Saturday, August 2, 2014

Millionaire or Pauper? Discover Card’s Mixed Feelings

I know I couldn’t be Discover Card’s favorite customer, but this week really brought home the bank’s mixed feelings about me as a customer. First, there was the glossy personalized mailer shown here, congratulating me on passing their millionaire test and explaining the bonus they will shortly be giving me as a prize. Then, by coincidence or not, the very next morning their mobile app announced in a roundabout way (in a technique known as a “forced upgrade”) that it no longer supports my phone, which is a model that hasn’t been on the market in nearly two years. Both messages were surprising, in different ways.

First, I’ll look at the mailer. The image I show here is reasonably representative of the six-panel folder, and it looks surprisingly middle-class for a mailer going out mainly to millionaires. The five stock photos not shown are only slightly more upscale. Partly this is a sign that millionaires are in denial about their wealth and think of themselves as middle-class in a way that wasn’t true 15 years ago. Look at it a different way, though. The mailer is customized with my name, so it could just as easily be customized with the bank’s idea of my cultural surroundings, perhaps based on my ZIP code. I say this not as idle speculation of what might be possible someday, but as someone who has done the computer programming for just this kind of customer segmentation at banks. We try not to make the segmentation in the marketing messages too obvious because we know the logic is never perfect and we are always putting some fraction of customers in the wrong segment, but that also means that the message segmentation happens far more often than you would guess as the recipient of the messages.

This kind of mailer is based on good marketing logic. As a business, when your loyalty program ends, you want to ward off the possibility that the former participants might forget that the business still exists. The mailer is meant as a feel-good reminder.

Yet being dropped by the Discover Card app has the exact opposite effect. It essentially says, “We don’t think you’re an important customer. Your account doesn’t matter.” I struggle to imagine the meeting where this decision was made, and someone saying, “Only 15 to 20 percent of our mobile customers will be affected, so who cares?” In case the irony did not come through, that imagined argument is the exact opposite of corporate marketing thinking, where teams struggle for months or years to eke out 1 percent gains in reach. Arbitrarily dumping a fifth of the user base based on some kind of principle is not a decision a marketing group would make voluntarily. Yet somehow, Discover Card came to that decision.

The key point against me, I imagine, is that people who carry phones that are two years old (three years, in my case) are less likely to be free spenders. They buy things when they need them, and hitting them with advertising messages has little impact. We might even be considered high-risk customers — if we can’t afford to upgrade our phones every year, how confident can a bank be that we can afford to make our credit card payments?

To be clear about what a “forced upgrade” involves, the app message said I was using an obsolete version of the app, even though I installed the latest version in June. It went on to explain that I would have to upgrade my phone operating system to install the newer version of the app. All functionality in the app other than displaying this message had been disabled. However, there is no newer operating system for my phone, so that would mean turning my phone in for recycling and purchasing a new phone — not something I’m likely to do just so I can keep tabs on my credit card account wherever I am. “Forced upgrade” is a known concept across the banking industry, but it is rare to see it used this way. All my other banks either allow me to continue to use the older versions of the app while they roll out more advanced app versions for customers who have the latest technology, or they make their designs flexible enough that they can run on last year’s operating system version. As I said, I have a hard time understanding how Discover Card could have decided that they could not take this same approach. But I hope I do not sound too critical. There must be a perfectly sensible reason behind this decision, and I am curious about what the reason is.

To summarize, Discover Card cannot decide whether I am millionaire or a pauper. My high level of transactions suggest the former, my out-of-date phone, the latter. Someday, my phone will fail and I will buy a new phone. Will that qualify me as a millionaire again? In the digital marketing age, it seems reputation hangs on just such random events.