Feature
Redefining top-ofwallet customers
A better way for issuers to identify their best and most profitable customers to target for marketing investment By Jason Wang
I
n many economies, credit cards are a common payment method that consumers use frequently—some even use cards for everyday activities like buying coffee or lunch rather than cash or debit cards. Consumers prefer this payment method for its convenience and security, and many cards also offer insurance protection and rewards programs. In fact, as of June 2016, 59 per cent of Canadian card holders have more than one credit card and, on average, those with more than one card have 3.3 open cards. The card industry is competitive; an important part of a card issuer’s strategy is to build loyalty and to be the consumer’s ‘top-ofwallet’ card—their primary go-to card for spend activity. Increasing the share of their cardholders’ spend, achieving the top-of-wallet position and growing their share of spend among cardholders are key goals for issuers. At the same time, profitability pressures require that issuers must be strategic about which customers they target for increased spend and wallet share in order to ensure a strong ROI on their marketing investment. Compounding the challenges that card issuers face is the incomplete view of a cardholder’s “off-us” activity—activity on cards issued by their competitors, which can obscure a clear view of which consumers are the best targets for higher marketing investment dollars. Traditional card marketing approaches look to identify consumers with significant off-us spend and to target those with the highest available spend to capture for the highest investment levels. These traditional approaches typically look at two metrics: total “on-us” spend on the issuer’s own card and the percentage of spend on the top card in wallet. By using these tools, issuers can estimate the level of available spend to capture and invest marketing dollars accordingly: high marketing investment on consumers with high offus spend, lower investment on cardholders with moderate potential and no investment on low-potential cardholders. 16
PAYMENTSBUSINESS
Recently, credit data platforms have been enriched to enable more holistic views about consumers. Consumer credit files are no longer a snapshot view of one single point in time; rather, the files contain trended data that provide a 24-month history, potentially minimizing the seasonality bias in analytics. Furthermore, the files now contain a broader range of data points, including consumer payment amounts, spend amounts and how much of the spend is carried to the next month (‘revolving balance’) and how much is paid in full by the required payment date (‘transacting balance’). With these recent advances in credit bureau data and better insights into a consumers’ activities, the question arises whether there is a better way to identify the best and most profitable customers to target for marketing investment. To answer this question, TransUnion conducted a study of Canadian cardholders using both a traditional marketing approach as well as a redefined approach that leverages advanced consumer credit data. The universe that we analyzed consisted of the depersonalized files of consumers who had more than one card in the 12-month window from July 2014 through
Four segments defined by wallet-share
Percentage of spend on the top card
Number of consumers (in millions)
Average number of cards per consumer
Loyalist
100%
1.9
2.7
Premier
70% – 99%
2.7
3.6
Shopper
50% – 69%
1.0
3.9
Diversifier
49% or less
2.3
4.3
September/October 2016