Our Thinking

The Who, When and How of Overcoming One-and-Done Credit Customers

By Ed Higdon. Posted in Action

October 29, 2014

One-and-done credit card shoppers are a major pothole for retailers. In many cases, customers sign up for a credit card, take advantage of the initial sign-up bonus, capitalize on the savings and promptly toss the card in the trash.

Many major retailers see as much as 50 percent of their credit shoppers fall into the one-and-done model. If these retailers could decrease that percentage by even one percent they could save millions of dollars annually. In the case of one major retailer, a five percent reduction equated to an incremental sales increase of 0.5 percent—which doesn’t sound significant, until you realize that equals $20 million.

So how can retailers improve on these critical one-and-done credit numbers?

Who are the Customers?

The first step is to develop a model predicting the actions of one-and-done credit shoppers – who is likely to return, who isn’t, and who falls squarely on the 50-50 line.

It’s that last category that’s the most valuable. Retailers can strain themselves trying to win over customers with an 80-percent chance of using their cards once, but it wouldn’t be worth their money in the end; conversely, customers with an 80-percent chance of returning are more safe bets, and subsequently, may not be the most strategic customers to invest in. The middle ground is the sweet spot with the best opportunity for increased sales.

When will they Come Back?

The next step is to develop a behavioral model that shows when they’re likely to come back. If one retailer’s current group of credit customers take an average of 31 days to make a second purchase, retailers can safely hope that their 50-50 group has a solid chance of joining that shopping pattern.

How can a retailer influence a single customer into that pattern? Easy: if she hasn’t come back by day 31, it may be worthwhile to entice her with another offer. It’s all about optimizing the spin on new credit customers, and helping to create predictable molds they can fall into.

How Can Retailers Bring Them Back?

Retailers would do well to capitalize on the eight- to 10-week lag time between credit card sign-up and first marketing communication. Typically, after an initial sign-up, new credit customers take that many weeks to be placed in the normal marketing cycle, so the only communication they receive between signing up and the first marketing communication is a bill. In order to engage a new credit card customer, filling up these 8-10 weeks with targeted messaging is critical to help bring them back into the store.

Picture the following timeline: a customer signs up for a credit card when buying a dress on Aug. 1. On Aug. 10, the retailer sends her the card, along with a 15-percent discount offer for signing up. On Aug. 25, they send her a note related to her first purchase, the dress. On Sept. 10, they send a communication about something related to dresses—say, women’s shoes. On Sept. 25, they send her information or an offer regarding the entire store.

Suddenly it’s Oct. 1, and she’s now in the store’s generic marketing cycle—only that eight-week downtime has been nullified, and she’s more likely to be a return credit customer.

The number-one rule: impress your customer

The bottom line isn’t about drawing customers into your store, but making your store the kind of place customers want to revisit. If an extensive marketing campaign like the one outlined above is too much, even just a welcome note from the specific store manager can be enough—something with the manager’s smiling face, with a letter expressing thanks for choosing their location, along with their contact number and an invitation to call whenever something’s wrong.

It’s a small touch, but often appreciated.