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New credit cards have emerged as a strong tool to build customer loyalty at two major automakers, and a third continues to eye a card of its own.

Co-branded credit cards have been around since the late '80s. But General Motors Corp.'s GM Card, introduced with great fanfare in September 1992, has been perhaps the most successful program to date, opening 6 million accounts and issuing more than 10 million cards so far.

GM was joined five months later by Ford Motor Co., which trotted out a similar card is sued by Citibank.

Credit-card industry executives say Nissan Motor Sales USA is scouting for a bank to issue the next major auto-rebate card, but Detroit's other Big 3 company, Chrysler Corp., has opted out of the fray.

The sudden interest in credit cards comes from the desire to sell more cars in an increasingly crowded and price-conscious environment, especially to current customers. A marketer that offers its owners hundreds (if not thousands) of dollars in discounts is more likely to keep them in its family, the theory goes.

"One of the basic premises behind doing the card was to increase owner loyalty," says Michael Losh, VP-group exec in charge of North American sales and marketing for GM. "There's no doubt in my mind, we do expect loyalty will be improved."

GM says it has already sold 140,000 cars and trucks to buyers using rebates earned with the credit cards. And contrary to industry expectations, it's not just GM owners who've been attracted to the card.

The company says it won four to five times as many converts as it predicted. And half of the California residents who've already redeemed rebates for new vehicles weren't GM drivers, in part because the state is one of GM's weaker markets.

Still, what's unclear is whether GM is merely offering discounts to customers who might have remained loyal without them.

"The $64,000 question is, how many of those 140,000 would've bought a GM car anyway?" says Bruce Brittain, president of Brittain Associates, a credit card consultancy.

Basil "Bud" Coughlan, recently retired as Ford's VP-North American marketing plans and operations, acknowledges Ford's entry into credit cards was "somewhat defensive."

Essentially, he says, Ford didn't want GM's card to undermine the loyalty of Ford customers.

Unlike GM, which spent $70 million in marketing costs for the rollout (and more than $50 million in media advertising), Citibank and Ford budgeted far more modestly.

According to Competitive Media Reporting, Citibank/Ford spent $4.6 million in measured media for the first nine months of 1993, while GM spent $24.3 million in the same period, after shelling out $28 million in the fourth quarter of 1992.

Ford's most effective-though controversial-marketing tool is the automatic conversion of other Citibank credit-card customers into the Ford program, unless they specifically instruct the bank not to do so.

Citibank refuses to disclose any details of the program's performance, except to say it's "on target" with expectations.

A Ford spokeswoman says the card has performed "very well" and says 20,000 customers have used rebates to buy new vehicles in the first year.

But because of the conversion process, estimates vary widely on the size of Ford's cardholder base. Consumer surveys conducted by Brittain and other industry researchers peg Ford's accounts at anywhere from 1.3 million to 5 million, with the actual number probably in the middle.

Because of GM's advantage, and the fact that Citibank controls the Ford card, GM now is in a better position to market to its credit-customer database.

"We're not at the point yet where we're starting micro-focused programs talking to people who own cars," says Philip Guarascio, general manager, marketing and advertising for GM's North American operations.

"The first year's objective was to gain accounts. Now we're moving into some bold and brave new areas of how to develop our database" responding to specific customer preferences with targeted mailings and statement inserts, beginning with a test this spring, he says. "It's going to be a laser scalpel kind of marketing."

Already, GM is sharing some credit-card data with its dealers. It provides printouts of GM cardholders in dealer territories, as well as lists of those who've redeemed rebates, including which models they bought. That enables dealers to thank loyal customers and promote extended warranties or service checkups.

While the card programs remain a valuable marketing tool, they won't have much bottom-line impact. Although exact arrangements aren't disclosed by either card, bank partners earn most of the finance charges consumers pay, in exchange for shouldering the risk of bad debt.

"[Automakers] don't care about the credit-card side," Mr. Brittain says. "What they really care about is selling more cars."

Raymond Serafin contributed to this story.

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