Improving The Return On Investment In Credit Card .

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Improving the Return on Investment in Credit CardSatisfaction—Focusing on What Really MattersTHE PROBLEM:Which Actions MostImpact BusinessResults?After a period of volatility and uncertainty,the credit card industry has stabilizedand again offers issuers opportunities forrevenue growth and profitability. Whilespend is trending upward, new challengesare emerging: Outstanding revolving credit hasdeclined over the past 2 years andshows no signs of rebounding toprevious levels. New channels, such as mobile andsocial media, require additionalinvestments, resources, and expertiseto understand and meet evolvingcredit card customer expectations.Within the context of the number ofchallenges competing for limited resources,what role does customer experience play?Which actions will have the greatest impacton business results and the largest payoffto major stakeholders—customers andshareholders?THE SOLUTIONThe good news is that the actions are,broadly speaking, pretty straightforward:reduce problems and improve rewards.Analyses conducted by J.D. Power andAssociates show that improving customerexperience impacts business resultsprimarily through reduced attrition andsecondarily through increased share ofspend.SOURCES OF INCREMENTAL REVENUE RESULTING FROM INCREASES IN SATISFACTIONSOURCES OF INCREMENTAL REVENUE RESULTING FROM INCREASES IN SATISFACTION80% There is less flexibility in changes to Competition for new customerscontinues to be intense;simultaneously, customers arespending an average of only 913 ontheir primary card, and the ease ofswitching is high. The Consumer Financial ProtectionBureau has heightened scrutinyregarding the handling of consumerproblems and complaints.70%Percent of Incremental Revenueterms and pricing to offset emergingrisks.“After a period of volatilityand uncertainty, thecredit card industryhas stabilized andagain offers issuersopportunities for revenuegrowth and onShare of SpendSource of RevenueSource: J.D. Power and Associates 2012 US Credit Card Satisfaction StudySMA Global Marketing Information Companyjdpower.com

J.D Power InsightsImproving the Return on Investment in Credit CardSatisfaction—Focusing on What Really MattersThe No. 1 driver of attrition is the number of problems an issuer’s customers experience. Theproblems most likely to drive attrition (in order of importance) are poor customer service;RELATIONSHIP BETWEEN PROBLEM INCIDENCE AND INTENDED ATTRITIONinterest rates; unsatisfactory problem resolution; issues with rewards programs; and fees.RELATIONSHIP BETWEEN PROBLEM INCIDENCE AND INTENDED ATTRITION20%Bank of AmericaProblem incidence15%American Express10%U.S. BankWells FargoChaseGE Capital Retail Bank(formerly GE Money Bank)BarclaycardCiti CardCapital OneHSBCDiscover Card5%0%0%5%10%15%25%20%Definitely/probably will switchSource: J.D. Power and Associates 2012 US Credit Card Satisfaction StudySMMore than two-thirds (68%) of credit card customers cite the quality of their card’s rewardsprogram as the main reason for selecting and maintaining their primary credit card, whichincreases the share of wallet held by issuers.REASON FOR SELECTING AND MAINTAINING PRIMARY CREDIT CARD68%Better rewards program on primary card30%Primary card does not charge an annual feeBetter benefits on primary card (e.g., fraudprotection, email alerts/reminders, etc.)Chart Elements VerificationElementsTimeline of Changes/Updates20%Higher credit limit15%Paper, Case Study, etc.)Yes on primaryType of cardDeliverable (Report, WhiteData provided (Excel/Word/PPT):Data and/or with primaryBetter servicecard edited chart provided14%on (date):J.D. Power Insight04/24/13printout of chart to editing on (date): Fill in date here/name of person editing more Illustrator/InDesignPrimary card is acceptedplaces than13%othercardsSubtitle of chart (if any):Flagchartifitcontainsunanswered info on (date):Fill in date here/other info if needed Title of chart:Axis titles (if any)Discountsokay:Follow-up withand promotionsa retaileron chart if it contains12% unanswered info on (date):Fill in date here/other info if neededSecond axis legend (if any) okay:Chart proofed by Rita/Sandy prior to final deliverable on (initial/date):Name and date Primary card is with primary bank12%Editor’s NameDateTaskLegend okay: Primary card has better onlineName or emailDateBrief explanation of update or change to chart12%Source provided okay: managementaccountNameoremailDateof update orchange 70%to chart 80%Run Spell check when final 0%10%20%30%Brief explanation40%50%60%Name or emailDateBrief explanation of update or change to chartNotes:Updated Charts 7-12-12.xlsSource: J.D. Power and Associates 2012US CreditCard Satisfaction DateStudySMNameor emailName or emailDateBrief explanation of update or change to chartBrief explanation of update or change to chart 2013 J.D. Power and Associates, The McGraw-HillCompanies, Inc. AllDateRights Reserved. ReproductionProhibited.Name or emailBrief explanationof update or change to chartName or emailDateBrief explanation of update or change to chart2

