Monday, January 30, 2012

Ddulite Investors

[for a definition of ddulite click here]

I started out in the banking industry. My company used to broadly recruit from other banks so we had plenty of chances to compare stories about strategies that different banks used and this particular one stood out to me as an interesting way of handling investor complaints.

The bank in question was in the middle of a very good run, making a flood of money from its credit card line, but investors kept complaining that the bank was making all that money the wrong way. This was the height of the Internet boom but the bank was booking all of these profitable accounts through old-fashioned direct mail. If it wanted to maximize its stock price, the bank needed to start booking accounts online.

The trouble was that (at least at the time) issuing credit cards over the Internet was a horrible idea. The problem was fraud. With direct mail, the marketer decides who to contact and has various ways to check that a customer's card is in fact going to that customer. With a website, it was the potential customers who initiated contact and a stunning number of those potential customers were identity thieves.

The Internet was an excellent tool for account management, but the big institutional investors were adamant; they wanted to see the bank booking accounts online. Faced with the choice between unhappy investors and a disastrous business move, the company came up with a truly ingenious solution: they added a feature that let people who received a pre-approved credit card card offer fill out the application online.

Just to be absolutely clear, this service was limited to people who had been solicited by the bank and based on the response rates, the people who went online were basically the same people who would have applied anyway. From a net acquisitions standpoint, it had little or no impact.

From an investor relations standpoint, however, it accomplished a great deal. Everyone who filled out one of those applications and was approved* was counted as an online acquisition. Suddenly the bank was using this metric to bill itself as one of the leading Internet providers. This satisfied the investors (who had no idea how cosmetic the change was) and allowed the bank to continue to follow its highly profitable business plan (which was actually a great deal more sophisticated than the marketing techniques of many highly-touted Internet companies).

*'pre-approved' actually means 'almost pre-approved.


  1. Just a technical one: your link to the definition of ddulite is to this very post and not to