Unlocking the potential

Editor’s note: Chris Slane is marketing research manager at PSCU Financial Services, St. Petersburg, Fla. Mark Sandler is vice president at SRA Research Group, Jupiter, Fla.

Innovation is a disruptive force that fuels progress. But innovation doesn’t happen in a vacuum. New products and services must be tested and often retested to measure viability. How useful would a new vaccine be if it wasn’t tested before it was released to the market? The possibilities are frightening. Albert Einstein said it well: “Innovation is not the product of logical thought, although the result is tied to logical structure.”

An example of innovation is the CardLock service from PSCU Financial Services, a St. Petersburg, Fla., financial services and payment processing company serving more than 600 credit unions and 14 million cardholders across the country. Introduced in late summer 2009, CardLock aims to strengthen fraud prevention by enabling cardholders to lock or unlock their credit or debit cards, effectively turning them off or on. Cardholders can call a toll-free number or visit a special Web site to lock or unlock their account in seconds using a simple four-digit key code. “We lock our homes and cars to prevent or deter theft, and CardLock works the same way for credit and debit cards,” says Steve Ruwe, chief risk officer at PSCU Financial Services.

Before going to market, PSCU Financial Services conducted research to test the viability of the CardLock concept, a process detailed below.

Much like vaccines, CardLock was not created in a vacuum. A vision was developed and the idea was championed internally to gain acceptance and endorsement by key corporate stakeholders. A cross-department task force consisting of the fraud, contact center and product development departments convened to discuss the idea. The team hammered out a product concept, discussed technical requirements, analyzed secondary data on the concept and provided anecdotal feedback about the market and the potential benefit to credit unions and their members.

Distinct differentiator

It was determined that no other product like CardLock existed in the marketplace, giving PSCU Financial Services a distinct differentiator. But before any product development took place, a research plan was needed to fully test the concept.

Stakeholders provided input and ultimately endorsed and supported a research plan. Stakeholders needed answers to the following questions: Does it fit a need? Does it have market potential? And, what features and functionality are needed to make it successful?

At this point, the company contacted Jupiter, Fla.-based SRA Research Group to consult on the potential ways to approach a variety of issues around this research. A brainstorming session produced a list of possible users to whom this product might appeal. As the list grew, it became clear that the idea needed to be tested among a wide array of cardholders to see quantitatively where above-average interest existed. Once those groups were identified, qualitative research would be used to understand the drivers of interest for each of the target groups.

The research plan was divided into three distinct phases: a quantitative segmentation study; a series of focus groups; and, if the concept made it far enough, credit union in-market testing. The process was atypical. Many research projects start with qualitative and then move to quantitative. Based on its experience, SRA indicated that one of the typical pitfalls in product development is qualitative research being used to push an idea to market. And, PSCU Financial Services needed confidence that a market existed before it could explore features and functionality - a more costly endeavor. Hence, the quantitative survey was done first.

Phase 1: Consumer segmentation study

The company needed a reliable pulse of consumer demand. To that end, PSCU Financial Services conducted an online survey in January 2009 using a nationally-representative panel from San Francisco research firm MarketTools. Qualifications to participate in the survey were primarily limited to owning either a debit or credit card. A total of 1,080 responded to the survey, yielding a 2 percent margin of error at a 95 percent confidence level.

A detailed concept statement for CardLock was introduced to consumers. The survey included questions on level of interest (with and without a fee); reasons for or against enrolling; likelihood of use; number of credit and debit cards owned; and experience with card fraud. Survey results were compared across age, income, education, presence of children, number of cards owned, home-ownership status and financial institution affiliation.

Overall, about four in 10 expressed interest in the CardLock concept (top-two box score). Level of interest was sustained even after introducing a $1 monthly fee to the concept. This gave us confidence that their interest was genuine.

Two key drivers of interest included the need to be protected from fraud - an obvious driver - and peace of mind. Those not interested generally felt they didn’t need it or were concerned about convenience (i.e., forgetting to unlock or forgetting their password). The big takeaway was that, to drive maximum adoption, product developers had to ensure CardLock was easy to use.

Research confirmed distinct marketable segments. Those with the most interest included online shoppers, frequent travelers, younger consumers, renters and those who were victims of card fraud. While not exhaustive, these segments were originally identified in our earlier brainstorming work. We also found that consumers preferred to use the service more so for their credit cards and less so with their debit cards. And, there was little difference in interest among bank customers and credit union members.

So, with evidence from the research that a market existed for the product, with pockets of greater interest among certain segments, internal stakeholders had confidence to move forward with the next phase of the research.

Phase 2: Consumer focus groups

PSCU Financial Services was confident it had a product with market potential. But, it wasn’t enough to know consumer interest. Before rushing it to market, the company needed some direction on what features and functionality to offer in order to drive greater adoption and usage. The company needed to know how consumers would use the product, what concerns they have and what roadblocks they might experience. This requires a qualitative approach. Focus groups were ultimately selected as the method of choice as they allow for rich discussion that can bring new insights to light and make products even more effective. SRA Research Group was commissioned by PSCU Financial Services to conduct this phase of the research.

