By: Prashant Malkani, Ritika Tiwari and Buket Mat
Published: October 01, 2024 | Updated: October 01, 2024
Read time: 6 minutes
Lifecycle marketing is a strategy for engaging with your customer at every stage of their association with your financial institution (FI). A well-executed lifecycle marketing strategy permeates each step of the customer journey, aiming to enhance engagement with the card, drive higher customer profitability and secure a top-of-wallet position.
Cardholder lifecycle management consists of four interconnected stages: Acquisition, Onboarding, Usage and Retention.
- Acquisition is the process of directing compelling value propositions to desirable customers to encourage them to sign up for the card. This is the stage where customers learn about your brand and what you offer.
- Subsequently, a comprehensive onboarding strategy is needed to build early cardholder engagement. An effective Early Month on Book (EMOB) strategy for new cardholders is crucial during this phase to facilitate smooth onboarding, boost card activation rates and encourage initial usage.
- The third phase focuses on usage, necessitating the development of targeted marketing strategies to stimulate spending, foster balanced growth and build loyalty.
- As cardholder tenure progresses, proactive retention efforts are vital in ensuring ongoing loyalty to the card, thereby preventing cardholder dormancy or retention.
5 best practices for lifecycle marketing implementation
Each of the four stages of lifecycle management presents unique nuances and requires a tailored strategy. Here are some best practices that FIs can be customize for each stage of the lifecycle:
- Identify the business pain point: It is crucial to identify the specific issue or the business pain point that must be addressed, such as low acquisition, low card activation rate or poor card engagement. A clear understanding of the problem is essential to creating a targeted strategy. In this step, investigate the pain points to frame some hypotheses on the underlying causes.
- Develop a clear strategy: While various approaches can solve the identified problem, conducting qualitative analysis to understand industry best practices will help identify gaps in an existing strategy. At this point, explore ways to enhance existing systems and processes. That could include upgrading the onboarding journey to include digital activation or setting up an in-house retention unit to combat attrition proactively.
- Use analytics to identify opportunities for targeted marketing: Analytics are essential to gain insights into customers' behavior and identify opportunities to drive engagement. Running analytics to perform benchmarking exercises helps analyze customer performance against industry standards and identify areas for improvement. Segment customer bases to categorize the portfolio based on factors like spend behavior, product type or demographics. Then it’s possible to design effective marketing campaigns to target specific customers through insights gleaned from usage and behavior.
- Create tailored marketing collateral with effective messaging: With the opportunities identified, the next step is to design customized marketing materials for targeted campaigns. Consider the following factors to maximize return on investment (ROI):
- Clearly communicate the campaign’s objective, such as incentivizing cardholders to use their cards for automated recurring payments or on e-commerce platforms.
- Define the target audience to identify relevant cardholders who have demonstrated low spending in the targeted category.
- Determine the messaging approach. Will it be educational, highlighting benefits like faster checkout and enhanced security, or incentive-driven, offering rewards for card usage?
- Identify the most effective channels for deploying the campaign to maximize customer reach and engagement.
- Measure and evaluate the impact of your initiatives to optimize your lifecycle communication strategy: Measure the success of your initiatives, including both campaign-driven efforts and system changes and then refine your approach. Continuously improve your lifecycle marketing activities by regularly reviewing your portfolio to assess changes in key performance metrics, determining if the campaigns are generating the desired results and identifying opportunities for campaign optimization.
How to measure the success of your strategy
Data and KPIs are vital for improving the customer journey and setting up reliable tools will allow you to monitor KPIs effectively.
Different stages of the customer lifecycle require different KPIs to measure success. These KPIs can be tracked monthly, yearly or even compared year-over-year to see how your strategies are performing.
Here are the important KPIs that financial institutions review in each stage of the lifecycle:
Acquisition:
- Cost per click (CPC): Measures the amount paid for each click on an ad. This indicates the immediate cost of driving traffic to your site or landing page.
- Cost per lead (CPL): Reflects the cost associated with acquiring a lead, which is a potential customer who has shown interest in your product or service by providing their contact information.
- Cost per acquisition (CPA): The total cost incurred to convert a lead into a paying customer, encompassing all expenses from the initial click to the final purchase.
- Conversion rate: Represents how many prospects who engage with your lead generation efforts become customers.
EMOB (including activation):
To effectively measure the EMOB performance, it is essential to understand the customer’s specific definition of EMOB. EMOB typically varies between 6 to 12 months depending on the customer, region and country.
- Activation Rate: Monthly EMOB metrics should be analyzed to determine the activation rate, representing the proportion of new customers engaging in transactions during their initial months. Your primary goal is to enhance this activation rate by adopting a monthly improvement perspective.
- Average transaction value (ATV): Understanding the ATV is critical to gauge customer spending behavior during the EMOB period. This helps assess the value of transactions new customers are making.
- Overall Spending: Analyzing customer spending, broken down monthly, will provide insights into how to drive increased engagement and value during these crucial early months.
Usage:
This stage has two key aspects: merchant campaigns and portfolio campaigns. For both, it is important to analyze:
- Overall spending, transaction count, SPAC (Spend per Active Card) and TPAC (Transaction per Active Card).
Additionally, understanding the difference between active and inactive audiences is crucial. We should also examine where users spend, considering both the merchant and industry perspectives. Furthermore, understanding spend across different channels such as CNP (Card Not Present) e-commerce and recurring payment transactions; CP (Card Present) POS transactions and cross-border transactions; and the ATV (Average Transaction Value) will provide a comprehensive understanding of user behavior and spending patterns.
Retention:
When retaining customers, evaluating their spending and transaction behavior is essential.
- Attrition rate: Number of accounts voluntarily closed divided by total open accounts in good standing
- Retention rate: Number of accounts saved divided by the number of accounts called in to close
- Attrition rate by of attribution reasons: Number of accounts saved divided by the number of accounts called in to close by reason
- Number of revolvers: Customers who do not make full payments within one cycle. Tracking the number of revolvers helps financial institutions to estimate the income and profitability. It helps to see the customer behavior patterns.
- Overall metrics: This includes overall spending, transaction count, SPAC (Spend per Active Card), and TPAC (Transaction per Active Card)
- Average transaction value (ATV): Understanding the ATV is critical to track customer spending. A higher ATV may indicate that customers are more engaged. Repeat customers contribute to the higher ATV as well.
- Number of industries transacted: This shows the reach of financial institutions. It shows the diversity of the customer base.
Following the performance of these metrics will help financial institutions to see how well they are engaging with their customers. They can look for strategies to improve their relationship with them further.
By tracking these KPIs, financial institutions can fine-tune their marketing efforts at each stage of the customer lifecycle, ensuring they attract and retain the most profitable customers.
Conclusion
Lifecycle marketing is pivotal for businesses aiming to engage customers throughout their journey. Tailored strategies at each lifecycle stage foster deep connections, boosting overall customer satisfaction and loyalty. Successful implementation requires a comprehensive approach, integrating people, tools, data, and streamlined processes for seamless execution. To learn more about how Mastercard can help drive customer acquisition and engagement with a comprehensive set of proven marketing solutions, request a demo.
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