Like most commercial banks that offer credit cards. Barnett Banks Inc. faced a serious problem with the advent of competition from national marketing powerhouses.

A Counteroffer Strategy

American Telephone and Telegraph Co.'s Universal card and Sears, Roebuck and Co.'s Discover card were luring away customers with rebate and discount offers, while highly efficient specialists such as MBNA Corp. and Advanta Corp. were targeting segments of the traditional banks' customer base with customized offers.

Our most effective tool against attrition is to intercept people who call us and write us to cancel their card. We take a quick look at account profitability and, if appropriate, offer to waive the annual fee.

We've tried gift certificates and other promotional items. but all our research continues to show that the No. 1 reason for card cancellation is the annual fee. If it's an unprofitable account, wet it go. The calculation of profitability involves a grid of revolving debt and purchase volume. We've cut our attrition rate by about one third.

By September 1991. Barnett customers were canceling their card accounts at a rate of about 17% annually. The southeastern regional, based in Jacksonville, Fla., reasoned that the credit card was an important item on the menu of financial services offered through its branch system. It decided to fight back.

Barnett set out to find ways to discourage customers from switching to competitors' cards. Barnett's counteroffers could be customized, sources said, ranging from the waiver of a fee to a discount at a local restaurant.

At a time when the banking industry faced added competiton from the likes of General

Excellent customer service. It's understanding what your customers want, responding in a timely fashion, and correcting any problems that might arise to their expectations. We call customers back to find out why they're closing their card.

If it's a problem, we correct it right away. We might explain other products we have that may be more to their liking. When we get customer complaints, we look into them all. We find out what caused the problem. and if it's a problem with infrastructure, we correct that.

Motors Corp. and General Electric Co., the bank's attrition rate has been dropping sharply. The most recent attrition rate is about 9.6%, said Dennis Cluley, senior vice president of customer service.

A Trend

Wary of divulging any secrets to competitors. Mr. Cluley declined to say what his most effective tools are. But he indicated that the bank decides what to do only after a review of the profitability of each account.

While few have created dedicated units to fight attrition, Barnett's move represents a trend, as seen in the comments below.

We moved to a variable APR in spring 1993 of prime plus 7.9% for gold and prime plus 8.4% for classic. Many free benefits, typically available only to gold cardholders, are also extended to classic.

We find the personal touch goes a long way for customer retention. Since we issue credit cards primarily in our local market, Massachusetts, we are able to offer outstanding personalized service, both in-branch and 24 hours a day via telephone.

Next month, our customers will be able to link their credit cards with the cards that access ATMs, allowing them electronic payment capability.

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