Does Spaghetti Jimmy really win?
Credit issuers jump aboard card personalization trend
By Jay MacDonald | Published: June 22, 2009
Is your credit card seeing more daylight lately?
Perhaps "Spaghetti Jimmy" is to blame.
More than a few proud parents have been lured to slap their favorite family photo on a Capital One card by the ubiquitous TV commercial featuring the grinning toddler with the Boyardee 'do. You know, the one where the mother-son quest for the perfect card photo ends with a triumphant "Spaghetti Jimmy wins!"
But in the real world, the victory goes to Capital One, which gambled two years ago that Americans would warm to a card that looks like that other prized piece of wallet real estate: the family photo.
"We know that there is a trend among consumers, be it with coffee or music or automobiles, to build your own, make your own," says Capital One's Pam Girardo. "We're definitely tapping into this notion of putting consumers in control and offering them choices. We believe that increases loyalty, which translates into usage."
The entertaining Capital One commercials actually advertise two services: CardLab, which enables consumers to customize their card's APR, terms and reward structure, and the image card, which can be applied to any new or existing Capital One card.
Girardo says that although its data are proprietary, Capital One's analytics show that CardLab has a positive impact on activation (new card accounts), while image cardholders use them over other cards and become more loyal customers.
"All issuers are seeking 'first in wallet' status," she says. "To the extent that we know that our customers are more loyal and that it positively impacts usage rates, that combination is kind of the sweet spot."
Credit card personalization
Sweet indeed. So much so that, according to the November 2008 report, "Overcoming the Challenges of Credit Card Issuing" by Boston-based Aite Group, eight in 12 U.S. card issuers surveyed listed personalization as "important to extremely important" to acquiring new customers.
Other issuers note positive customer response. Salt Lake City-based Zions First National Bank reported a 15 percent to 20 percent jump in transactions in the first two months among customers who switched from traditional to customized cards. Dallas-based TNB Card Services, which provides the personalization option to its 550 credit union clients, echoes that enthusiasm.
"People are passionate about expressing themselves, and this is a way for them to do that," says TNB vice president Mitch Raymond. "Cardholders who are emotionally invested in their cards tend to use them much more often, pushing their monthly average balances higher, as well as increasing the number of transactions."
Putting a happy face on risk
In short, well -- we like ourselves. And our kids. Card companies are awakening big-time to the largely untapped profits to be made by cozying up to "Spaghetti Jimmy."
"I believe that card personalization is going to be the next battlefield for issuers," says Aite Group analyst Adil Moussa, who authored its study. "Credit card issuers have realized that people develop a bond with something personal. The more personalized the card, the more it will be top-of-wallet."
Even if we don't admit it. In a CreditCards.com/Roper poll from October 2008, respondents overwhelmingly denied that their self-esteem was affected in any way by the plastic in their wallet. As for influencing their opinion of other cardholders, the physical appearance of the card ranked a distant third (23 percent) behind the card brand (64 percent) and card level (gold, platinum, etc.) (34 percent).
W. Keith Campbell, social psychology professor at the University of Georgia and co-author of "The Narcissism Epidemic," says a personalized card is the next logical step up the status ladder.
"Historically, you received status in cards by having a gold card, then a platinum card, then that really cool titanium card that nobody knows about," he says. "Personalizing is a way of adding uniqueness to that. It makes cards seem like a part of you."
Naturally, usage would increase: "It's part of your self-image, so you're more likely to use it publicly or show it to people. I can see pulling that one out of my wallet rather than others for that reason. It's a way of branding yourself," he says.
Personalized cards tougher to cut up
It's equally logical that personalized cardholders would be more loyal.
"If I have a card with a picture of my kid on it, that's going to be part of my identity. I'm not going to want to give that up or cut it in half with a pair of scissors."
Campbell says card issuers would be crazy not to offer card customization. "It gives people choice, it gives them freedom, it gives them uniqueness, specialness and esteem. And it probably helps build a little loyalty. It makes sense from their perspective."
This isn't wrapping a card up with responsibility and putting a warning label on it. It's making it more fun and part of you. So that's going to disguise the risk a bit.
|-- W. Keith Campbell
University of Georgia
Unfortunately, some consumers may lose if "Spaghetti Jimmy" wins.
"Credit can be misused as a way just to inflate yourself; you buy a lot of things you think you deserve that you can't afford. Credit is a risky thing, and something that should demand a little responsibility, and this doesn't seem to put it in those terms," Campbell says. "This isn't wrapping a card up with responsibility and putting a warning label on it. It's making it more fun and part of you. So that's going to disguise the risk a bit."
Although Capital One is the first major issuer to deploy a robust image card, other big issuers, including Bank of America and Wells Fargo, have been kicking the tires for several years.
Some pilot image-card programs, such as MBNA's college and university affinity cards, are still flying high, while others, including the ill-fated celebrity co-branded cards (remember the KISS card? David Bowie debit? The Elvis Visa?), crashed on takeoff.
Scott Strumello, an associate with Auriemma Consulting Group of Westbury, N.Y., says issuers are taking a closer look at personalization, in part to help recoup some of the anticipated revenue they stand to lose from impending government regulation.
"I would definitely say there is interest in it," he says. "The economics look a lot more positive than they did. The cost of offering this has gone down a lot over the last 10 years, to where now it's an incremental expense. The challenge has always been, how do you evaluate its contribution to the bottom line? They're a little bit smarter in how they model it now."
It's also a way to inject some warm-fuzzy into the increasingly contentious credit card environment.
Strumello predicts that more and more issuers will test their own versions of "Spaghetti Jimmy" to collect the data to justify going all-in on personalization. PayPal just introduced its PayPal Plus MasterCard with Photo Card in May 2009.
"It's not just the bank that's making the decision, it's the bank and the co-brand partner and, in some cases, the network, Visa or MasterCard or American Express. Increasingly, they're looking at whether it has an impact on loss rates, so that also brings risk management to the table," he says.
But with the cost obstacle largely removed, chances are good that we've not seen our last adorable overturned bowl of spaghetti.
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