For Fifth Third Bank's credit card offerings, how should we weigh increasing cashback rewards against maintaining lower annual fees to attract and retain customers?

Introduction

The trade-off between increasing cashback rewards and maintaining lower annual fees for Fifth Third Bank's credit card offerings is a critical decision that impacts customer acquisition, retention, and overall profitability. This scenario involves balancing the attractiveness of higher rewards against the potential deterrent of increased fees. I'll analyze this trade-off by examining the product ecosystem, identifying key metrics, designing experiments, and providing a data-driven recommendation.

Step 1

Clarifying Questions (3 minutes)

• Based on the competitive landscape, I'm thinking our current cashback rewards might be lagging behind. Could you share how our cashback rates compare to our top 3 competitors?

Why it matters: Helps assess the urgency of increasing rewards Expected answer: We're slightly below average Impact on approach: Would prioritize reward increase if significantly behind

• Considering our revenue model, I assume interchange fees are a major income source. What percentage of our credit card revenue comes from annual fees versus interchange?

Why it matters: Balances potential revenue loss from fee reduction against increased usage Expected answer: 70% interchange, 30% annual fees Impact on approach: Higher interchange reliance would favor increasing rewards

• Looking at user segments, I'm curious about our customer retention rates. What's our current annual churn rate for credit card customers?

Why it matters: Helps determine if retention or acquisition should be prioritized Expected answer: 15% annual churn Impact on approach: High churn would lean towards lower fees for retention

• Regarding technical feasibility, can our current systems support variable cashback rates or dynamic annual fee structures?

Why it matters: Assesses implementation complexity and timeline Expected answer: Yes, with 2-3 months of development Impact on approach: Long implementation time might favor simpler solutions

• Considering resource allocation, what's our current budget for marketing and promotional activities for credit card products?

Why it matters: Determines capacity for supporting new reward structures Expected answer: $10 million annual budget Impact on approach: Large budget could support more aggressive reward increases