A major electronics retailer was in trouble—their financial services department was near extinction, and needed to find a way to create greater savings. As a solution, they looked at increasing the issuance and utilization of its private label credit card (PLCC) to offset some of the nearly $370 million in annual interchange fees (the transaction fee charged to merchants for using the cards) related to arbitrary rates imposed by issuing banks and card brands.
This idea was easier said than done—it required an entire corporate culture shift and a relationship reestablishment with its two issuing banks—all within an eight-month period.
To get buy-in from the company’s decision-makers, there needed to be clear data that showed that the strategy was likely to succeed. The company enlisted the services of Nighthawk Intelligence to examine inefficiencies in the PLCC application process and effectiveness of marketing campaigns geared toward PLCC holders. Drew Pulvermacher, founder and chief probability officer at Nighthawk Intelligence, utilized StatTools, @RISK and PrecisionTree—all part of Palisade’s DecisionTools Suite—to help the retailer with this process.
Using StatTools, Pulvermacher was able to show how a marketing campaign to promote customer PLCC sign-up would affect consumer activity, allowing the retailer to adjust the messaging and price appoints to achieve the greatest likelihood of success for each marketing campaign. Additionally, using @RISK and StatTools, Pulvermacher was able to build a distribution library, which the retailer could use to audit variable assumptions.
Pulvermacher also used PrecisionTree to determine how best to streamline the PLCC application process (customers could get deterred by long wait lines at the customer service desk). Using PrecisionTree, Pulvermacher mapped out a series of customer decisions that took place when making purchases and where their interest in making a purchase broke down, and identified the departments that would benefit most from a faster, more efficient application process.
Within a year of implementing the strategy towards expanded PLCC usage, the company realized nearly $250 million in related accrued benefits, which included interchange savings, financing income, and enhancement services. Instead of finding a way to justify its existence, the financial services department became a vital part of the organization’s fiscal success. “Palisade…offered the resources necessary to quickly transform an entire organizational mind-set to embrace uncertainty and embed a systematic process of measuring performance,” said Pulvermacher.
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