Relationship Marketing im Retail Banking (German Edition)
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Marketing of Financial and Banking Products: An Example fromBangladeshi Bank
The best place to start on robotics in procurement is with repetitive, time-consuming, lower-value processes. Unleash productivity and maintain quality in the service center simultaneously by better understanding the rep experience. Get a comprehensive picture of the state of technology across the service organization. Learn how to optimize your service channels to enable customers to effectively resolve their issues. As we mentioned earlier, the credit card business is perhaps the most advanced at using data and analytics to market to consumers, but there is still room to improve consumer value.
Our test credit card elicited a choice probability of 61 percent figure 7. Annual fees were the most important driver of choice among credit cards, outstripping every other attribute figure 8 —though not to the same degree as with checking accounts.
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This finding raises questions about how banks communicate, and consumers perceive, credit card fee waivers. A majority of respondents across all segments insisted on low or no fees, but some statistically significant differences emerged between groups. Here, older consumers and women had stronger preferences, again indicating their higher sensitivity to prices. So did consumers who bank with midsized regional banks and community banks, who tend to be older than the overall sample another notable finding.
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Respondents with the highest credit scores also had a stronger aversion to annual fees. Interestingly, consumers were more sensitive to increases than they were to decreases in credit card rates.
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Raising the rate on our test card from 12 percent to 20 percent yielded a 22 percent drop in choice probability. Yet lowering it to 8 percent, well below the current national average of Clear generational differences were apparent in credit card choice: Older customers surveyed focused on annual fees, while younger customers prioritized lower rates, probably due to their greater need for, and higher comfort with, credit. Since lower credit scores are typically skewed toward the young, it is no surprise that those with lower credit scores prioritized low rates in choosing credit cards.
Rewards are nearly ubiquitous in credit card marketing. Of all the non-price attributes we tested, they had the most influence on credit card choice. Eliminating rewards from the test card led to a 17 percent decline in choice probability. This large drop underscores why cards that offer minimal or no rewards are generally offered free.
Among the types of rewards, cash-back rewards were more effective than points-based incentives, perhaps because they are easier to understand, and give consumers greater spending flexibility. This preference suggests that consumers recognized the potentially superior value proposition of cash-back cards. Introductory offers were also important, although the type of offer appeared to have less of an impact on choice.
Excluding an introductory offer from the product configuration reduced the choice probability by 11 percent. Similarly, the lack of a cash withdrawal option resulted in a 5 percent drop in choice likelihood, indicating that some consumers view their credit card as an emergency liquidity source. Similar to checking accounts, respondents preferred credit cards from large national banks. However, consumers did not differentiate between regional banks, community banks, and online-only lenders in their choice of a credit card.
Credit limits also had a muted impact on choice, 30 probably because most card holders already had limits that met their needs. Our sensitivity analysis focused on annual fees figure However, in an important contrast to checking account fees, choice probability declined in larger increments with each marginal fee increase. Simulations by gender revealed that women were generally more sensitive to increases than were men. And consumers with high credit scores exhibited more sensitivity, which could be attributed to their financial savviness.
Credit cards are perhaps the least commoditized retail banking product in the market today; they are offered in multiple variations and cater to a vast array of target segments. The goals of issuers, processors, and affinity partners are also highly divergent. For instance, banks structure offerings to maximize fees and net interest income, but cards issued by or co-branded with affinity groups generally focus on promoting loyalty.
Our guidance reflects this product heterogeneity:. The mortgage industry in the United States has undergone radical shifts in the past decade. While securitization and product innovations expanded the market significantly ahead of the crisis, regulations affected all aspects of the business thereafter. Meanwhile, borrowers are in the most advantageous position in over a decade. Rates have never been lower, and mortgage availability is close to post-crisis highs. Our test mortgage figure 11 reflected popular offerings available in the market, and had a choice probability of 60 percent.
Our simulations showed that a fixed-rate structure was the most important driver of choice, even eclipsing interest rates figure Aversion to variable rates was high—choice probability dropped by 31 percent when the rate became variable after 10 years, and by 36 percent if the fixed-rate period was 5 years long. The lack of interest in variable rates is understandable as rates are only likely to go up in the future. Consumers unequivocally preferred fixed rates. Respondents with the highest credit scores also demonstrated a stronger preference for a fixed rate.
Raising the interest rate on our test mortgage to 5. Conversely, if the rate dropped to 2. Interest rates might have even greater influence than our model results suggest. And once again, consumers with the highest credit scores showed greater insistence on low interest rates. The year mortgage has long been the bread-and-butter of the US mortgage industry.
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When the loan term was changed to 15 years, choice probability for our test mortgage increased by a substantial 16 percent; lengthening the term to 40 years caused a 10 percent drop in choice likelihood. These preferences toward shorter-term loans may reflect not only more debt-averse behavior following the financial crisis, but also the unprecedented low interest-rate environment. Lenders are currently offering year fixed rate mortgages at APRs averaging 2.
The long-understood prepayment risks associated with mortgage-backed securities only support this phenomenon.
In a highly competitive, low-interest rate mortgage market, even small differences in origination fees created meaningful impact in mortgage preference. Dropping the 1-point origination fee on our test mortgage to zero increased choice probability by 8 percent; raising the fee to 2 points decreased choice likelihood by 7 percent.
Variations in other product attributes easily overshadowed these differences.