Right now, all of us are in love with cobranding. But when the honeymoon is over, the bills for the wedding will dampen many card issuers' enthusiasm.

As the cost of funds rises, and it will, issuers with narrowing profit margins will find they must limit the benefits available from their cobranded products.

That trend has, in fact, begun. Citibank recently announced it will be limiting the mileage one can earn on the [American Airlines] Advantage Card to 60,000 miles a year.

And that's not all. When the offspring of this blissful union arrive, we will discover that - unlike human beings - all cobranded cards are not created equal. For every AT&T and GM, we think there will be many others that don't make the grade.

Leveraging Relationships

We do believe, however, that one form of cobranding - joint ventures with other unites of the retail bank - will be the answer for many issuers.

Such partnerships will enable your bank to leverage preexisting custormer relationships.

The partnership will enable the card unit to leverage a well-know brand identity, just as the better-known cobranded cards do.

A bank's name may not carry the clout 8of an airline or a telephone company. But a letter to an existing customer with a bank's return address on the envelope is more likely to be opened than a card solicitation with a standard marketing teaser on the envelope.

What's more, your in-house banking partner has marketing power.

A Larger Budge

Chances are, your credit card marketing budget is managed separately from the retail marketing budge. And if your bank does TV advertising, the retail bank's budget is probably much greater than yours.

By poolin some portion of your resources for a joint program, your budgets can go further.

Finally, a partnershp with your own bank will enable you to offer extra value to your cardholder.

Your partner doesn't fly airplanes or manufacture cars. But your retail institution provides financial sevices of ciritical importance to consumers, whether checking accounts, investments, or loans.

Study Business Issues

The first step to developing an effective product concept is to get an understanding of your retail bank's business issues.

As with any partnership, the most successful approach is to look at the world from your partner's point of view. Imagine you are the head of your retail bank. What are some of your top issues?

The Wells Fargo California Advantage Card grew out of a need for increasing mortgage originations in the weak California market, not from any strategic card need.

If you are like most retail bankers, your top issue is retaining your best source of low-cost funding8, that is, your deposits. This is followed closely by your ability to generate assets or loans.

Each of these challenges to the retail bank represents an opportunity for the card issuer.

Once you decide to enter the realm of retail banking, there is a temptation to include many retail products. Generally, you should avoid this temptation at all costs.

Why? Because ultimately you'll have to communicate the concept effectively in simple, brief terms. Whether you are using 30-second TV spots or five-word billboards, a complex sales message is one you cannot afford.

Perhaps the best way to build your cobranded protfolio is to dangle bonuses to employees who meet sales goals.

Multiple Incentives

Don't forget that your opportunity in establishing an incentive for your retail cobranded credit id to provide a double or even triple incentives: one for the card and one for each product tied to the card.

Lastly, make suere that the support systems you need to effectively sell your new product are in place.

One of our clients developed a wonderful rretail bank cobrand concept. Then the word came that they would be moving their operations to an outside processor, which delayed the product launch.

Once back in action, they discovered that the new system did not provide the needed information to the branches.

But while there are a few pitfalls, there are innumerable opportunities in cobranding with your retail bank. Here are six:

* Frequent user points. You could take a cue from the frequent-flier cards and offer frequent-user points for discounts on checking, savings, or loan product fees.

The beauty of this approach is that while only a small segment of the population travels8 on a regular basis, over 90% of the U.S. population have checking accounts.

In fact, of your credit card holders, probably 100% having checking accounts - though, according to PSI, if you are an average institution, only 30% have them with your bank. That leaves a 70% opportunity for your retail bank.

* Free "banking for life." How about rebates on card usage to earn "free banking for life?" That is, the cardholder earns a percentage rebate, say 5% as with the GM card, which can be applied to banking fees over time to attain free banking for life.

* Linking the card to a home equity line of credit. A third idea is linking your credit card to a home equity line of credit and providing greater buying power, enhanced convenience, and tax savings. Cards that access home equity lines are having something of arevival because of the dual appeal of low rates and tax deductibility of interest.

Some smaller banks, in particular, are fans of the home equity card because it allows them to compete with larger banks on interest rates and customer services

* Homeowners advantage card. A fourth idea is to emulate the Wells Fargo California Advantage Card, which resembles the GM card, except that the rebates are accumulated toward points, bank fees, or interest rate on a Wells Fargo home loan.

This concept can be expanded to create a "homeowners advantage" card. In addition to the mortgage rebates offered for card usage, the homeowners advantage card could include such things as: a rebate on a home loan; discounts on homeowner's and fire insurance; a furniture buying service, a home repair serice; access to a referral network for housecleaning, gardening, and other home-related services; and discounts at home repair retailers like Home Depot.

* Auto club card. What the homeowner's advantage Card is for home loans, this card would be for auto loans. Cardholders could earn rebates on an auto loan or even on the purchase of a car. The latter benefit would require you to establish special deals with the auto companies or dealers.

Beyond the rebate, the card would offer discounts on auto insurance, sevicing, parts, even gas, and it could8 be merchandised with free tickets to the major auto sh8ows in each area.

One of the appeals of both the homeowner's advantage concept and the auto club concept is that theey help you distinguish yourself with the young people who are first-time buyers.

* Reverse mortgage card. On the other end of the age spectrum is a reverse mortgage card for older cardholders who already have plenty of credit cards and are already among your best retail customers.

Many retirees have more accumulated equity in their homes than they have income. And, they are often more concerned about having enough cash to meet their daily needs than they are about leaving their homes8 debt-free to their children.

For these consumers, a card that accesses a reverse mortgage can be a literal life-saver by turning equity into cash.

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