China has experienced a fast expansion of credit card usage in the past 10 years, accumulating more than 390 million credit cards by the end of 2013, around 16 times more than 2003. But Chinese banks suffered from low activation rates of credit cards. In my recent report, I found China CITIC Bank (CNCB) faced a similar challenge; their 21 million credit cards had less than 20% activation before 2012.
In 2012, to increase the number of active credit card users, CNCB decided to revamp its customer analytics capabilities to better understand customer profiles and manage customer relationships. As a first step, the bank used SAS Enterprise Miner to deeply analyze both active and inactive cardholders and their usage scenarios and to measure the effectiveness of its credit card campaigns and programs through cardholder analysis for customer segmentation and marketing program effectiveness analysis including:
- Cardholder analysis for customer segmentation.CNCB first collected and classified basic information about its cardholders from past marketing campaigns and transactional data. It defined four basic types of cardholders: inactive users, moderate users, convenience users, and heavy users. The bank spent two months to build data marts from the summarized data. It decided to focus on two groups of inactive cardholders: those who could be swayed by marketing campaigns and those who were heavy users of other banks’ cards but not CNCB’s through the analytics engine.
- Marketing program effectiveness analysis.CNCB surveyed customers to understand their needs and concerns, implemented methods like A/B testing to stimulate inactive cardholders to use their credit cards, and launched several campaigns in the same period to motivate customers to activate their cards. The bank conducted pilots in a variety of cities of different sizes to verify the effectiveness of its marketing programs.
Based on the results of customer segmentations and usage scenario analysis, CNCB designed, implemented, and optimized marketing campaigns and gift and loyalty programs to increase card activations. In 2013, the number of people holding a CNCB credit card grew by 21% to a total of nearly 21 million and total credit card transaction values rose to $74 billion — just 18 months after launching optimized marketing campaigns. In the same year, CNCB increased its card activation rate by 40%, credit card center income rose by 50% to $1.4 billion, and optimized campaign management lowered the bank’s marketing costs by 7%.
Now Chinese banks are facing new challenges to increase profit from credit card business and increase wallet share. How to apply new customer analytics and marketing analytics tools becomes the new headache for customer insights professionals in these banks. I will continue to discuss these topics in my next research.