Researchers elected to conduct four focus groups in two markets: Tampa, Fla., and Phoenix. These markets were chosen out of convenience and to some extent out of a need for a more neutral consumer group. Survey research from phase one indicated that younger consumers were more interested in the concept than older consumers. Therefore, each of the four sessions was devoted to one of four specific age groups: 18-to-24, 25-to-34, 35-to-44 and 45-to-54. Those 55 and older were not considered a strong market based on the quantitative research and were therefore not included in the focus groups.

Screeners were used to help recruit panelists. Since the focus was when and how the service would the product be used, researchers needed to have the right audience around the table. After a careful review of the quantitative research, it was decided that invitees had to own at least one debit or credit card, have some interest in the concept and exhibit some of the segment characteristics identified in phase one (i.e., routine traveler, online shopper, etc.). Recruiting was accomplished using local contacts, databases and networking. SRA carefully monitored the mix of respondents to ensure all of the potential interest groups were represented in the sessions. Ten respondents were recruited for each group.

The discussion guide was developed and categorized into four key sections. The first section covered panelists’ card usage patterns and behaviors. Researchers wanted to know the types of purchases they make on their cards and were any of them recurring - a technical challenge PSCU Financial Services would have to overcome. The second section covered panelists’ perception of the ideal card. If they could build a card from scratch, what would it look like? Researchers wanted to know how panelists would handle fraud prevention in a “build your own card” scenario without tipping them off to the product being studied.

A clear product concept statement was supplied to each group. The moderator then solicited feedback. What was their reaction? Would they register their card for the service? Why or why not? How would they prefer to register? How would they like to be notified in the event someone tried to use a locked card? How often would they use it? What’s missing from the product? These questions would be critical to ensuring the product had the correct functionality.

During the discussions, it came as no surprise that most respondents use a debit card more frequently than a credit card, particularly in this economy. Yet the quantitative research indicated the appeal was even greater for credit cards than debit cards, as consumers view a credit card as having more potential liability and hassle if problems occur than a debit card.

Convenience was also a major consideration mentioned in the groups. The system needed to be quick to lock and unlock otherwise respondents would not use it.

The groups also included a short discussion on card fraud. This was a bit tricky in that we wanted to avoid the lengthy war stories but still understand the depth of concern consumers have about this issue. Since we intentionally included people who had been victims of card fraud or identity theft, it was important to keep them from creating an atmosphere where group-think pushed everyone toward the idea. We wanted to juxtapose CardLock against current card-fraud protections such as zero liability and fraud monitoring, which are already available on most cards. If consumers felt that they were adequately covered with zero liability and fraud monitoring, marketers would have to convince consumers that CardLock was another important tool to mitigate fraud - not to replace what they already have.

Much to our collective surprise, many participants only had a limited understanding of their liability under existing cardholder agreements. Despite this, panelists generally understood the value of the service and expressed interest. Having control gave some of them much-needed peace of mind. In addition to the additional control, the inconvenience of dealing with card fraud was a major motivating factor driving interest.

As one respondent said, “I had to call the card company and we had to cancel the cards. We had to file a police report and fax it to the bank. With the card company, we had to wait a while and it took a lot longer to get the charges credited back and then it took even longer after that to get them to adjust the interest because we have a billing statement that dropped in between the time of the transactions.”

In all, the consumer focus groups gave product development managers great insight on how to build features and functionality to drive adoption and usage. They also provided an in-depth view into how consumers could be motivated to sign up for this type of service. Now, product development managers needed to test the water.

Phase 3: Credit union testing

At this stage, CardLock development was near complete. But, PSCU Financial Services realized that credit unions needed to become comfortable with it before they would champion the benefits to their own membership - a key to the product’s success. Pilot-testing the new solution to a handful of credit unions would also serve to provide valuable in-market data to PSCU Financial Services.

A decision was made to pilot the new solution to three credit unions. Employees of these credit unions were given full access to CardLock. Their use was monitored. How often did they turn their cards on and off? How long did they leave their cards locked? Were there any technical glitches? PSCU Financial Services conducted weekly check-in calls with pilot coordinators and conducted an on-site feedback session at the end of the pilot period. The in-market test ran for 10 weeks and was considered a success.

Added sense of control

After much due diligence, CardLock moved through the product development pipeline and became an official product. A press release was sent to major credit union trade publications in August 2009 announcing the new service. Since its debut, over 30 credit unions have enrolled. “Our members are interested in this service because it gives them an added sense of control and security, which translates to added confidence when using our card platforms,” says Suzanne Dusch, vice president, marketing, CFE Federal Credit Union, Lake Mary, Fla. “This service delivers added control without added responsibility - that’s a very attractive combination for our credit union and for our members.”

Marketing research paved the way for CardLock. The time and investment in both consumer research and in-market testing proved extremely beneficial. It helped to transform a concept into a truly viable and innovative product. In the end, a need was identified, a market was cornered and peace of mind was achieved.