White Paper. Real-time Credit Marketing at the Point-of-Sale. Why Real-time Prescreen-of-One Should Get a Bigger Share of Your Marketing Budget

Transcription

1 > White Paper Real-time Credit Marketing at the Point-of-Sale Why Real-time Prescreen-of-One Should Get a Bigger Share of Your Marketing Budget Andrew Skillen October 2008

2 Table of Contents Introduction Three, Two, One Approved! Prescreen vs. Cross-selling Why Lenders Should Adopt Real-time Prescreen Solutions The Best Solution is a Holistic Solution About Equifax

3 Introduction Faced with lower response to direct mail credit offers as well as economic pressures to reduce marketing costs, lenders are looking for practical strategies to meet growth objectives. Many lenders are adopting more sophisticated direct mail prescreen practices, such as lifestyle analytics, in an attempt to reach the right prospects. While effective, these off-line prescreens, as they are known, are only one part of the solution. The bigger opportunity for lenders is to augment the off-line prescreens with real-time whenever the opportunity arises. Using a real-time prescreen system, a bank teller or call center operator can, for example, immediately determine for which products or services a consumer is pre-qualified. The teller can then make a firm offer of credit for these products while the consumer is still at the point of sale. This approach is a powerful complement to a lender s overall account acquisition strategy. While direct mail still remains an important line of attack, lenders who don t adopt next-generation solutions to better market their products will be left at a competitive disadvantage. With an online prescreen solution, lenders can make pre-approved credit offers within seconds. Three, Two, One Approved! Real-time prescreen solutions offer lenders the ability to confidently extend credit to pre-qualified individuals at the point-of-sale. Once a prescreen-of-one solution is implemented, the ongoing cost of cross-sell initiatives is much lower than other marketing activities. As a result, real-time prescreen is one of the most effective ways to increase wallet share and customer retention. Solutions can be easily deployed in call centers, at the teller line, or through the online channel. What can a smart real-time prescreen solution deliver? For starters, it can facilitate credit offers within three seconds. Some lenders have experienced a 40% increase in pre-approval rates. Or, even better, increased their customer acceptance rates by 20 percent. Prescreen versus Cross-selling While the terms prescreen and cross-sell are often used interchangeably, there are differences between the two. Crossselling generally occurs when a consumer has made an application for a specific product. As part of the application, the lender pulls a credit report to determine whether or not the individual is eligible for that specific product. The lender can then evaluate other products and services for cross-selling. 1

4 Prescreen-of-one, on the other hand, leverages the consumer s presence at the point-of-sale even though they haven t applied for any specific product. During a real-time prescreen transaction, a consumer s creditworthiness is evaluated in seconds. When a consumer passes the prescreen criteria, federal law dictates that a firm offer of credit must be made. Why Lenders Should Adopt Real-time Prescreen Solutions The effectiveness of direct mail is waning. In 2007, lenders mailed out 5.3 billion new credit card offers, according to market research firm Synovate. (The more consumers are deluged with direct mail or off-line prescreen offers, the less apt they are to respond to your offers.) It s clear there is a legitimate place in marketing budgets for direct mail offers. But if lenders are to fully maximize opportunities to grow organically as well as through new customer acquisition, they must find an optimum balance of both off-line prescreen and real-time prescreen strategies. Real-time prescreen solutions can lead to higher ROI. Direct mail offers from high variability: every mailing has costs for market analytics and list selection, creative costs, printing costs, mailing costs and conversion costs. In contrast, a real-time prescreen solution can be significantly less expensive over the long term. That s because it is implemented online, with little ongoing variable cost once the solution is implemented. Lenders don t have to invest in robust prescreen solutions at the outset. Instead, they can walk before they run and upgrade later to more complex prescreen-of-one marketing programs that perform real-time optimization to determine which product best matches the needs of a particular consumer. Prescreen-of-one can better focus on consumer needs. Real-time prescreen solutions can work for many credit products, from credit cards and credit-based overdraft protection to home equity lines. This offers lenders the power and flexibility to increase wallet share with minimal effort. And it offers consumers the satisfaction of being approved instantly. Example of real-time prescreen at a large bank Equifax recently helped a bank with a nationwide footprint and more than $500 billion in assets to implement a real-time prescreen system for multiple products across all sales channels. This bank s primary goal was to quickly prescreen consumers for new credit cards when they come to the bank to conduct transactions on their existing accounts. The bank implemented an enterprise-wide 2

