With the credit card industry at a crossroads, marketers who normally fight over cardholders joined forces last week to devise marketing strategies to compete in the age of electronic commerce.

Amid the constant clanging of casino slot machines, nearly 500 credit card industry executives gathered in Las Vegas last week to attend "High-impact marketing on a low-impact budget," a conference sponsored by Faulkner & Gray.

A major theme of the three-day event was the growing ineffectiveness of direct mail campaigns aimed at garnering new credit card accounts.

The experts agreed that the industry must find new ways of reaching customers, because traditional sales tactics are faltering. Response rates to mail solicitations have dropped to between 1% and 3% and continue to decline.

"We are mailing into the teeth of a blizzard," said Herschell Gordon Lewis, president of Communicomp, a company that specializes in direct marketing.

In 1995, by one estimate, nearly three billion pieces of mail will be sent to consumers' homes.


Star Banc Corp. believes it has an answer to the direct mail conundrum: telemarketing. While the Cincinnati-based bank has not stopped sending mail, it is rolling out a new marketing strategy that combines direct mail efforts with telemarketing.

"We cannot rely on the old tried ways of marketing," said William G. Davis, vice president, Star Banc Corp. "The market is saturated and requires innovation."

Star Banc, Mr. Davis said, has been following up its mail solicitations with a phone call and vice versa.

Telemarketing campaigns also have higher success rates. Between 7% and 10% of the calls result in a completed and returned application.


Another trailblazer, Barclays Bank, has been testing consumers' appetites in the United Kingdom for buying goods and services on the Internet.

The bank, which controls 35% of the card market with a product called Barclaycard, solicits one out of every five people in the United Kingdom.

Barclays Bank has gone a step further than most if not all card issuers in the United Kingdom and the United States. Through its site on the World Wide Web, Barclaycard Netlink, Barclay customers can shop on the Internet and pay for items with their credit cards.

Roger Alexander, managing director of the emerging markets unit of Barclaycard, said the bank has developed a secure method of payment on the Internet, and that Visa's and MasterCard's initiatives with Microsoft and Netscape, respectively, "will not protect what we need to accomplish over the Internet."

Barclays Bank customers may shop on-line using their MasterCard or Visa cards in BarclaySquare, a virtual shopping mall that has attracted major U.K. retailers, said Mr. Alexander.

The bank has been offering this service since January, but has kept it quiet as it worked out the kinks. In 1996, said Mr. Alexander, the bank will heavily promote the service to its customers.


Clinton W. Walker, vice president and general counsel of Citicorp Financial Inc., delivered a strong message to his colleagues in the card business. Mr. Walker beseeched the industry to follow Citibank's example by developing and implementing consumer privacy policies before the government becomes involved.

Stephen D. Drees, principal, Strategic Marketing Services, who was also the chairman of the conference, said, "The privacy movement is large and gaining momentum."

The most troublesome privacy issue, said Mr. Walker, is a movement in Europe to prevent companies from transporting consumer data to non-European countries, unless those countries are deemed to have adequate privacy laws.

"There is some question as to whether U.S. laws are adequate," said Mr. Walker, adding that Europe views the United States as the "Wild West" regarding privacy issues.

Privacy expert Alan F. Westin, editor and publisher of the newsletter Privacy & American Business, said that "pressure from Europe to allow multi-national companies to do business abroad will be a big issue if the industry does not react."

Some conference attendees, however, doubted whether the pressure from Europe is significant or has increased.


Two proponents of supermarket cobranded credit cards maintained that the seven or so such programs launched since 1993 are just the beginning of what promises to be a significant movement.

Already the fifth-largest Visa merchant category, supermarket card programs provide a means to bypass the clutter of direct mail, said Alan Ellison, credit card strategic business manager at Manufacturers and Traders Trust Co., which has cobranded relationships with Tops Friendly Markets and Price Chopper supermarkets. Supermarket cards are marketed primarily at the point of sale.

Programs that followed the Kroger-Fifth Third Bank credit card, largely seen as the genesis of this food market movement, have benefited from the partners' mistakes.

Mr. Ellison pointed out that supermarket cards now offer rebates on all purchases made with the credit card versus the Fifth Third-Kroger card's initial launch, which granted rebates only on Kroger purchases.

According to a study conducted by Supermarket News, credit cards account for 10% of supermarket sales. Moreover, the average credit card supermarket transaction of $60 is twice the size of the average cash purchase.

Bank IV of Wichita, Kan., offers a cobranded consumer credit card with the Dillons chain, a subsidiary of Kroger, and plans to expand into the corporate card arena with a product that allows the 15,000 corporate clients of Dillons to earn rebates. Few business cards offer cardholders perks like rebates, said Jerry Lester, senior vice president of Bank IV card services.

The program, expected to be launched early next year, may be the first of its kind.

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