ANA Annual Meeting 2012

Why Discover Created 'Peggy'

Behind Credit Card Marketer's Strategy to Build Credibility in Industry Viewed Worse Than Oil, Tobacco

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When credit card companies raised rates in the face of declining profits during the recession, the industry's consumer reputation sank faster than the economy.

"How low can you go when you are below petroleum and tobacco? And that 's how low the credit card industry was," Harit Talwar, Discover Financial Services' exec VP for U.S. cards, said on Saturday at the Association of National Advertisers annual meeting in Florida.

To be specific, the industry's approval rating sat at about 16%. So with that as a backdrop, Discover revamped its marketing strategy with moves that eventually led to "Peggy," the star of a quirky campaign that has helped it beat back some of the negativity plaguing the industry.

In a presentation at ANA, Mr. Talwar and John Adams, CEO of The Martin Agency, outlined the thinking behind the campaign and other recent strategic moves.

Discover views its customer-services division as an asset, including the fact that all representatives operate from the U.S. But rather than touting it in advertising, the marketer decided to make its point by showcasing how bad it can get when credit card companies don't handle calls correctly. Thus was born "Peggy," who is actually a man working for a fictitious competitor named "USA Prime Credit" who bumbles and stumbles his way through customer-service questions.

"We all know how difficult it is to be convincing in advertising about customer service, even if it's great customer service," Mr. Adams said. "But we can connect with customers on a very emotional level by reminding them what it's like to have no customer service."

The campaign has emerged as a social media hit with fans sending Peggy requests for birthday, anniversary and other shout-outs on his Facebook page. One fan even outsourced a marriage proposal to Peggy.

Yet the campaign barely got off the ground because Discover initially viewed it as too risky, Mr. Talwar said. But "John's team was very committed to it," he said. So "we put it though research and it researched very well."

While Discover says it now scores well with customers, the "marketplace in general" still "has a high level of distrust with the credit card industry," Mr. Talwar said. So Discover is seeking to "once again leverage this distrust and convert it into an opportunity for our brand," he said.

One way it is seeking to stand out is with a new credit card offering that promises to bypass late fees if a customer misses a payment "every once in a while," Mr. Talwar said. And the card won't "immediately jack up your interest rate." The card is now being tested in 10% of the U.S., he said.

Discover is also taking a low-key sales approach. "One of the most courageous things we are doing is when people call in we are not cross-selling other products, or other features, or other services. [We are] letting our customers own the conversation, rather than we owning the conversation," he said.

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