5 prescreen solution deployed across all platforms and channels to allow for one universal online prescreen process. Whether national or regional in scope, best-of-breed prescreen-ofone solutions have shown the ability to: Process prescreen offers for multiple products simultaneously Extend offers within several seconds Achieve offer acceptance rate of 15 to 20 percent Within the same organization, there is typically one department working on mailing credit card offers and another working on optimizing credit card offers at the point of sale. Is your organization optimizing both online and off-line prescreen? Another important metric any good prescreen solution should track is in the area of offer management. For our customers that do not have an Offer Management system that tracks prescreen results, Equifax provides an Offer Table that tracks responses and offers for each transaction. This gives customers the ability to monitor both approval rates and offer acceptance rates. There is no single best practice to improve prescreen take rates. Many factors can affect the take rates from business line to business line, as well as between channels. Below are sample best-of-breed acceptance metrics from a prescreen-of-one solution. For private label prescreen offers for credit cards, acceptance rates can range anywhere from 10% to 90%. In the case of a lender with a highly loyal customer base and a well trained call center, combined with a competitive credit card offer you might see take rates as high as 90%. Call centers are generally the most effective channel for prescreen of private label credit cards, with average take rates between 20-30%. Prescreen-of-one is very effective at the teller line when a consumer is doing their branch banking, but not necessarily applying for any new type of bank product. A good presentment of a prescreen offer at the teller window can result in take rates as high at 60%. What is certain is that prescreen-of-one for credit cards is a low-cost acquisition strategy, compared to other marketing initiatives. Once implemented, prescreen at the point-of-sale requires limited incremental marketing investment and the lender has total control over when and what to offer, which helps further improve ROI. The Best Solution is a Holistic Solution Direct mail, in spite of its shortcomings, is a proven way to acquire new customers. In fact, direct mail was the source of 32 million applicants for new cards in 2007, according to Synovate. That s why off-line prescreen remains an essential weapon in the marketing arsenal. 3

6 Banks experience measurable life when they target their mailings more intelligently. For example, early adopters are leveraging analytical tools that can segment prospect lists for prescreening based on changes in consumer credit behavior over time. A typical solution from Equifax allows our customers to select high-value prospects utilizing up to 26 weeks of consumer credit history. Prospects can be prescreened using credit criteria that includes up to four scores and 175 credit attributes. In addition, Equifax offers demographic and lifestyle data that can be used to segment creditqualified prospects for off-line and online offers. In addition to delivering real-time credit data, Equifax also offers an enormous amount of non-credit household and personal data that can also be delivered in real-time to personalize marketing offers. The charts below summarize non-credit data that can also be accessed in real-time to help select the best product or service for evaluation of a prescreen offer. HOUSEHOLD DATA Field Number of Contributing Sources Household Verification Date Telephone Area Code Telephone Number Telephone Suppression Source Telephone Transaction Date Household Age Code Household Age Indicator Ethnic Group Code Home Ownership Code Renter vs. Buyer Household Marital Status Equifax ValueScore Income (Raw) Income Model Indicator Number of Children in Household Number of Adults in Household Length of Residence Code Combined Market Value of All Vehicles Occupation Code TXL Emerging Flag Age of Child Description Indicates the # of incoming sources contributing to the composition of this household record The year and month this surname and address was most recently verified by the most current source list National directory assistance data and self-reported information National directory assistance data and self-reported information Source that provided information to suppress phone number The year and month of most recent telephone transactions from phone source data Age Code of the Household Use in conjunction with Household Age Code to determine degree of source of the age code Modeled field that identifies the ethnicity of the household Derived from county assessor, USPS and self-reported information Marital Status of household. Compiled/Self-Reported/Inferred based on other data in the household Equifax ValueScore is a predictive model that leverages Lifestyle Selector and TotalSource XL data in order to fine-tune profitability in marketing results Household Income, -25% self-reported, with the majority modeled based on individual and household demographic and self-reported data Use in conjunction with Income to determine source Number of Children in household Number of adults in household (18 years old or older) Indicates the length of time a household has been identified at current address. Derived from both Assessor data and the origination date The sum of the household s car and truck current market value. Compiled from vehicle registration and title household data. Market value is assigned using current National Auto Dealers Association (NADA) statistics. Occupation title associated with someone in the household, from self-reported and compiled data sources Indicates whether the household has an individual on the credit file Birth date of child in the household (unique data field available for first, second, third and fourth child) 4

