Growing Card Usage

“Our penetration rates were good; activation rates were pretty good. And [debit card] usage was in the upper quartile,” explains Randy Braun, vice president of retail banking at German American Bancorp. “It wasn’t like our base was busted and we needed to fix it. This was an enhancement strategy,” Braun stresses, noting the rationale of the bank's senior staff when approving the debit card usage campaign with its processor for debit, Fiserv.

The goal of the campaign was twofold: to change cardholder behavior and get a positive return on the bank’s marketing investment by providing the proper incentive (in this case a $5 gift card to cardholders who performed a certain number of debit transactions in a month).

A Look at the Numbers. When all was said and done Braun and his team were happy with the results. The total incremental interchange the campaign generated for the bank was $16,149, from a total value of $1.24 million in transactions. Even offsetting the costs of the campaign—roughly $10,000— the bank realized a 55 percent return on investment (ROI).

Key to the campaign’s success was targeting the right cardholder, which entailed grouping cardholders into categories (by transaction volume) based on two years of historical data, three months prior usage stats, and the bank’s budget, Merer noted.
Fiserv’s system also adjusted for anomalies that might skew responses, such as the Target data breach that caused mass re-issuances in the industry in January and February of last year or accounts with no activity in the three months prior to the campaign kickoff—both of which were excluded from the campaign.

The hurdle or goal transaction was determined by what usage segment the cardholder fell into. Cardholders who met the criteria were given a choice of 20 different retailers including, Wal-Mart and Barnes & Noble to redeem their $5 gift card. The campaign generated 592 winners of the card offering or an 8 percent response rate (slightly higher than the Fiserv’s typical 5 to 7 percent response rate.)

There is also what Fiserv's Card Vision Engagement manager Donna Merer calls the "halo" effect;  cardholders who upped their transaction activity but failed to meet the threshold necessary to earn a $5 gift card. This group (2,739 cardholders or 37 percent of the targeted group) increased their incremental transactions by five and generated $9,434 of the total campaign interchange. Fiserv also offers peer comparisons so community banks can measure their results against their peers to help them set goals.

ROI calculators are available on Fiserv’s portal that allows banks to test differing budgetary/ sample sizes. “I’ve had clients run campaigns with budgets as small as $1,000 or target lists of 500,” says Merer. “Our goal is to help clients drive non-inter
est revenue growth, regardless of size or budget.”

Next Steps. Merer usually recommends a follow-up campaign six months later and as a rule suggests including the winners and halo group from the prior campaign. And while non-responders would typically be included in the subsequent campaign they wouldn’t be a hallmark of all future campaigns, Merer notes, once it becomes evident that they are not likely to change their behavior.

What we hope to have happen is to migrate customers to the next usage category with subsequent campaigns so that they sustain themselves to a point where they naturally drop out of the campaign parameters because their behavior is in line with the bank’s goals (typically 40 transactions a month), she explains.

Table 1: German American Bank Debit Usage Campaign Results

 # Mailing Population     1,172  1,683    2,348      2,208
 # Winners    77  153  187  175
 % Total Winners    13.0%   25.8%   31.6%     29.6%
 Prior 3-Month Average  1.9   7.3    17.2     32.8
 Campaign ATF*    18.6   29.4   40.9  59.7
 Incremental Transactions    16.7   22.1    23.8     26.9
 % Increase in Transactions    877%   304%   139%     82%

*Campaign Average Transaction Frequency