Winner: Marks & Spencer Money

Project: Chip & PIN

Business goal: To turn the threat of customer churn that might result from the introduction of Chip & PIN authentication into an opportunity that enhanced customer loyalty.

Project partner: Kognitio

When the UK’s credit card infrastructure moved to the Chip & PIN identification system in 2005, card issuers were relieved of some of the responsibility for fraudulent transactions. But the switch from signature-based verification also posed a commercial threat to many card issuers, especially recent entrants into the credit market.

With customers provided with multiple PIN numbers for their different cards, issuers faced the danger that customers might focus their transactions on a single card. In anticipation of this rush of card rationalisation, Marks & Spencer’s financial services unit, M&S Money, launched a large-scale marketing campaign with existing customers of its &MORE card with the aim of convincing them theirs was “the only credit card you’ll ever need.”

And to ensure that its best efforts were applied to the customers that were of the greatest value, M&S Money put its customer intelligence function into overdrive.

The company’s customer intelligence platform, ‘Minerva’, had been set up in 2002 to identify opportunities for cross-selling credit cards to customers of the M&S retail outlets. Minerva was built in partnership with and operated as a managed service by business intelligence specialist Kognitio.

In preparing the Chip & PIN campaign, M&S Money and Kognitio enhanced Minerva’s analytical capabilities so it could put the data on M&S’s 2.5 million credit card customers through a rigorous analysis – and to great effect.

Segmentation analysis, for example, revealed that 14% of customers accounted for 54% of &MORE transactions and 51% of the processed spending, while a mere 10% of cardholders produced 89% of the quarterly profit.

Armed with that insight, and detailed customer behaviour predictions, M&S Money launched an intricate campaign involving 62 different mailing batches and over 9 million separate mail pieces, targeting cross-sell opportunities and loyalty incentives to precisely the right kind of customer.

The project’s targets were more than met: in the high priority customer segments, between 93% and 97% of the new Chip & PIN credit cards were activated by customers, and, to date, around £950,000 extra revenue extracted from cross-selling – almost entirely paying for the £1 million project.

The partnership of M&S Money and Kognitio ensured that what many credit card operators regarded as a “cost sink”, the move to Chip & PIN, became a highly profitable opportunity.

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