How Has Reform Legislation Affected Credit Card Advertising?
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How Has Reform Legislation
Affected Credit Card Advertising?
Research and Analysis:
Jon Swallen
Senior Vice President of Research,
Kantar Media’s Intelligence Sector
Background
The credit card industry has been rocked by the recession and the collateral damage to debt-strapped
consumers. Revenue has declined as customers cut back on credit card purchases and reduced their
outstanding balances. Write offs on delinquent accounts have soared to record levels. By some
estimates, card lenders have absorbed as much as $150 billion in losses.
Even as the economy shows signs of strengthening and troubled financial companies return to
profitability, the outlook for credit cards remains challenging due to reform legislation approved by
Congress last year. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)
makes it more difficult for the banks that issue consumer credit and debit cards to charge penalty fees (for
example, overdraft charges) or raise interest rates, two major revenue streams.
The new rules are expected to severely crimp industry revenues. JPMorgan Chase, for example, recently
told shareholders the bank is projecting a $500-750 million hit to its credit card income.
As card issuers comply with the CARD Act and seek new ways to replace lost revenue, changes to card
products and programs are certain to follow. Given industry competitiveness and its reliance on
marketing, we were curious to explore if and how this transition is being manifested in media advertising
campaigns. In particular, what’s happening to ad budgets and to the content of ad messages for
consumer credit cards?
Analysis
From the Kantar Media ad monitoring database, we examined historical media ad spending trends within
the credit card category stretching back 5+ years and covering TV, internet, magazine, newspaper, radio
and outdoor (direct mail solicitations are not included in our analysis).
Then, we zoomed in on a handful of the largest category advertisers and isolated their specific spending
on consumer cards. Corporate promotion and sponsorship advertising were filtered out at this step.Since TV gets the overwhelming share of the media budgets at these card companies, we analyzed the
content of all their TV commercials from September 2009 through March 2010 and noted main themes
and message points. This time period spans both sides of February 22, 2010 - the date when the new
federal regulations for consumer credit cards took effect.
Main Findings
After peaking in 2005 at $2.17 billion, category ad spending declined by more than 35 percent
during the next four years and finished 2009 at $1.40 billion.
At the bottom of the financial crisis, credit card advertising was pacing even lower, at an
annualized rate of just $1.25 billion.
While total category spending has started to rebound and posted two consecutive quarters of solid
growth, the gains are mostly attributable to just two advertisers. Several major marketers have yet
to restore their media budgets.
Most of the major card issuers continue to focus on rewards programs as the key selling point in
their TV commercials.
The impact of reform legislation on new card programs and product innovations is most apparent
in some recent TV advertising from JPMorgan Chase. While the new rules are also prompting
other banks to make product changes, this news is generally not being conveyed through their TV
advertising. Presumably, direct marketing (which is not part of this analysis) is fulfilling that task.
The following sections discuss these findings in greater depth.
Ad Spending Trends
Category ad spending in measured media peaked in 2005 at $2.17 billion. Entering 2008, expenditures
had fallen back nearly 20 percent to about $1.80 billion. As the credit crisis took hold in late 2008, card
advertising swiftly plunged and finished 2009 at $1.40 billion, the lowest level of annual spending since
2002.
After four consecutive quarters (Q4 2008 through Q3 2009) where the annual rate of category spending
sunk to $1.25 billion, expenditures have recently rebounded. Q4 2009 was up 38 percent and Q1 2010
rose 45.6 percent as compared to the depressed levels of a year ago. Even with these gains, category
spending has only been restored to the levels of 2003.
Category figures do not reveal the complete story. Among the seven leading marketers who account for
over 85 percent of credit card ad expenditures, spending patterns have been extremely varied.
Insights Brief 2The 2009 meltdown in category advertising was primarily attributable to budget slashing by Capital One
and Citigroup. Combined, these two companies lowered their card spending by a total of $290 million as
part of larger cost-containment initiatives within their organizations. Reductions at Visa and MasterCard
took out another $98 million of spending but these were offset by a total gain of $78 million from American
Express, JPMorgan Chase and Bank of America.
TOTAL CARD AD SPENDING: 2008-2009
($ millions)
%
ADVERTISER 2008 2009
Change
American Express 324.6 350.1 7.9%
JPMorgan Chase & Co 163.2 183.2 12.2%
Bank of America 39.0 71.2 +82.4%
Visa USA 318.5 281.1 -11.7%
MasterCard Intl 259.5 198.9 -23.3%
Capital One Financial 207.5 108.8 -47.6%
Citigroup Inc 216.8 24.7 -88.6%
Source: Kantar Media
Over the past two quarters, ad expenditures at these companies have diverged even more dramatically.
For the six months ending March 2010, Amex and Chase more than tripled their ad budgets versus the
year-ago period and accounted for nearly 40 percent of total category spend. New credit card product
launches contributed to the hikes.
Citigroup and Capital One continued to reduce media spending even further from their already low levels
of a year ago, although we observed a pickup by Capital One at the end of Q1 which has continued deep
into Q2.