7 Field Birth Date Indicator for Child Gender Code for First Child Net Worth Segmentation Code Income Producing Assets Segmentation Code Description Source of child s birth date (unique data field available for first, second, third and fourth child) Gender of child (unique data field available for first, second, third and fourth child) The estimated value of the household s assets minus liabilities The estimated value of household assets which produce income, such as deposit accounts, securities and mutual funds Presence of a Credit Card(s) in Household Product Purchase Medium Mail Purchase Product Purchase Medium Internet Purchase Product Purchase Medium Telemarketing Product Purchase Medium Sweepstakes Mail Responder Number of credit cards present in the household Household has made purchase via mail Household has made purchase via the Internet Household has made purchase via the telephone Household has made purchase via sweepstakes Household has responded by Mail. Sourced from Buyer sources (e.g., retail catalogers, magazine subscriptions, etc.) Mail Buyer Books/Reading Collectibles Contributors Cooking/Wines Crafts/Sewing Health Choices Investments Entertainment Pets Gardening Recreation/Outdoor Sports Travel Dwelling Type Equifax Home Valuation Model Home Sale Date Home Sale Price Mortgage Expiration Date Year Home Built Number of Generations in Household Household has made a Purchase by Mail. Sourced from Buyer sources (e.g., retail catalogers, magazine subscriptions, etc.) who perform transactions with consumers by mail. Type of home. Compiled/Inferred based on other data in the household Equifax model identifying the value of the home Date of home sale per deed Home sale price at time of purchase Mortgage (term) expiraiton date (or refinance) Indicates construction year of home Number of generations present in the household Family Composition Family makeup of household Niches 2.0 Niches 2.0, classifies every household into one of 26 clusters (or 108 SuperNiches ) based on lifestyle and demographic data that describes the household s life stage PRIZM NE Segmentation Code Household P$YCLE NE Segmentation Code Household CONNEXIONS NE Segmentation Code Household PRIZM NE, a Claritas segmentation system, classifies every household into one of 66 consumer segments (14 social groups, 22 life-stage groups) based on the household s purchasing preferences. P$YCLE NE, a Claritas segmentation system, classifies every household into one of 58 consumer segments based on the household s usage patterns for financial products and services. CONNEXIONS NE, a Nielson Claritas segmentation system, classifies every household into one of 53 consumer segments and 10 life stage groups based on the household s adoption and usage of technology, voice, video and data services 5

8 PERSONAL DATA Field Verification Date of Person Number of Sources for Person Person Gender Code Person Birth Date Two-Year Age Increments Product Purchase Recency Product Purchase Recency Online Product Purchase Recency Off-line Number of Products Ordered Number of Dollars Spent on Products Average Dollar Amount Per Order Personal Family Member Relationship Bankruptcy Disposition Code for Individual Bankruptcy File Date for Individual Bankruptcy Status Code for Individual Bankruptcy Type Code for Individual Description The year and month this person was most recently verified by the most current source Indicates the number of incoming sources contributing to the information of this individual Gender code of person, from sources including public information and selfreported data, or derived from the person s name, title ( Mr., Mrs., Ms. ), etc. The year and month of birth Person s age within two-year age increments The freshest catalog transaction date for an individual that has had any purchase activity (including off-line and online) in the last 24 months The freshest catalog transaction date for an individual that has had any online purchase activity in the last 24 months. The freshest catalog transaction date for an individual that has had any off-line purchase activity in the last 24 months. The number of catalog product orders (including off-line and online) for an individual within the last 24 months. Calculates total dollars spent on product purchases for an individual within the last 24 months. This field calculates the average dollars spent on all product purchases for an individual within the last 24 months. Relative position within household. Derived using TXL business rules. Bankruptcy Disposition File Date for Bankruptcy Date of Bankruptcy Bankruptcy type Real-time or online prescreen is one of the most cost-effective and flexible ways to quickly increase wallet share. However, direct mail is still a substantial source of revenue for lenders big and small. The best approach is to deploy a balanced blend of both strategies. Equifax offers both real-time prescreen and direct mail prescreen. Equifax can also help your organization implement marketing strategies that grow your business the right way. About Equifax Equifax (NYSE: EFX) is a global information solutions company and S&P 500 member, with a heritage dating back 109 years. With more than 7,000 employees, Equifax s presence spans three continents and 15 countries. Leveraging its unique data assets, technology leadership and advanced analytics, Equifax provides solutions that help businesses make mission-critical decisions. Businesses rely on Equifax for consumer and business credit intelligence, portfolio management, fraud detection, decisioning technology, marketing tools and much more. 6

9 About the Author Andrew Skillen, a director of marketing at Equifax, has over 18 years of experience in sales and marketing of business and consumer products for such companies as Adobe, Macromedia, Dole and Del Monte. Mr. Skillen is currently responsible for the marketing of Technology Services at Equifax. He has a BA degree in Computer Science and Economics, a Master s degree in International Management from Thunderbird School of Global Management, and an MBA from ESADE, Barcelona. 7

10 Equifax is a registered trademark of Equifax Inc. Inform, Enrich, Empower is a trademark of Equifax Inc. Copyright 2008, Equifax Inc., Atlanta, Georgia. All rights reserved. Printed in the U.S.A. EFS-829-ADV 10/08