Faced with declining mail-order response rates and indications of market saturation, credit card issuers are being forced to refine and redefine their methods for identifying prospects.

Though much about card marketing will remain outwardly the same - direct mail will be dropped, cobranding programs announced, and balance transfer wars continue - bankers acknowledge that their strategies need fine-tuning.

Among the trends that accelerated in 1995 were gold card mailings, which overtook standard ones; secured card programs; telemarketing as backup for direct mail offers; and, as always, market segmentation.

Meanwhile, bankers are trying desperately to stimulate the customer loyalty that has faded with years of cutthroat competition.

"It's certainly a challenge," said Robert Skolnick, executive vice president, BAI Mail Monitor, which tracks direct-mail solicitations. Noting how fickle cardholders have become, he said more than 2.6 billion card offers were mailed in 1995, up from 2.4 billion in 1994.

Response rates hovered around 1.4% in 1995, down from 1.6% last year, according to BAI. There was also a decline in response to the popular cobranded offerings. "Consumers are becoming skeptical of a lot of reward programs that are either not relevant or too complicated in terms of cashing in," Mr. Skolnick said.

Mr. Skolnick, who is based in Tarrytown, N.Y., said he expects mailings to remain heavy. Banking industry megamergers, rather than decreasing competition, have created larger institutions with more marketing dollars and the ability to compete nationally.

Examples of such powerful marketing contenders are Banc One Corp., NationsBank Corp., and SunTrust Banks Inc. The past year's merger crop should produce more fit players for the national scene.

"High impact for low budget is the theme of '96," said Jeffrey Jurick, president of Fala Direct Marketing Inc., Melville, N.Y. "Everyone wants to get the cost of the package down." Mr. Jurick said cost-conscious issuers are experimenting with postcard mailings and other less expensive materials.

Mr. Jurick observed more direct-mail targeting and segmentation in gold cards, affinity programs, and solicitations of the youth market.

He said multiculturalism is taking off in the form of Spanish, Portuguese, and Kanji print - Asian fonts - in direct-marketing pieces.

Though still in its infancy, the Internet will play a bigger role in marketing in 1996 and 1997, Mr. Jurick said. The computer network's multimedia World Wide Web is already used by many card issuers to disseminate information, but full-scale electronic commerce is building momentum.

Despite a perception that cobranding is cooling off, Rita Champ, MasterCard International's vice president of cobranding and affinity marketing, said the association launched over 1,000 programs worldwide in 1995, with 517 in the United States. MasterCard claims 62 million cobranded and affinity cards, up from 50 million in 1994.

"Cobranding has clearly become and will remain a part of credit card marketing," said Ms. Champ.

She said future growth areas include health care and insurance. Some new markets broken into this year include wholesale shopping clubs such as BJ's Warehouse, and home centers such as Rickels.

But cobranded programs must be clear and simple, with rebates that are easy to achieve.

"Consumers are getting a little jaded," said Collin McKenny, president of Cincinnati-based Star Bank Card Services Group. Cobranded offers will have to be "pretty original to get the envelope open."

Cobranded cards must compete on price "to even be considered by consumers," said Anne Moore, president of Synergistics Research Corp. in Atlanta. "You have to be competitive no matter how big the reward."

The cobranding craze has spread to issuers who previously had not considered it. K. Shelly Porges, a San Francisco-based marketing consultant, noted that First USA Inc., whose "claim to fame had been high- limit, no-fee gold cards, has clearly gotten into the affinity game."

She said major issuers have been forced to diversify because "everyone has seen declines in response rates."

With chargeoffs and delinquencies on the rise and many portfolios already fat after the rapid growth of recent years, issuers may turn inward and concentrate on retention and activation strategies. Credit line increases, balance-transfer checks, and other enhancements might boost the loyalty of desirable customers.

"Because a number of products haven't fulfilled their promise, some banks are spending more time in the marketing lab," said Marc Altman, senior vice president of marketing at First of America Bank Corp.

With technological advances, data base marketing ploys have become more and more focused in an effort to retain customers.

"It's a much more subtle and invidious development" than cobranding, said Ms. Porges.

Stuart Feldstein, president of SMR Research Corp. in Budd Lake, N.J., called it "hypersegmentation," where issuers tailor rewards to match consumer spending patterns. "If successful it could stem attrition."

Rather than getting a generic mailing for vacation packages, a cardholder who shops frequently at The Gap, for instance, might get a coupon for a 10% discount at that store.

Some observers compare credit card customers to those of the long- distance telephone companies, who keep switching from one to another to get the best offer.

Mr. Jurick advises his direct-marketing clients to use a three-pronged approach - television, print ads, and direct mail - to maximize response rates.

Star Bank follows up its mail drops with telephone calls, which Ms. McKenny said adds a personal touch that consumers respond to.

Star Bank, a niche issuer with $264 million of receivables as of midyear 1995, said it is taking segmentation to a new level by using a complex model to predict profitability. "Banks need more sophisticated models to remain competitive," Ms. McKenny said.

But she warned that privacy issues are a concern. Although the intention is to increase sales by rewarding consumers with rebates and discounts where they like to shop, she said, "We don't want to create such an environment that consumers feel they have no privacy at all."

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