Long distance telephone companies are competing for that scarce commodity, the high-volume caller. They make telephone calls to prospective customers ad nauseum (usually around dinnertime), and their offer usually has some oddball, complex plan of pricing that includes in-state and out-of-state, daytime and night time, weekdays and weekends, etc. There are often loopholes and hitches in even the simplest of these plans, such as charges based on the nearest five seconds or when there is no answer to a call. Einstein and John Maynard Keynes would be hard pressed to figure out where the real value propositions are. The U.S. government has even stepped in to try and regulate what is told to consumers.
The net result in this confusion, of course, is that there is very little loyalty, and a great deal of switching, in the long-distance industry.
Worse, however, is the fuzzy value created by bank marketers, and their affiliates, in the mad scramble to lure consumers to their credit cards. There's a great deal of money to be made through the extension of credit to qualified card users, so it's no surprise that there's so much competition to obtain them, or steal them away from the cards they already have. It has been estimated that the average American household receives at least three credit card offers a week. That's over 150 a year! One online credit card search engine carries close to 350 different credit card offers.
Most of the sales approaches are annoyingly similar. That's part of what makes the value proposition for these cards so indistinct for the customer. There's usually a low introductory APR (annual percentage rate) for new purchases or balance transfers from other credit cards. Then they layer on services like high credit lines, 24/7 "relationship managers" available by phone, e-mail, or online chat, e-mail account reminders, travel insurance (life, automotive, and even luggage), concierge service, and on and on.
That's just the beginning. There are credit cards that provide a 1% or 2% yearly cash back rebate on purchases. There are sports/theme credit cards (university alumni, National Geographic Magazine, Bass Pro, Six Flags Entertainment, National Hockey League, U.S. Ski Team, Universal Studios, World Championship Wrestling). There are frequent flyer credit cards where a cardholder can earn miles on any airline, plus other assorted benefits. Then, of course, credit cards the airlines themselves. Alaska Airlines, America West, Delta, Continental, United, TWA, USAir, Northwest and British Airways have credit cards. Most of these travel-related credit cards come with an annual fee; but they have a fistful of "benefits" like anniversary bonuses, low-cost companion tickets, class upgrades, bonus miles at sign-up, bonus miles at first usage, and free subscriptions, adding to the confusion.
There are automobile company and buying service credit cards, such as GM's, where cardholders can earn points on usage which apply to the purchase or lease of a new car or truck. Gasoline companies like Phillips 66, Citgo, Texaco, Exxon, and BP, specialty retailers like Barnes & Noble, Eddie Bauer, Home Shopping Network, L.L.Bean, Kmart, and Toys 'R' Us, other specialty issuers like Reader's Digest, Sony, and even Star Trek (!), and many grocery/supermarket chains also have their own Visa and MasterCard programs. Most of these offer points or percentage rebates on purchases from these companies plus lower percentage rebates from other merchants.
The big question is: With this blinding array of so-called benefits, which have customers identified as having value, that is enough benefit to attract them and keep them? Or, as is more often the case, by what process, divine or otherwise, have the card issuers decided which combination of benefits to offer? One credit card issuer, Juniper, is not at all bashful to say they use their own staff, called Product Innovators, to help design benefits. Their advertising says: "We're all customers, too. So we designed products we'd want to use ourselves." Great, but where is the "real" customer input?
As in any market space, there is a small percentage of companies that are both innovative and customer-centric. In bank cards, MBNA has maintained one of the highest rates of cardholder retention, despite higher APR's, by a focus on proactive benefits, such as quick and easy credit limit increases, built-in over-limit protection, and building relationships through their call center. NextCard Visa has built a following by offering online capabilities - balance transfers, account management, and special features like one-click shopping, and instant cost comparisons for desired products.
Some credit card issuers have now begun utilizing data mining and personalization techniques to give them an edge. HSBC, having seen its base of 2.5 million card customers remain unchanged for the past three years, has eliminated their reward points program. Instead, the company is introducing a variety of retail discounts, competitions, and special offers tailored to their spending patterns. The key is, of course, whether current and potential customers will see value in the revamped program.
Customer service expert T. Scott Gross has said: "Satisfaction is easy. Quality is a notch up the ladder. Value is where it's at." Only clear value propositions, in any industry, can take the confusion out of product and service marketing.