RBC Credit Card Rewards Tradeoff | Product Strategy Interview

Table of contents

For RBC's credit card offerings, should we prioritize cashback rewards to drive adoption or focus on lower interest rates to improve customer retention?

Strategic Thinking Data Analysis Customer Segmentation Banking Financial Technology Consumer Finance

Product Strategy Customer Retention Financial Services Credit Cards Rewards Programs

Introduction

For RBC's credit card offerings, we're facing a critical trade-off between prioritizing cashback rewards to drive adoption or focusing on lower interest rates to improve customer retention. This decision will significantly impact our product strategy, customer acquisition, and long-term loyalty. I'll analyze this trade-off by examining the business context, user impact, technical feasibility, and potential outcomes to provide a strategic recommendation.

Analysis Approach

I'd like to start by asking a few clarifying questions to ensure we're aligned on the key aspects of this trade-off. Then, I'll walk you through my analysis framework, including product understanding, hypothesis formation, metrics identification, experiment design, and decision-making process.

Step 1

Clarifying Questions (3 minutes)

Based on recent market trends, I'm thinking cashback rewards might be more appealing to younger demographics. Could you share any insights on our target customer segments for these credit card offerings?

Why it matters: Helps tailor our strategy to specific user needs and preferences Expected answer: Mix of millennials and Gen X professionals Impact on approach: Would influence reward structure and marketing strategy

Considering our revenue model, I'm assuming interchange fees play a significant role. How does our current revenue split look between interest income and transaction fees?

Why it matters: Balances short-term adoption with long-term profitability Expected answer: 60% interest income, 40% transaction fees Impact on approach: Would affect the trade-off between lower rates and higher cashback

Looking at user behavior, I'm curious about our current churn rates. What's the average customer lifetime for our credit card products?

Why it matters: Helps quantify the impact of retention efforts Expected answer: 3-5 years average customer lifetime Impact on approach: Longer lifetimes might favor interest rate focus, shorter ones cashback

From a technical standpoint, I'm wondering about our flexibility to implement dynamic reward structures. How easily can we adjust cashback rates or interest rates on existing accounts?

Why it matters: Determines our ability to test and iterate quickly Expected answer: Moderate flexibility with quarterly adjustments possible Impact on approach: Would influence experiment design and implementation timeline

Considering resource allocation, how does this initiative align with our current product roadmap? Are we looking at a major overhaul or incremental changes?

Why it matters: Helps scope the project and set realistic expectations Expected answer: Mid-priority initiative with flexibility for incremental changes Impact on approach: Would impact the scale and timeline of our recommendation

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