3 Digital Challenges for Consumer Credit Marketers

analytics dashboard on laptop

At Pragmatic, we work with several clients in the consumer lending space, many of whom have similar challenges when it comes to marketing their products and services in digital channels.

• Digital Acquisition: Low approval rates and higher credit risk are common for customer acquisition through anonymous digital media channels like search and display, creating scale constraints for issuers.
• Channel Integration: Integrating direct mail and digital efforts is difficult and impact of channel integration is difficult to measure.
• Personalization At Scale: Personalization of customer marketing messages at scale requires significant investment in digital transformation and data hygiene.

While there is no “silver bullet” solution to any of these difficult challenges, here are a few considerations for each that our clients have found useful.

Digital Acquisition

Historically, the consumer lending industry has relied on traditional database marketing, leveraging known vs. anonymous data. This known, third-party data is sourced from the credit bureaus and marketers rely on sophisticated predictive models to optimize for response, conversion, credit risk and LTV. (Click here for an excellent overview of known vs. anonymous data from Pragmatic partner Lloyd Lee).

Based on the rich offline behavioral data from the bureaus, issuers can effectively segment and calibrate their offline acquisition marketing investment to manage credit risk and maximize scale in ways that are predictable and profitable.

Unfortunately, much of this data is unavailable in the anonymous digital media space. Paid search is targeted based on prospect keywords, while display and affiliate channels are targeted based on credit seeking behaviors.

The lack of ability to refine targeting based on credit risk amplifies a challenge that is unique to consumer lending: the prospects who are most actively in need of and looking for credit typically have the lower credit scores and pose a higher risk of default.

This is not to say that search, affiliates and display aren’t viable channels for consumer lending and card marketers, but in order to work, they need to be very closely managed and have limited scale. For example, non-branded search terms have the highest scale, but are highly competitive and expensive, creating economic challenges for scaling the channel.

So what should you do?

Shifting the focus and goal of a portion of your digital media investment from direct acquisition to awareness and education can be an effective way to scale these efforts. Credit education content marketing and targeted awareness campaigns can help increase response rates in traditional channels like direct mail, which leads us to our next topic.

Channel Integration

Direct mail is the workhorse communication channel for the consumer lending and credit card industry since it is addressable to an individual (vs. a household), and delivers the firm offer of credit required by the FCRA. Based on the targeting precision afforded by known, third-party bureau data, direct mail is not going away time soon.

The challenge for marketers is how to extend the value of their proprietary predictive models into the digital world where algorithmic black boxes and walled gardens are the norm.

Recent innovations in data onboarding from platforms like Liveramp, Datalogix and Neustar have it possible to take a direct marketing list of known PII data and target those same users through digital media. There can be match rate challenges for this approach, with match rates in the 50%-70% range depending on the matching platform and audience.

Additionally, mobile location data providers can be used to identify devices associated with the households on your DM list. The match rates here approach 100%, but it is household level targeting, not true 1:1.

For more context on channel integration, check out my previous article on people based marketing.

So what should you do?

Digital channels can effectively be used to generate brand awareness and communicate customer centric benefits to direct mail recipients during the in-home window to help lift response rates.

New channels like connected TV and streaming audio can be effective in creating targeted awareness, which still leveraging the direct mail to drive response and conversion.

We recommend beginning with an ITA audience to test and learn while avoiding the regulatory concerns associated with preapproved audiences due to the FCRA.

Personalization at Scale

Another common challenge experienced by our consumer lending clients is leveraging modern marketing technology platforms to deliver personalized messages to customers at scale.

• Location based content can be used effectively to drive spend with targeted offers.
• Lifecycle stage is an important trigger for personalized content, driving education early in the lifecycle, growing usage in the mid lifecycle, and re-engaging dormant customers.
• Recent transaction behavior is another opportunity for increasing message relevancy – related products & categories, rewards reinforcement, and card-on-file behavior can be effectively reinforced w/ post-purchase triggered messaging.

So what should you do?

As more and more consumer spend behavior moves to digital and mobile channels, it is increasingly important for marketers to invest in martech capabilities like CDPs and MAPs to enable personalized and relevant digital communications that drive spend and usage behavior for existing customers.

Audit your existing platforms, playing special attention to opportunities for data integration across platforms to increase opportunities for personalization.

If any of these challenges sound familiar to you, know you are not alone. Pragmatic has explored these issues in depth with a number out our clients and would be happy to discuss them with you as well.

Reach out and let’s chat!

Jay Dillemuth|August 11, 2020

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