In search of the perfect plastic

Editor's note: Mary P. Tonneberger is vice president of Kennedy Research Inc., Grand Rapids, Michigan

Like no other industry, telecommunications has seen its playing field abruptly change over the past decade. For example, long-distance service, once highly regulated, is now a hotbed of competition, a development that overnight changed the rules of the game for the entire industry.

Nowadays, both long-distance and local telephone companies find themselves looking over their shoulders-first at the courts, then at their competitors - as one long-standing regulation after another is struck down, opening dramatic new opportunities.

At first blush, the industry's newest innovation - a foray into the lucrative credit card business- - seems incongruous with the traditional role of telecommunications, though it makes perfect sense when seen in the twin lights of fewer regulations and more competition.

But that initial incongruity is precisely why Chicago-based Household International Inc. and Ameritech Corp., one of the seven regional Bell companies, relied heavily on market research to help position the new Complete MasterCard, a credit card with all the advantages of a telephone calling card.

Kennedy Research Inc., based in Grand Rapids, Mich., worked with Ameritech and Household International in conducting the market research that played such an integral role in the introduction of the Complete MasterCard.

"One of our concerns was how customers would respond to the telephone company introducing this type of product," says Rich Bialek, director of credit card services for Ameritech. "Beyond that, a host of issues needed to be addressed through research before we could develop a card that would have a strong chance of succeeding."

Multipurpose plastic

The Complete MasterCard, jointly issued by Ameritech and Household International, the country's ninth-largest credit card issuer, combines a MasterCard with the features of a telephone calling card, allowing users to shop, pay bills, take trips and make phone calls.

"With this card, our customers can make credit card purchases at over nine million locations worldwide, obtain cash at over 250,000 banks and 60,000 ATMs, and make calling card calls at over two million pay phones in the United States," Bialek says.

The Complete MasterCard is one of a handful of "co-branded" cards, the latest development in the credit card business. With co-branded cards, a major marketer's logo is featured prominently, and the cardholder gets a value-added benefit, often in the form of discounts. Sponsors form ties with a Visa or MasterCard member bank that issues the cards to consumers.

The Complete MasterCard became available to Ameritech's 10 million residential customers in Illinois, Indiana, Michigan, Ohio and Wisconsin this past fall. Ameritech is the first of the seven regional Bell companies to become active in the competitive credit card business, though others are expected to follow suit.

The multipurpose card will generate a new source of revenue for Ameritech, but, even more important, the card will strengthen the company's relationship with its customers and increase awareness of the Ameritech name.

"The principal idea was to make our calling card more attractive by combining it with a credit card," Bialek says. "So many cards are competing for space in the consumer's wallet that the convenience of combining two or more cards into one is attractive for many people.

"With the increased competition in the calling card market, we needed to offer our customers the convenience of a multipurpose card in order to meet their expectations. We wanted market research to help us determine what mix of features would make our card most appealing to customers. The question we kept asking ourselves was, 'What will motivate people to use the Complete MasterCard instead of other cards they now hold?"'

Focus groups-phase one

Research prior to the introduction of the Complete MasterCard consisted of three phases. The first two phases were qualitative, involving focus groups that helped narrow down what issues should be addressed during the quantitative third phase, which used conjoint analysis to determine the "ideal" card for Ameritech's target audience.

"In the first phase, we conducted a series of eight focus groups - four in Chicago, two in Detroit and two in Cleveland - with consumers who use both credit cards and calling cards," says Kennedy Research Account Executive John Kennedy, who helped plan research into the Complete MasterCard.

Participants were randomly recruited and assigned to different focus groups, each about two hours long. "During this stage, we were mainly interested in exploring consumer reaction to the concept of a credit card with a calling card feature," Bialek says. "We needed to evaluate how customers would accept the idea and explore their general expectations for this type of card."

Focus groups - phase two

The second qualitative phase consisted of another series of focus groups with calling card holders in Chicago, Detroit and Cleveland. In this phase, various design options for the proposed card were examined for the first time. A number of different designs for what was to become the Complete MasterCard were shared with focus group participants, who were asked to give feedback on which option best portrayed the image of an all-purpose, dual-function card. The winner: an eye catching spectrum that streaks diagonally across a blue background, with the name of the card and the Ameritech logo featured across the top.

"During this second wave of focus groups, we also tried to get a feel from participants about what key issues needed to be addressed in the subsequent conjoint analysis phase," Kennedy says.

"We probed for detailed insight into how people use credit cards. Why did you choose the cards you own? What cards do you use most often? What do you perceive to be the benefits of your cards?

"Our ultimate goal, of course, was to identify those specific features that would be most likely to appeal to card users. Before we could design the conjoint analysis questionnaire, we needed to find out how people perceived the various attributes of both credit cards and calling cards."

In addition, the personal interaction during the second phase of focus groups helped Kennedy Research determine the proper terminology to incorporate into the questionnaire that would be used for the conjoint analysis.

"Since the third phase of our research would be self-administered, understanding the proper terminology was essential to crafting an effective questionnaire," Kennedy says.

For example, are interest rates, discounts and credit limits considered to be "features" or "attributes"? Do people say annual "fee" or annual "charge?"

Conjoint analysis

Kennedy Research recruited 500 Ameritech customers - about 100 in each of the five states Ameritech serves - to participate in the conjoint analysis phase. Participants were recruited through a combination of mall intercepts and telephone pre-recruiting. They reported to one of eight shopping malls throughout the Midwest to take a self-administered, computerized questionnaire.

Each questionnaire lasted about 30 minutes. Participants isolated the combination of features that most appealed to them by keying their answers to a detailed series of questions into the computer.

In all, 15 different features were examined, including annual fee, interest rate, and what the card would be named.

Furthermore, a number of options within each of these different attributes were tested. For example, participants were asked to choose among seven potential card names, four annual fee options, and three interest rate options.

"Each question offered the participant a choice between two different options," says Jamal Din, the Kennedy Research account executive who designed the conjoint analysis phase. "For example, 'What is more important - a card with no annual fee or a card that offers a variable interest rate?' The computer then automatically tailored subsequent questions depending on the answers to previous questions.

"There were an infinite number of ways the card could have been designed. By using conjoint analysis, we were able to quantitatively determine how removing or adding certain attributes affected the card's overall perceived value."

At the end of each self-administered questionnaire, the computer constructed two or three hypothetical "best bets" and asked participants to decide which presented the ideal card.

"By the time participants went through a series of 50 or so questions, they weren't sure what they wanted anymore," Din says. "The computer was able to assign relative values to the various features, based on each individual's answers, and then design the one card that would most likely be irresistible to that individual."

The final part of the self-administered questionnaire called for participants to key demographic data about themselves into the computer to help identify which features were most important to different socio-economic groups.

The end result

In the end, the Ameritech Complete MasterCard boasted no annual fee and a 10 percent cash-back offer - paid annually by the bank - on most calls made with the calling card feature. (Most long-distance companies accept the calling card number for calls over their network.) In addition, the card features a tiered interest rate that can go as low as 16.8 percent and a 25-day grace period.

"We're very pleased with the response the card has received so far," Bialek says. "We expected the credit card features to be attractive in themselves, but even more important we hope the convenience of the multipurpose card will stimulate our calling card business.

"In themselves, the credit card and telecommunications industries are among today's most competitive. Combine the two--as Ameritech and Household International have done with the Complete MasterCard-- and you have a product that absolutely must be carefully tailored before its hits the market. Market research, specifically conjoint analysis, helped us construct a card that would have the strongest possible chance of success."