TOTAL CARD AD SPENDING
($ millions)
Q4 ’08 - Q4 ’09 - %
ADVERTISER
Q1 ’09 Q1 ’10 Change
American Express 109.9 335.1 +204.9%
JPMorgan Chase & Co 48.9 164.2 +235.7%
Visa USA 116.0 130.5 +12.5%
Bank of America 27.3 36.6 +34.0%
MasterCard Intl 115.5 73.2 -36.6%
Capital One Financial 92.7 43.0 -53.6%
Citigroup Inc 65.3 12.0 -81.6%
Source: Kantar Media
Ad Messaging: Rewards Programs
Consumers have come to expect rewards for using their credit cards and issuers use reward programs as
a marketing tool and point of competitive differentiation. Historically, a large volume of the ads from card
Insights Brief 3issuing banks has focused on rewards whereas the card networks (e.g., MasterCard, Visa) have mostly
engaged in image building. Our audit of TV ad messages airing from September 2009-March 2010
showed these traditional themes remained dominant, even as the underlying business structure for credit
cards was being reshaped by the CARD Act.
% Share of TV Ad Occurrences By Main Message Theme:
September 2009-March 2010
Image Other Card
ADVERTISER Building Rewards
Features
Visa USA 96% 4%
MasterCard Intl 83% 17%
American Express 4% 80% 16%
JPMorgan Chase & Co 78% 22%
Bank of America 99% 1%
Capital One Financial 46% 54%
Source: Kantar Media
The emphasis on image advertising by Visa and MasterCard is understandable. These companies earn a
fee every time their card is used as payment so their marketing objective is to drive merchant acceptance
and consumer usage.
The continued message focus on rewards programs by card issuers implies business as usual. However,
credit card reform will curtail some very large and profitable revenue streams which have been used to
subsidize the rewards programs that consumers have become accustomed to. As card issuers scramble
to find new revenue and realign internal costs, reward programs are likely to become less generous by
reducing perks and/or imposing extra fees on members. Not surprisingly, it is unlikely that consumers will
glean a hint of these downgrades from current ad messages.
Our review of TV spots confirmed that rewards programs are still the predominant pitch point from the
leading card issuers, reaffirming the primary marketing battleground even as programs become more
restrictive. The ads predictably outline program parameters and the potential rewards customers can earn
– travel, merchandise, cash rebates, etc. They accentuate the positive and skip over limitations. Any
required disclosure of specific terms and conditions for the rewards programs is left to other
communication channels, such as direct mail or Web sites.
Ad Messaging: New Product Introductions
On another front, our examination of credit card advertising found some evidence that the CARD Act is
spurring new card programs and product innovations that marketers are aggressively promoting via
media advertising.
Two prime examples come from JPMorgan Chase. In September 2009 it launched Sapphire, a new
personal credit card targeted at affluent consumers, a market segment that is more attractive to issuers
under the new protective legislation. Through March 2010, measured ad spending was $55 million and
the core ad message has been centered on rewards.
During the same time period, Chase introduced an adjunct product named Blueprint. This is an online tool
that helps Chase cardholders manage their spending and borrowing. A core feature is the development of
an individualized plan for paying down balances over time (a behavior that generates interest income for
the bank). From launch through March 2010, Chase has spent $59 million in measured media to promote
Blueprint.
Insights Brief 4Blueprint’s proposition is consumer control and greater transparency regarding interest payments to help
customers reduce the total amount of interest they pay on revolving balances. Yet the CARD Act already
mandates that monthly billing statements provide more disclosure on finance charges and show the
savings from paying off the balance more quickly. While Blueprint goes a bit further, Chase has
essentially taken a legal requirement and cleverly turned it into a marketing sales point.
At the other end of the spectrum, advertising for some other recent credit card introductions stick to
familiar themes and selling points that evoke the pre-CARD Act era. For example, in Q4 2009, American
Express rolled out a new “Premier Rewards” program for its Gold Card touting bonus points on select
types of purchases. In late March of this year, Capital One broke a major campaign to launch the Venture
card and a rewards program that offers double travel miles on each purchase.
Summary
As the credit card industry attempts to recover from the recession, it is also grappling with how to adapt its
product portfolio and marketing approaches to meet the requirements of pro-consumer Federal legislation
that took effect in February.
American Express and JPMorgan Chase, the two largest issuers of credit cards, have boosted their ad
budgets significantly in recent months as they try to take market share from weakened rivals. Other major
advertisers have been slower to ramp up again and the net effect is that total category ad spending,
despite a year-over-year increase of 41 percent in the past two quarters, remains more than 20 percent
below its 2006 peak.
TV still accounts for the majority of credit card ad spending and a majority of TV ad messages continue to
feature rewards programs as a primary product benefit, even as the CARD Act legislation is forcing card
issuers to scale back their rewards programs in order to align total costs with diminished revenue.
However, there are some early examples of credit card product innovation that seem to have been
influenced by the CARD Act and that marketers are aggressively promoting via media advertising.
About Kantar Media
Established in more than in 50 countries, Kantar Media enables exploration of multimedia momentum through
analysis of print, radio, TV, internet, social media, and outdoors worldwide. Kantar Media offers a full range of media
insights and audience measurement services through its global business sectors – Intelligence, Audiences and TGI &
Custom. Combining the deepest expertise in the industry, Kantar Media tracks more than 3 million brands and
delivers insights to more than 22,000 customers around the world. (http://www.KantarMediaNA.com).
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