Credit Card Mailing Volume Hits New High
Direct mail was overwhelmingly the medium of choice for new accounts, accounting for 76 percent of all card applications. Retail take-one brochures accounted for 9 percent, telemarketing 8 percent and the Internet just 2 percent.
The record mail volume represented a 15 percent increase over 1997 while response rates were down slightly from the 1.3 percent average of a year ago. The added solicitations led to an increase in direct mail card applications from 39 million to 41 million, and a jump in total U.S. household penetration from 69 percent to 75 percent.
The rise of card offers geared to the lower income or sub-prime segment of the population was most responsible for the increase in household penetration, said Christopher Batenhorst, vice president of competitive tracking services at BAI Global. Issuers have slowly grown this segment, he said, by learning to price their offers for risk.
Issuers also are getting better at reaching the immigrant and non-English speaking segments that historically have been neglected.
"In the last five years, [issuers] have come to the realization that these people are vibrant parts of our economy and they are very loyal," Batenhorst said. "They have really started investigating `How do I service these accounts.' "
The various Hispanic markets have drawn particular attention from leading issuers. Through research and the hiring of Hispanics, Batenhorst said issuers are developing programs to serve the different cultures and dialects of Spanish speakers, including Cubans in South Florida, Mexicans in Texas and Puerto Ricans in New York.
Despite the entry into new markets, platinum card offers accounted for two thirds of all 1998 solicitations. Standard card applications represented 28 percent of all offers and gold cards 5 percent.
A response rate of 1.3 percent in the fourth quarter, which Batenhorst attributed to better targeting of offers and low fixed interest rates, marked a strong recovery from an all-time low response rate of 0.8 percent in the second quarter.
Over the last 10 years, targeting has improved and customization become standard as issuers have harnessed data mining technology to learn more about customers and prospects. More testing and better communications with customers also have helped, Batenhorst said.
It's these customization features, he said, that make direct mail preferable to the Internet for credit card offers, at least in the short term.
"The Internet right now is a great tool for nonspecific products," Batenhorst said. "But part of the strategy of credit card companies now is customizing products for individuals and it's hard to do that on the Internet. Once they customize, it will be fantastic."
Batenhorst predicts Internet customization will happen in the next couple of years. As for now, credit card marketing via the Internet reaches roughly 25 percent of all households.