industry in the year 2000 and what strategies would be needed to survive and prosper.

While 95% indicated that they will increase their investment in bank card portfolios over the next few years, gold cards, in particular, were singled out as the most important product offering in the years ahead.

Moreover, according to the survey findings, gold cards are viewed by industry leaders as one of the best opportunities to maximize profits in the foreseeable future.

What accounts for the popularity of gold? For starters, financial institutions find gold cards to be an effective tool for retaining their best cardholders as well as acquiring new, upscale ones.

Higher spending limits and a package of emergency and travel-related enhancements are appealing to today's premium customers.

In fact, Visa consumer research identified rental car insurance, extended warranty and 24-hour, 800-number card replacement and customer service as some of the enhancements most valued by cardholders. Premium customers want gold cards because they provide access to these tangible, usable services that are directly related to their everyday lives.

Also, once. consumers have gold cards and are aware of the advantages, card usage can nearly double that of standard cards, with annual spending on gold cards averaging $4,592 per active account, compared with $2,343 per active classic account.

Recognizing this potential, many issuers have adopted targeted acquisition campaigns, including extensive direct mail and telemarketing efforts.

Banks have also combed their portfolios to identify existing customers who can be upgraded to gold.

In today's environment, payment card marketing activities are targeted so that many financial institutions are practically managing their current and prospective card bases on an individual account basis.

It is against this backdrop of customer segmentation that gold cards have proved to be a powerful marketing weapon. Financial institutions see gold card programs as a strategy to deliver a customized product to a more upscale target base of customers.

Issuers can tailor their gold card programs with specific product positioning and features that match the specific needs and spending patterns of their targeted customer base.

These primary customer markets will most likely include baby boomers and the older members of generation X.

Gold cards are also playing an important role in the strategies of the growing ranks of cobranding issuers and their partners.

By combining their own set of benefits with the value-added package of gold card services and offering them to upscale or most loyal customers, cobranders have the opportunity to see even greater returns on their investments.

In some cases, cobranded card issuers have added the gold product to their portfolio after the classic program has been in place for some time.

In this way, gold cards can help issuers segment their existing portfolios more effectively.

Many of the cobranding programs that have been launched recently are featuring both classic and gold cards from the start. And looking ahead, cobranders will continue to incorporate the power of gold into their marketing strategies. in accordance with the size, demographics, and other features of their targeted markets.

Visa provides an ongoing promotional campaign specifically dedicated to Visa Gold, which provides cardholders with "dollars off" savings from premier merchants and manufacturers across the country.

The program has been implemented by numerous issuers for a variety of strategic applications, including account acquisition, activation, customer retention, and cross-selling.

In the second quarter of the program's operation, more than 14 million "dollars off" certificates were ordered by participating financial institutions and redemption rates of 2% were reported by participating merchants, a very strong level for this type of promotion.

Since its creation, the payment card industry has grown and prospered throughout remarkable periods of change in the structure of the economy, industry, products, technology, and customers.

Today, change remains a constant factor, as card issuers face increased competition, tighter profit margins, and greater consumer demand for product performance..

However, as history has shown, opportunities for continued growth and revenues are always there for those who have the ability to develop and implement solutions for a changing environment.

For banking executives, planning strategies in an ever-changing universe is becoming an increasingly formidable challenge.

But, the soundest strategies are often the most simple -- as illustrated by the current use of premium cards.

Gold cards give upscale consumers what they're looking for

more spending power, flexibility, and service.

And they give financial institutions what they're looking for: loyal, profitable customers.

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