The wrong marketing compensation is risky business

Brian Claridge is the VP of consumer insight for a large, regional bank. He leads a team that provides data to the bank’s various marketing teams. The bank’s goal, like most other financial institutions, is profitable growth with minimal risk. A few months ago the bank’s CMO hired Janice Storms as its new VP of credit card marketing. Her goal, of course, is to increase the number of new credit card holders. Her compensation reflects that goal only; it doesn’t incorporate profitability or risk.

Her first acquisition programs were successful, so she wanted to expand the campaigns to target additional segments of prospective customers, purchasing external lists to do so. Those new prospects were high risk but highly likely to accept the offer: an attractive 0% balance transfer and one year at only 5% interest for all purchases.

During lunch with Janice, Brian learned that she was targeting high-risk customers ho would likely churn once their first late fee hit—a strategy that would earn Janice a large bonus but put the bank at risk for losses. He discussed the risks with her, but she dismissed them saying that it would be the collection department’s problem; that she was hired to acquire, period.

Should Brian report Janice to the CMO or CFO, should he try to reason with her again, or should he look the other way because it was the CMO who set up the bad bonus structure to begin with, making it the CMO’s problem?

What would you do?

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