MasterCard Offering a Plan To Help Keep Cardholders
With the cost of luring new credit card customers soaring, MasterCard International is aiming to help its member banks keep the cardholders they have.
The New York-based card association is offering Mastering Retention, a series of six promotional programs to help banks get customers to use their cards more. Under the programs, developed by MasterCard and a unit of Lintas Worldwide - the card group's advertising agency - banks use small gifts to reward customers according to how and when they use their cards.
Norwest Corp., Minneapolis and BancOhio Corp. will be among the first to take advantage of the programs.
The promotions represent a departure for MasterCard, which in the past has not been as active as Visa U.S.A. in helping its member banks keep their card businesses profitable, said Charles W.B. Wardell 3d, MasterCard's senior vice president in charge of member relations. "One thing Visa has done very well is service its banks," Mr. Wardell said. Now, MasterCard plans to do the same.
"The banks are anxious for the help," Mr. Wardell said.
The basic idea behind Mastering Retention is that it is less expensive for banks to activate a dormant card account than to acquire a new one. According to Mr. Wardell, banks that buy credit card portfolios from other banks often spend up to $320 for each new account. Soliciting accounts is also costly, often running from $60 to $160 for each new cardholder.
But with Mastering Retention, participating banks can attempt to activate existing accounts for as little as $15. They can also stem attrition, Mr. Wardell said, which today hovers at 18% of the average issuer's card base. The program can be used to promote all of a bank's credit cards - not just its MasterCards.
The Mastering Retention series consists of six individual programs designed to accomplish different goals. These include reactivating inactive accounts, increasing cash advances, retaining active revolvers, and retaining customers gained through a portfolio acquisition.
Gifts for Various Purchases
Under the reactivation program, cardholders receive a gift when they make one purchase of at least $25 over a 60-day period. Another program rewards cardholders when they make five purchases of $25 or more over 60 days. Gifts include clock radios and pen and pencil sets.
Financial institutions that join the program receive a turnkey package containing all of the necessary marketing and operations materials. MasterCard and Lintas will customize the program's artwork for each participant, print and mail it to a bank's customers, buy and ship all the gifts involved, and establish the data base. Issuers may also choose to include a toll-free number as a service for cardholders with questions about the program.
Mastering Retention is now being reviewed by 39 MasterCard issuers. "It's being universally well received," Mr. Wardell said. He said he expects the program to appeal most to midsize issuers that do not have large staffs for extensive promotions.