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NATION Banks generate profits through service calls from credit card holders



Published: Mon, February 10, 2003 @ 12:00 a.m.



Banks use the calls to sell additional products to card holders.

DOW JONES NEWSWIRES

WASHINGTON -- Credit card holders who call the toll-free customer hot lines to check balances or question a bill are generating profits for banks that once considered such calls an unavoidable expense.

Two banks -- Citigroup Inc. and J.P. Morgan Chase & amp; Co. -- say revenue has outpaced expenses from their customer service centers, where operators answer card holders' questions and complaints.

Card holder customer service centers were long considered a necessary expense, and banks struggled to keep costs down by providing more automated response systems and rewarding employees who kept calls short. Recently, more banks see an opportunity to directly sell products to existing card holders.

Neither Citigroup nor J.P. Morgan breaks out the amount of profit generated by their credit card service centers. Citigroup estimates that it's bringing in 15 percent to 20 percent more revenue than expenses per month.

Citigroup's centers entered the black last spring. J.P. Morgan Chase began seeing profits in 2001.

American Express Co.'s card-holder centers also generate revenue by selling products to customers who call in, but sales don't yet cover the cost of running the centers, the company said.

Personal data at hand

Turning customer service centers into effective sales offices requires the kind of detailed personal data that credit card companies excel at -- past payment histories, spending habits and information about a customer's favorite stores.

"Offers are individualized by looking at information like how customers are using their cards, their demographics and recent things we have offered them," said Steve Kietz, senior vice president of marketing in J.P. Morgan Chase Bank's credit-card business, which issues cards through its Chase Manhattan Bank USA subsidiary.

The banks don't lob new products at everyone who calls in to complain or wheedle their way out of a late charge. Only customers who fit certain profiles calculated by their massive data systems receive a sales pitch.

Computers crunch through the data to generate likely leads for different products; a customer service rep answering a call from someone who has recently purchased several airline tickets, for example, may see a prompt to discuss buying extra baggage insurance.

Paying representatives

The way customer service representatives are paid has changed at banks that have retooled their service centers. Now, as much as 25 percent of the reps' pay is based on commissions they generate from sales to customers; before changing the centers, there was no commission-based component.

Since the majority of a customer service rep's compensation is still based on customer satisfaction, the emphasis is on backing off rather than making a hard sell, say bank executives. Rarely is the same product offered twice to a customer who previously turned it down.

"In a retail shop, if I buy a suit and you want to sell me a tie, if you're not attentive and didn't help me with the suit, I won't want to listen to you about the tie," said Rich Garside, chief operating officer of Citigroup's North American cards division. "We want to make sure the interaction is an extension of really good service, and not intrusive or offending."

Time added to call

At Citigroup, the average length of a call that does not include an additional sales pitch is about three minutes, said Garside. With the sales pitch, about 30 to 40 seconds are added. But the added time has been worthwhile; about 20 percent of the products pitched to customers are purchased, he said.

Spending on two sales methods that most consumers find especially intrusive or offensive -- direct mail advertising and telemarketing -- have declined at both J.P. Morgan and Citigroup as a result of their service center sales efforts. Neither will provide exact figures.

At Citigroup, for example, two-thirds of the products it sold to card holders in 1999 came through outbound calls made by telemarketers. Today, less than a third do.

J.P. Morgan Chase said sales made to inbound callers to its customer service centers have replaced a portion of its telemarketing and direct-mail pitches, but it couldn't quantify by how much.




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