NEW YORK – The pesky piles of credit-card offers that clog many Americans’ mailboxes may start to taper off a bit.
Since the early 1990s, the volume of credit-card solicitations mailed to U.S. consumers has soared more than sixfold. Last year, card companies sent out more than six billion offers, according to market-research firm Synovate. But the pitches have been losing effectiveness. Just three out of every 1,000 offers generated responses last year, down from about 28 per 1,000 in 1992.
Now, top card issuers such as Bank of America Corp. and JPMorgan Chase &Co. are rethinking their marketing strategies and shifting away from direct mail. Instead, they hope to peddle more credit cards through bank branches, Web sites and even ATMs in hopes of cutting costs and boosting the effectiveness of their pitches.
The trend already appears to be taking a bite out of mail volumes. After sharp increases in 2004 and 2005, the number of credit-card offerings in the mail unexpectedly dipped by about 20 percent to 25 percent in the first quarter of 2006, said Brent Stratford, a vice president in Synovate’s financial services team.
“You have a much lower clutter rate in the homes,” Stratford said.
The disillusionment with direct mail stems partly from the high cost of sending billions of pieces of mail. Those costs may get even higher next year if, as expected, the U.S. Postal Service raises postage rates.
At Bank of America – which earlier this year wrapped up its acquisition of MBNA Corp., making the company the nation’s largest card issuer – executives say they are turning from direct mail to bank branches largely for financial reasons.
“The cost to acquire a new customer is dramatically lower” at branches, said Henry Fulton, a card-services executive at the Charlotte-based bank. In the second quarter of 2006, direct mail generated 23 percent of Bank of America’s card sales, down from 30 percent a year ago.
Broader factors also are at play. Some U.S. households get inundated with hundreds of offers a year, and many Americans’ wallets already are stuffed with several cards. Banks are scrambling to find new customers in what some view as a saturated market, and they are eager for marketing venues where they can use existing connections to lure potential customers.
“Direct mail as an acquisition vehicle has a declining response rate,” said Matt Kane, a senior vice president in JPMorgan’s Chase credit-card unit. “We need to find these alternative distribution opportunities.”
In addition to relying more on their branches and Web sites, Bank of America and JPMorgan both are experimenting with ATMs that offer cards to customers who meet credit and other criteria, executives say. And New York-based JPMorgan is using partnerships with hotel chains, airlines and others to directly reach potential customers with offers tailored to their interests and spending habits, Kane said.
“I think we’ve got to be pretty much at the peak” of bulk-mail volumes, David Robertson, publisher of the Nilson Report, a card-industry newsletter, said of direct-mail marketing. “It just makes more and more sense for the biggest players to take a different tack.”
Even so, direct mail remains the most effective marketing venue for issuers, generating more than 60 percent of applications for new cards last year, according to Synovate.
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