Optimizing The Cardholder Lifecycle Part 2: Activation & Early Month On Book (EMOB)

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Key Takeaways

  • Banks struggle to reinforce credit card value proposition and maintain cardholder excitement during the waiting period after acquisition, leading to low activation rates.
  • Customers who receive EMOB messaging have three times the lifetime value of other customers, but banks generally under-invest in this vital stage.
  • Personalized offers and experiences delivered through bank-owned channels such as a mobile app can boost activation rates and set profitable spending habits during EMOB, increasing lifetime value.

The period after acquisition is high stakes for banks. On average, only 57% of new customers activate their cards after receiving them in the mail. That means nearly half of new cards remain unactivated and unused, with no way for banks to recoup acquisition costs. For customers who do activate, their behaviors during their first 60-90 days with the card, also known as the EMOB, sets usage patterns that will last the lifetime of the relationship, for better or for worse. 

Unfortunately, most banks lack the tools to effectively influence customer behavior during these key stages of the cardholder lifecycle. Activation incentives shared through expensive, interruptive, third-party channels like paid advertising are easily lost amidst non-banking-related content or forgotten while the card is in the mail. 

Even when customers do activate their cards, banks still struggle to reach them during EMOB, making it difficult to incentivize frequent and diversified spending habits during this key period. That lack of effective communication channels might be why many issuers only allocate a fifth of their marketing budget to EMOB, despite the large proportion of lifetime value generated there.

In my last post on acquisition, I explained how sharing data across lines of business (LoBs) and leveraging bank-owned channels, such as mobile apps, will lower customer acquisition costs (CAC) and boost conversion rates. By reaching out to customers in a context where banking is already on their minds, and offering to solve a pain point that is relevant in the moment, banks can shift their marketing from an interruptive to a permission-based paradigm. Their campaigns will facilitate a tight value exchange for customers instead of simply demanding their attention.

Banks’ efforts to influence customer behavior at activation and EMOB should follow a similar value-added strategy. By making personalized offers at the right place and time, through the right channels, banks can boost customer activation rates and encourage profitable spending habits while also nurturing customers’ trust and loyalty.

Reinforcing card value proposition at the activation phase

To raise credit card activation rates, banks must maintain a sense of urgency and excitement as the customer waits for their card to arrive in the mail. Regular communication is key to reinforcing a card’s value proposition and reminding the customer why they acquired the card in the first place. By leveraging the bank’s mobile app, for example, banks can more effectively deploy strategies like personalization to increase activation rates and build spending habits. 

Five ways to boost activation rates via bank-owned channels

  1. Gamify the waiting period. Studies show that for each additional day a customer has to wait for a card in the mail, the chances that they will activate it decreases. Banks can reduce the impact of this waiting period by making the card traceable in the mail, like an Amazon purchase, which gamifies the process and creates anticipation for the card’s arrival. 
  2. Encourage card usage before it arrives. Banks can also encourage customers to add the card to an eWallet like Google Pay or Apple Pay before it arrives, eliminating the waiting period completely. Once activation occurs, they’ll already have the card on file, increasing stickiness.
  3. Personalize incentives to provide meaningful value. With their data assembled across LoBs, banks can tailor activation incentives to individual customers, increasing the likelihood of activation. For example, if a customer has purchased concert tickets with her debit card in the past month, the bank can offer a month’s free subscription to Spotify or another music streaming service. This not only increases activation rates, it also incentivizes primary-card behavior by encouraging the customer to put a card on file.
  4. Make the right offer at the right time. Banks can also go further by making offers like this contextual. For example, if data from the customer’s smartphone shows she has a long commute by train each day, the bank can offer the Spotify subscription at the beginning of the ride home. By alleviating pain points in customers’ day-to-day lives — even if it’s just by making a commute a little more tolerable — banks build customer trust and nurture loyalty.
  5. Engage in EMOB messaging. In general, EMOB messaging intended to encourage diverse category spend, get cards on file, and incentivize other sticky, primary-card behaviors can encourage activation, too. According to research, cardholders that receive EMOB messaging activate credit cards five days faster on average than other customers.

By incentivizing mobile app downloads at activation, then following up with personalized and context-informed messages via bank-owned channels, banks can boost activation rates while also keeping costs low.

Setting good spending habits during EMOB

If banks want to maximize the lifetime value of a new customer, it’s vital that they set profitable spending behaviors during EMOB. According to research, cardholders who received EMOB messaging averaged 22% higher balances after their first statement cycle, and also have up to three times as great a lifetime value as other customers. The first 60-90 days after activation sets the stage for banks to nurture customers for the long term during the usage phase (which I will discuss next week).

McKinsey research has shown that cardholders are more likely to make a card their preferred form of payment if they do five things:

  1. Frequent transactions. Banks should aim for new customers to make their second transaction within one week of their first transaction taking place. This is another scenario where gamification makes sense — banks can offer a bonus for that second transaction, then send the customer nudges as the deadline draws closer.
  2. Diverse category spend. Contextual data like user location can be useful in encouraging spend in new categories. For example, if a customer has never used their card to buy groceries before, the bank can send them an offer for double cash back on groceries when they’re close to a grocery store.
  3. Transactions over $100. Personalization can help incentivize customers to make larger purchases. For example, if a customer regularly buys hotel rooms, but usually puts those purchases on a debit card, the bank can reward them with bonus points if they spend $100 or more at a partner hotel chain on their credit card by a certain date.
  4. Mass retailer purchases. Using a card at a mass retailer is another important primary card behavior, and one where banks can bring their relationships with retail partners to bear. Banks can offer double cash back on purchases at a specific retailer when the customer is near a brick-and-mortar store — or when they’re at home, connected to wifi, and likely to be open to doing some online shopping.
  5. Use of specialized products. Often, customers don’t set up specialized services like automated bill payment because they aren’t sure where to go in the bank’s website or app. Banks can increase usage by leveraging their mobile app to communicate setup instructions to the customer.

Delivering more value across the cardholder lifecycle

A strong activation and EMOB strategy is vital to ensure banks maximize value across the cardholder lifecycle. By boosting activation rates and proactively encouraging ideal spending behaviors early on, banks set themselves up for success at the usage stage (more to come on that next week).

As first steps, banks should leverage bank-owned communication channels and assemble proprietary, device, and public data to provide meaningful, relevant experiences. Besides reducing costs, this enables context-driven personalization that in turn drives customer engagement and builds trust. By making offers that solve relevant pain points and ensuring a tight value exchange between them and the customer, banks can build stronger customer relationships that generate higher lifetime value.

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