E-mail may be the direct-marketing wave of the future, but card issuers seem reluctant to make a splash with this technique-at least as far as their account-acquisition activity is concerned-apparently fearful they will run into business trouble, anger potential customers, or both.
  While it's clear that card issuers do use e-mail for a number of activities, including attracting new customers, and have done so for years, they are not eager to discuss their strategies. In fact, all of the issuers contacted for this article-including those known to have used e-mail campaigns for account acquisition as well as other objectives-either declined to be interviewed or did not return phone calls.
  One reason card issuers might be hesitant to discuss their use of e-mail to acquire new business is they have seen one of their own-NextCard Inc.- implode as a result, at least in part, of a mismanaged electronic marketing strategy. NextCard, an online-only issuer, pursued an aggressive Internet-based marketing program for its Visa card that included e-mail campaigns. While this strategy initially fueled the issuer's growth, it later backfired as NextCard acquired a large percentage of high-risk accounts that eventually defaulted and undermined the company's stability.
  Some say NextCard's troubles, coupled with the collapse of the dot-com sector in general, may have cooled issuers' interests in e-mail marketing. "It certainly hasn't helped the industry," says Kevin Foley, president of Creative Solutions International, a direct-response advertising agency in Hockessin, Del. "There are people who are skeptical to begin with, and when you add on the issues surrounding the dot-com collapse, it just gives them more ammunition," he says. "I think that's probably a short-sighted way to look at it."
  Issuers also may be treading lightly for fear they may inadvertently anger the very prospects they're trying to attract. Consumers increasingly are growing tired of having their electronic mailboxes cluttered with unsolicited e-mails and might, in fact, have a negative reaction to a promotional message, even if they already have another account with the card-issuing institution.
  Still, it's clear that the benefits of e-mail marketing outweigh these negative factors, at least for some issuers. Atlanta-based CompuCredit Corp. generally is considered to have launched the first preapproved e-mail acquisition program about four years ago with the help of Creative Solutions. In addition, a Credit Card Management editor recently received an e-mail solicitation from Chicago-based Bank One Corp. for its United Airlines Mileage Plus Visa card.
  "I would say that there seems to be 25 or 50 issuers that have some degree of activity," in terms of e-mail account-acquisition programs, says Greg Newman, senior product marketing manager for prescreen products in the Costa Mesa, Calif., office of credit-reporting and marketing services firm Experian Inc. Experian launched a product to assist issuers with their e-mail campaigns in August.
  Newman adds, however, that issuers are proceeding cautiously with their e-mail account-acquisition programs. "I get the sense that there's a lot of invitations to apply, but the preapproved side hasn't really peaked yet," he says.
  "If you go back several years and look at what has happened in the area of e-mail marketing, you see there's been a lot of activity on the non-preapproved front," adds Foley. "Time has proven that while online is an attractive area that people want to be involved in, it's certainly not the be-all and end-all."
  That peak may not be too far in the future if one considers the findings of a recent survey conducted by Synergistics Research Corp., Atlanta. "What we're seeing is that Internet users are receiving a lot of e-mail solicitations," says Genie Driskill, chief operating officer and senior vice president of research at Synergistics.
  The firm polled 1,199 Internet users age 18 or older and found that two-thirds said they had received an e-mail solicitation for some type of financial service or account. The median number of e-mails received was 10 per week.
  Driskill says one finding that would be of particular interest to issuers is that about 20% of those who received e-mail solicitations actually accepted or purchased the account or service promoted. She also notes that credit cards were by far the most-popular item purchased, selected by about 60% of the respondents who applied for an account or service. Cards were followed by brokerage accounts, 15%; checking accounts, 13%; and savings accounts, 11%.
  Driskill also says that 68% of those who applied for a financial service or account were not previously customers of the institution. "This shows that (e-mail) can be an effective account-acquisition tool and used to reach new market segments," she says. "But, it has to be managed effectively."
