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Last post 10-06-2007 11:44 AM by paulcarson. 0 replies.
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  • 10-06-2007 11:44 AM

    New Credit

    About a year ago, JP Morgan Chase started a new credit-card program aimed at college students, working with Facebook, the social-networking site. “We felt Facebook would be a good partner for us, since they had such strong credibility in the students’ world,” explains Sangeeta Prasad, who oversees branding for Chase Card Services. “And we felt, you know, financial institutions lacked credibility. Students don’t see credit-card issuers or financial institutions in general as meeting their needs.” Thus the company started offering a new card it called +1, primarily by way of a “sponsored” Facebook group.

    Credit-card issuers take a keen interest in college students, partly on the theory that they can lock them in for a lifetime of loyalty. This is why hard sells to sign up for a first card seem like part of orientation; by one count, more than 75 percent of undergraduates wind up having at least one credit card. And those young cardholders, on average, carry an estimated balance of more than $2,100 each — which, along with stacks of direct-mail solicitations, may explain why card issuers have a campus credibility problem. Nevertheless, a year after its debut, the Chase +1 Facebook group has nearly 34,000 members. This puts it in the upper ranks of the 190 or so “sponsored” groups, in the company of American Eagle and the Dave Matthews Band Summer Tour.

    The +1 program was largely devised by Noise Marketing, a company that specializes in reaching young adults with nontraditional branding tactics. Making Facebook central to a college-focused effort had obvious advantages. “Everyone talks about the fragmentation of the media,” observes Noah Kerner, the C.E.O. of Noise Marketing. “Yet there’s never been such a concentration of people from one segment in one place before.” The Chase + 1 group has attracted so many participants in large part because of a rewards-program scheme. One tweak of this familiar tactic is that some of the rewards are tied to “credit education” material. Kerner maintains this coupling is what’s “really resonated” with students. “It’s connecting with them on a basic level: ‘O.K., you’re not trying to pull the wool over my eyes, and I appreciate that,’ ” he says.

    That said, the education component doesn’t use precisely the same curriculum that, say, Consumer Reports would design. Students are advised not to spend money they don’t have, which is hard to argue with. But some might replace the counsel to “Pay at least the minimum due on time so you don’t waste money on late fees” with a blunt example of how fast debt can accumulate if the minimum is all you pay. While a quiz asks what “A.P.R.” stands for, there’s nothing to indicate that the +1 card’s variable annual percentage rate of interest — set between 18 and 24 percent after six months — is well above the national average of around 14.5 percent.

    Kerner says that more good-behavior incentives are in the works — like rewards for paying your bill on time. And it’s the rewards that really seem to draw people in. The +1 system involves racking up “karma points.” You get 1 for joining the group, 15 for registering your +1 card, 5 for taking a brief “credit essentials” quiz and so on. These points can be disposed of only within Facebook: either spent at a special store (White Stripes’ “Icky Thump”: 10 points; Ticketmaster gift card: 35 points; Facebook T-shirt: 10 points), donated to one of several designated charities or given to other Facebook members.

    The group has no discussion board, and Chase communicates with members only once a month or so with alerts about new offers and the like. Kerner says that the program has been influenced by the involvement of several hundred student “ambassadors,” who have weighed in on everything from design to the group’s content in exchange for points or in some cases internship credit. “They’re engaged, and they’re giving us more feedback than we thought we would get,” Chase’s Prasad says. “They tell us honestly what they think.”

    Big-brand sponsored Facebook groups are not as exotic as they were a year ago (even Wal-Mart has one now), the marketing for +1 seems to be working and is likely to remain Facebook-centric. After all, Chase’s research has shown “substantial lifts” in the awareness of Chase and in “the credibility of the institution” among students, Prasad says. Perhaps that’s why a venerable banking institution ends up dealing with a skeptical audience by associating itself with a company started in a dorm room a couple of years ago: it needed the karma points.

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