J.D Power InsightsImproving the Return on Investment in Credit CardSatisfaction—Focusing on What Really MattersRECOMMENDED ACTIONSNo. 1: Reduce problems through clearercommunication of pricing and rewards.J.D. Power analyses across all financial services products show that the most effective way toreduce or prevent problems is to clearly communicate the benefits, functionality, and pricingof a product at both the initial point of purchase and through ongoing communications.For example, not only is satisfaction higher among customers who say they “completely”understand their pricing structure, but they also have a greater understanding of theirterms; experience fewer problems; have lower intended attrition; and have greater shareof spend on their primary card. Notably, many of these customers indicate experiencingbetter communication during the card activation process, saying their representative tookthat opportunity to clarify benefits; explain rewards programs; fully explain fees; and answerquestions.Effective communication is also important to ensuring that customers are highly satisfied withtheir available rewards programs, which is critical because loyalty and retention metrics aretied heavily to the rewards provided by card issuers. Customers who say they “completely”understand their rewards program are also more likely to indicate that their account repexplained the rewards program during the application/activation process, as well as morelikely to have received clear rewards information delivered to them in a welcome packet aftercard activation.No. 2: Raise the bar on service standards.Issuers that have been unsuccessful in executing on the more common aspects of thecustomer experience tend to receive more complaints related to customer service. In turn,those complaints lead to low levels of satisfaction, thereby increasing the risk of customerattrition.Despite the increased comfort with conducting simple transactions online, the call centerremains the primary interaction point for problem resolution, yet satisfaction with the livephone problem resolution is lower than the online experience. Customers who report a serviceproblem are less likely to receive key best practices during an interaction with their call centerrep, including being greeted in a friendly manner; being called by name; and being thankedfor their business. Long wait/hold times are also common among customers who experiencea service-related problem. Finally, issuers must ensure that their call center reps speak clearlyand in terms that are easily understood by all customers.The good news for issuers is that service-related problems tend to be preventable throughimproved training and coaching. 2013 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. Reproduction Prohibited.3