  Pros and Cons
  The survey's findings are not surprising to proponents of e-mail marketing campaigns. In fact, many third-party marketers say e-mail overcomes many of the limitations of traditional direct-marketing efforts. The experts note, for example, that e-mail promotions can be highly customized, are cheaper than traditional direct mail when used for multiple campaigns, and can facilitate an ongoing, two-way dialogue between the marketer and customer or prospect.
  "It allows credit card marketers to reach out to consumers in a way that is cheaper than direct mail. Yet, it allows the card marketer to get out into the marketplace much, much faster than direct mail," says Experian's Newman.
  While prices on traditional direct mail vary depending on the size of the campaign and the sophistication of the creative elements, in general issuers might pay about 35 cents per mail piece, excluding postage and the cost of list acquisition, while e-mail solicitations cost only two to three cents each.
  The lower cost means issuers can reach out to their target markets on a more frequent basis. "What e-mail marketing does is allow you to create a dialogue with your customers and prospects," through ongoing communications, says David Dwek, managing director of Breakthrough Advertising, a New York-based direct and interactive marketing agency.
  "There are some distinct advantages that you have in the online space that you just don't have in the offline space," adds Newman.
  That's not to say, however, that the strategy doesn't have pitfalls. Observers note, for example, that a shortage of quality e-mail address databases makes these lists more expensive on a cost-per-thousand basis than traditional mailing lists. An e-mail list might cost about $250 to $275 per thousand names, compared with about $100 to $150 per thousand names for traditional mailing lists.
  One way issuers can offset the higher cost of acquiring an e-mail list is to build their own databases. Not only does that reduce the cost, but it also enables marketers to incorporate other information from outside sources to facilitate the qualification process.
  "The challenge with credit card marketing is to collect e-mail addresses so you can categorize and qualify them so you can send them targeted offers," Dwek says.
  For example, an issuer can use sweepstakes and other promotions to not only collect e-mail addresses, but also ask several qualifying questions.
  "The prices (for e-mail lists) are going to come down over time, but this is about supply and demand and right now there's not a lot of supply," Dwek says. "That's why it's so important to build your own lists."
  He adds that it's also important to perform regular maintenance on e-mail databases, whether developed internally or purchased from a third-party source, to ensure that the addresses remain valid. "The rule of thumb is that (e-mail address) turnover about 3% per month, which is high," says Dwek, noting that postcards and other forms of traditional direct marketing can be used to follow up with a consumer if an e-mail is returned as undeliverable.
  Once the e-mail arrives in the intended recipient's inbox, a marketer still has to get him to read it. According to research conducted by Synergistics, 55% of respondents said they delete unfamiliar e-mails without opening them. Of the remaining 45%, only 4% open the e-mail and read it carefully.
  Breaking Through the Clutter
  Dwek says two things determine whether a consumer will open an e-mail-who sent it and the subject line. "There has to be an incentive right up front," he says, adding it's important that marketers take advantage of the medium's interactive capabilities. "The more that you craft the offer to your customers, the better the response you're going to get," he says. "The idea is to build a sense of trust and give them what they need."
  Foley says the subject line of an e-mail campaign plays the same role as the outer envelope in a traditional direct-mail effort and is just as important. "That subject line really has to grab someone's attention and make them click on it and open it," he says.
  Several firms have developed products designed to help issuers' e-mail marketing efforts, both from a creative and list-development perspective. For example, Experian has a product, called Email Prescreen, and Creative Solutions has one called bloom. These products offer features such as prescreen list processing, data enhancement, logging of credit inquiries and responses, Web-based tracking portals and e-mail distribution and campaign-management services.
  As more of these types of products are rolled out, and issuers become more comfortable with this new medium, observers expect e-mail solicitations to become more prevalent.
  "It makes sense that people are continuing to test and hone their skills in this area," says Foley. "I don't think anyone has cracked the nut in terms of overwhelming success."
 

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