VISA and AmEx Cardholers Most Loyal (2/21/97)

SUMMARY:

J.D. Powers '1996 Cardholder Brand Image Analysis' reveals 83% of American Express cardholders and 82% of VISA cardholders feel their card is a card that people can feel loyal toward. For MasterCard the figure was 74% and for Discover/Novus it was 38%. The study, released Thursday, also listed the perceptions most strongly associated with each brand. For VISA: 1. "card that can be used wherever needed" and 2. "a card that people feel loyal toward". For MASTERCARD: 1. "a card that can be used wherever needed" and 2. "a card that people can depend on in emergencies". AMERICAN EXPRESS: 1. "a card that provides good value" and 2. "a card for people with a lot of money". DISCOVER/NOVUS: 1. "a card that is prestigious" and 2. "a card that provides fraud protection". Powers surveyed 10,170 cardholders, covering 22 of the major U.S. issuers and 50 individual card products.

In a somewhat related area J.D. Powers also released a research report on sub-prime lending that indicates that despite the recent troubles of Mercury Finance and JayHawk Acceptance the prospects for sub-prime auto financing remain good.

FULL STORY:

J.D. Power and Associates Reports: American Express and Visa Rated as the Cards People Feel Most Loyal Toward
The J.D. Power and Associates 1996 Cardholder Brand Image Analysis reveals that 83 percent of American Express cardholders and 82 percent of Visa cardholders feel their card is a card that people feel loyal toward. The percentage for MasterCard drops slightly to 74 percent and Discover/Novus trails with 38 percent.

The analysis also details other perceptions associated with each brand. From a battery of perception statements, respondents identified the statements they associated with each brand. MasterCard and Visa share the same primary identifying image. The perceptions respondents most strongly associated with their individual brands are as follows:

    Visa:
    -- A card that can be used wherever needed
    -- A card that people feel loyal toward

    MasterCard:
    -- A card that can be used wherever needed
    -- A card that people can depend on in emergencies

    American Express:
    -- A card that provides good value
    -- A card for people with a lot of money

    Discover/Novus:
    -- A card that is prestigious
    -- A card that provides fraud protection
However, images strongly associated with a brand may not necessarily be associated with increased card spending.

"There are clear opportunities for each brand to identify and promote specific brand perceptions that can enhance cardholder spending. Identifying those perceptions has the dual advantage of enhancing image and usage opportunities," according to Andrew March, director of financial services. "At the same time, the intensifying brand competition makes loyalty all the more important to securing primary card status."

The following are perceptions strongly associated with each brand, which do not enhance usage with the individual brands:

    Visa:                A card people feel secure with
    MasterCard:          A card for people who can manage their finances
    Discover/Novus:      A card which provides good value
    American Express:    A card for people with a lot of money
The 1996 Cardholder Brand Image Analysis further analyzes information about the four major card brands collected from the 1996 J.D. Power and Associates Comprehensive Credit Cardholder Satisfaction Study(SM). A total 10,170 credit cardholders were surveyed, covering 22 of the major U.S. issuers and 50 individual card products (basic, gold, rewards).

J.D. Power and Associates is an international marketing information firm with headquarters in Agoura Hills, California and offices in Detroit, Michigan, Westport, Connecticut; Torrance, California; Toronto, Canada; London, England; Tokyo, Japan; and Seoul, Korea. J.D. Power and Associates is best known for marketing information, consulting and measurement expertise in the areas of consumer opinion and customer satisfaction. J.D. Power and Associates can be accessed through the World Wide Web at http://www.jdpower.com. Email: info@jdpower.com.

No advertising or other promotional use can be made of the information in this release or J.D. Power and Associates survey results without the express prior written consent of J.D. Power and Associates.

J.D. Power and Associates Forecasts Positive Long-Term Outlook for Sub-Prime Auto Lenders
J.D. Power and Associates forecasting and research groups indicate that despite the recent troubles experienced by Mercury Finance and Jayhawk Acceptance, the future prospects of the sub-prime auto financing market remain good.

Paul Ballew, J.D. Power and Associates' chief economist, stated that, "Macro economic trends indicate that the sub-prime market will continue to expand." Ballew believes that this growth is primarily due to three factors. He reported, "The positive outlook for sub-prime lenders is due to the slow real income growth experienced by all but the most affluent households. It is further influenced by the related impact of increasing household indebtedness and bankruptcies. Finally, growth for sub-prime lenders will come from the employment dislocations caused by corporate downsizing and restructuring. All in all there is a future for sub-prime automotive lenders."

According to a recent J.D. Power and Associates research report, 10 percent of new vehicles that are financed are acquired by sub-prime customers. The J.D. Power and Associates Dealer Financing Satisfaction Study, fielded in May 1996, also found that 75 percent of dealers who use a sub-prime provider expect that sub-prime customers will be increasingly important to future business.

The study reported the responses of nearly 3,000 automotive dealers who specified a wide range of performance issues in terms of the sub-prime lenders' ability to satisfy dealer needs. In a ranking of sub-prime lenders, Ford Credit ranked at the top, while the California-based Western Financial ranked highest among banks. Mercury Finance, indicative of its recently publicized problems, ranked the lowest among sub-prime providers in terms of dealer satisfaction according to the study.

According to David McKay, manager of auto finance research at J.D. Power and Associates, "The lenders that thrive in this market will be those who satisfy both their consumer and dealer customers, while deftly managing their financial risks." McKay continued, "Evaluation of our research data reveals that industry analysts and investors would be well advised to arm themselves with a thorough understanding of how well a firm is meeting all of its customers' needs before they recommend or invest in them."

J.D. Power and Associates is an international marketing information firm that produces customer-based surveys with headquarters in Agoura Hills, California and offices in Detroit, Michigan; Westport, Connecticut; Torrance, California; Toronto, Canada; London, England; Tokyo, Japan; and Seoul, Korea. J.D. Power and Associates is best known for marketing information, consulting and measurement expertise in the areas of consumer opinion and customer satisfaction.

J.D. Power and Associates can be accessed through the World Wide Web at http://www.jdpower.com. Email: info@jdpower.com.