Driving Price Premiums and Demand Share for a Retail Credit Card Company
Client Situation
Our client was experiencing an overall decline of retail credit card ownership and usage due to an increasing number of bank cards on the market. As their own stores began to accept bank cards, they were at risk of losing their in-store monopoly and "captive market". As steadily decreasing interest rates among credit cards intensified the battle to lock in the best customers, we were asked to determine how they could maintain (or grow) profit and volume as their competitive environment got tougher.
Demand Strategy Approach
We identified the most valuable customers – the small number of credit card users that account for the bulk of profits – and determined what was most valuable and motivating to them (beyond interest rates). We then developed a Demand Value Proposition for the client's card that delivered enough additional benefit to justify higher interest rates.
Results
- Share of in-store sales increased from 58% to 60%
- Client's card holders carry an average balance of $912 vs. average balances of $275 for other cards
- 80% of client's cardholders carry balances in spite of the high 21% interest rate
- 44% increase in profits over three years