Interest and reaction time analysis of credit card offers: Discovering underlying segments that transcend conventional demographics

An alternative segmentation system divides customers by the pattern of their impacts, rather than by the actual definition marketers conventionally use (ie age, geo- demographics, usage patterns, etc). The method for such segmentation was presented in previous papers. , The method looks for patterns in the data, specifically in terms of the relation between an individual’s impact values and some underlying semantic differential scales. These semantic scales are developed and deployed in the dimensionalisation phase described above (see Table 1).

When customers are divided in this fashion, it is found that there are two clearly distinct segments, as shown in Table 3, as well as a third segment of individuals who show little or no clear pattern, and thus who cannot be easily classified as members of a particular segment. Segment 1 can be labelled ‘stuff oriented because the elements that have the greatest interest to them deal with things and services that they obtain by using the credit card. This segment comprises approximately /3 of the total panel. Segment 2 can be labelled as ‘lifestyle’ oriented or ‘experience’ oriented because the elements that have the greatest interest to them deal with the Formula One experience. Segment 2 comprises slightly more than /3 of the total panel. The remaining segment shows no elements that motivate it, and may be considered to be an ‘indifferent’ segment. It is worth noting that these segments are not imposed on the data by any preconceived marketing notion, but rather emerge from the data, using clustering methods.

Table 3 Winning elements for each of the two key concept response segments emerging from the credit card data

Total

Seg. 1

Seg. 2

Base size

167

58

67

40

44

45

Winners: Segment #1 (Stuff)

As a card holder you get one airmile for every
£15 spent

4

7

4

Interest-free repayment period of up to
56 days

5

7

3

With your application, you get an offer for cheap
BA flights

4

6

4

Follow your dreams

4

6

3

As a card holder you will get a chance to win one
of five all expenses-

paid trips for two to any European Grand Prix

6

6

9

Transfer a balance of £500
for six months or more and get 500
free

airmiles

3

6

3

Premium insurance benefits, including car rental
and travel accident

insurance

3

6

1

Winners: Segment #2 (Lifestyle experience)

With your application, you get an opportunity to
win a day at the Formula

One test tracks

6

4

10

On acceptance of your application you will be
entered into a draw for

tickets to the Monaco Grand Prix

6

5

10

For every month you use your card ten times or more
(as long as the total

spend is £500 or more),
you will get a chance of a lifetime to drive the

Jordan race car at Silverstone

5

3

10

On acceptance of your application, you get an
opportunity to win a

helicopter ride and tickets to the Monte Carlo
Grand Prix

6

3

9

For every time you spend £500
or more on your card, you will get a

chance of a lifetime to drive the Jordan race car
at Silverstone

5

3

9

As a card holder you will get a chance to win one
of five all expenses-

paid trips for two to any European Grand Prix

6

6

9

On acceptance of your application, participate in a
competition: 25

winners get an all expenses-paid trip for two to a
Formula One Grand Prix

event in Japan

6

4

8

For every time you spend £500
or more on your card, you will get a

chance to win one of ten pairs of tickets to tour
the Jordan factory in the

United Kingdom, watch the Jordan test day at
Silverstone and meet

Damon Hill

4

3

8

As a card holder, you get additional airmiles to
Japan, to see the last Grand

Prix of the year

5

3

8

This type of segmentation into three clear groups (indifferent, stuff, lifestyle) occurs in other credit card studies in different countries, and may represent two basic attitudinal segments that transcend categories. One segment is interested in the material aspects of the product or service, whether this be ‘stuff or ‘low price’. Another segment is interested in the relationship aspects — namely, the lifestyle or experiential aspect (see also Moskowitz and Greene [2001] for similar types of segments in the jewellery category).

Table 4 How two key segments (stuff and lifestyle) and the third (indifferent) use their credit cards. The percentage refers to the proportion of customers in the segment saying that they use the credit card for the specific end use


End use


Seg.
1
(stuff)
%


Seg.
2
(lifestyle)
%


Seg.
3
(indifferent)
%

Shopping

72

59

74

Restaurant

59

49

45

Gas

47

45

46

Tickets (eg Theatre)

43

36

45

Grocery shopping

34

28

31

Hotel

29

33

50

Mail order

24

30

24

For cash

14

16

24

These segments transcend conventional demographics. Both segments show similar distributions by age and by income. What is more interesting, however, is that these segments show similar (albeit not identical) ways in which the members use their credit cards. Table 4 shows the distribution of customers in the segments who used their credit cards for specific end uses. By and large, even though the segments respond to different messages they are similar in geo-demographics, and they use the credit cards similarly.

Representative APR 391%. Average APR for this type of loans is 391%. Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

Calculate APR