J.D Power InsightsImproving the Return on Investment in Credit CardSatisfaction—Focusing on What Really MattersMETHOD USED TO RESOLVE PROBLEM/COMPLAINTMETHOD USED TO RESOLVE PROBLEM/COMPLAINT20112012ProblemResolution Index80%Phone—live customerservice %40%60%80%100%Percent of CustomersSource: J.D. Power and Associates 2012 US Credit Card Satisfaction StudySMSince it is impossible to prevent all problems, properly handling them when they do arise isparamount. Keys to resolution include taking ownership of the problem, expressing empathy,and resolving the issue quickly; however, in those instances where problems can’t be resolvedquickly, setting and meeting expectations become critical to satisfaction. The importance ofownership is underscored by the finding that customers who are given the choice betweena single point of contact and same-day resolution prefer the single point of contact.Satisfaction actually drops by 85 points when customers are transferred to a second rep.No. 3: Offer a rewards program that is easy tounderstand, easy to use, and provides clear value tocustomers.Chart programs are primarydriversofofselection, switching, and spend in the credit cardElementsindustry. In fact, customersYes withTypeabove-averageof Deliverable (Report,White Paper,Study,etc.) programssatisfactionwithCasetheirrewardsJ.D. Power Insightspend51% more per monththeirprimarycard providedthan doonthosebelow-averageData provided(Excel/Word/PPT):Dataand/oredited chart(date):with04/24/13 onsatisfaction.Illustrator/InDesign printout of chart to editing on (date): Fill in date here/name of person editing Subtitle ofItchart(if any): that customersFlag chart ifhowit containsunansweredinfo on(date):Fill in criticaldate here/otherinfo if needed understandis criticalrewardsare earnedandeven morethattheyhow tothem.onEasemay infobe enhanceddisplayingAxis titles (ifany)understandokay:Follow-upchartofif itunderstandingcontains unansweredon (date): byFillin date here/other info if needed redeemrewardsearnedon statementsandproofedpersonalizedWeb priorpages;providinginformationon rewardSecond axislegend (ifany) okay:Chartby Rita/Sandyto finaldeliverableon (initial/date):Name and date promotions and special offers; and offering and promoting rewards tracking tools online. ForEditor’sNameDateTaskLegend okay: more complex programs, care must be taken to clearly communicate which rewards—of allName or emailDateBrief explanation of update or change to chartSource provided okay: by differentavailable—can be earneduses of a specific card and what the different rates ofNameoremailDateBrief explanation of update or change to chartRun Spell checkfinalpointwhenaccumulationare based on purchase categories.Title of chart:otes:pdated Charts 7-12-12.xlsName or emailDateBrief explanation of update or change to chartName or emailDateBrief explanation of update or change to chartName or emailDateBrief explanation of update or change to chartName or emailDateBrief explanation of update or change to chartName or emailDateBrief explanation of update or change to chartName or emailDateBrief explanation of update or change to chart 2013 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. Reproduction Prohibited.4

J.D Power InsightsImproving the Return on Investment in Credit CardSatisfaction—Focusing on What Really MattersData shows that different types of customers prefer different types of rewards. Nearly half(45%) of customers prefer cash rewards, while others prefer such rewards as airline miles,hotel discounts, or gift cards. Regardless of the types of rewards offered, ensuring thatrewards have no maximum limit and no expiration date may enhance the perceived value ofthe reward program, thereby increasing satisfaction, spend, and loyalty metrics.THE BOTTOM LINEWhile priorities ranging from investment in digital channels to CFPB compliance need tobe addressed, don’t lose focus on the actions that are likely to have the greatest impact oncustomer—and shareholder—satisfaction:1. Ensure customers understand pricing and rewards2. Raise the bar on personal interactions, which are less about routine transactions andmore about moments of truth3. Provide a rewards program that delivers ease of use and valueFor more information, pleasecontact:information@jdpa.com or805-418-8000The information contained herein has been obtained by J.D. Power and Associates from sources believed to be reliable. However, because of the possibility ofhuman or mechanical error by our sources, J.D. Power and Associates does not guarantee the accuracy, adequacy, or completeness of any information and is notresponsible for any errors or omissions or for the results obtained from use of such information.This material is the property of J.D. Power and Associates or is licensed to J.D. Power and Associates. This material may only be reproduced, transmitted,excerpted, distributed or commingled with other information, with the express written permission of J.D. Power and Associates. The user of this material shallnot edit, modify, or alter any portion. Requests for use may be submitted to information@jdpa.com. Any material quoted from this publication must be attributedto “J.D. Power Insights: Improving the Return on Investment in Credit Card Satisfaction—Focusing on What Really Matters, published by J.D. Power andAssociates, 2013 by J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.” Advertising claims cannot be based on informationpublished in this special report. 2013 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. Reproduction Prohibited.5

Primary card is accepted more places than other cards Better service with primary card Higher credit limit on primary card Better benefits on primary card (e.g., fraud protection, email alerts/reminders, etc.) Primary card does not charge an annual fee Better rewards program on primary

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