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Creating a Co-Branded Credit Card: 6 Criteria Credit Card Issuers Look For

Each year, Advantage receives dozens of calls from merchants interested in learning more about what’s involved in launching a new co-branded credit card program. Prior to approving a new merchant credit card program,credit card issuers will carefully evaluate the merchant’s opportunity in order to predict the likelihood of the program’s success.

To assist you with your preliminary evaluation process, let’s look at 6 key elements that credit card issuers will evaluate to determine the potential of your new co-branded credit card opportunity.

  1. How strong is your brand? - A strong brand translates to strong adoption of a credit card program and enhanced card usage. Therefore, the strength of your brand and customer loyalty are primary motivators for credit card issuers to create a co-branded program.

  2. How big is your customer base? - Most credit card issuers seek co-branded credit card opportunities that have the potential to yield a significant number of accounts. It is difficult for most issuers to justify the required investment in systems, and program management for smaller programs. Those credit card issuers that will manage smaller programs still require the ability to generate a minimum of 15,000 to 20,000 new credit cards per year. While 20,000 new cardholders per year may not seem like a lot to many organizations, consider the following…response rates for credit card offers can be .15% or lower. Of those who have applied for the card, less than 4 in 10 may be approved. As such, achieving 15,000 to 20,000 new cardholders per year requires a sizeable database and strong ongoing program promotion to your customers.

  3. How extensive are your customer touch points? - Card issuers expect their merchant partners to leverage available customer touch points to market the co-brand program (e.g. websites, emails, in-store, Customer Service calls, etc.). Leveraging your customer touch points to acquire accounts is often much more efficient than using traditional acquisition channels managed by the credit card issuer. Generally speaking, merchants that offer a broad base of customer touch points will be of greater interest to credit card issuers than those who do not.

  4. What are your product sales dynamics? - Co-branded programs are designed to build value and rewards for cardholders. A typical co-brand provides reward points for all purchases made with the card. However, cardholders recieve several times the number of points for each dollar spent for the sponsoring merchant’s products or services. If the purchase frequency of your product is minimal, or if your average ticket size is very small, it will be difficult for cardholders to earn significant value for their use of the card unless the card is used extensively for general purchases. Programs that do not offer strong reward opportunities will not be competitive in the market.

  5. How strong are your customer demographics? - Stronger customer demographics (e.g. income, education, marital status) equate to stronger approval rates and better credit card usage patterns. If your customer demographics are weak, credit card issuers may perceive the opportunity as limited in terms of new account generation oppoortunities and sales volume potential.

  6. What are your co-branded credit card program goals and objectives? - First and foremost, a co-branded credit card program should be viewed as a tool to enhance your marketing and loyalty efforts. Co-brands are designed to reward cardholders for their patronage to your brand. They are also designed to drive cardholders back to your websites and retail locations. If your primary objective for a co-branded program is to generate revenue directly from the credit card issuer, your objectives will be misaligned with those of the card issuer. While credit card issuers do provide strong financial contributions, these contributions are primarily intended to support a cardholder reward program that will be competitive in the market.

Are you ready to introduce a new co-branded credit card program?

Advantage has assisted hundreds of merchants in planning, developing and launching new credit card programs. Our clients span a broad base of industries and include many of the world’s most recognized brands.

For a free consultation, please call Advantage at (516) 795-7300 to speak with one of our experts about developing your credit card program.

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