Response Rates Drop as Card Solicitations Rise

After nearly a year of retrenchment, the credit card industry's direct marketing machine revved up in the second quarter of this year. Solicitations for credit cards reached 992 million during the second quarter according to Mail Monitor, a tracking service of the market research firm, BAIGlobal Inc. This was up 19% from the 832 million solicitations mailed in second quarter, 1999 and was the highest quarterly total since BAIGlobal started tracking the industry in 1988. The company estimates that 79% of U.S. households received at least one card solicitation during the quarter.

Not surprisingly, the productivity of these solicitations has declined over the period. Back in the first quarter of 1999, it required 62.5 solicitations to generate one application. In the second quarter of this year, 250 solicitations were needed to produce one application-a 0.4 percent response rate. At least three reasons explain these trends. First, the consolidation of card issuers and the accompanying savings from operating costs have provided them with more cash to spend on marketing. According to Credit Card News, the top 10 card issuers accounted for 91% of all mailings during the second quarter, 2000. Second, although the rate of response was declining from the first quarter to the second quarter of this year, due to the huge volume of mailings the number of applications received by card issuers during the second quarter actually grew by 14 percent to a total of about 4 million. Finally, the low response rate reflects the fact that card issuers were generally chasing the same potential customers. Mail Monitor estimates that the average prime customer (the subscribers to Spotlight on Finance) received 50 solicitations a year. Less creditworthy consumers are receiving about six solicitations annually.