Product Optimization

Smart Choice with Profitability Modeling


A financial services client wanted to develop a new credit card product for small business owners. Recognizing the importance of credit card rewards for businesses, the intent was to develop a competitive product that would resonate strongly with the market and be viable for the bank. More specifically, the objectives of this research were to evaluate the opportunity for various rewards credit card options, identify the optimal combination of features and benefits capable of driving acquisition and usage, forecast rewards profitability of new product structures, and inform future positioning.

An online survey leveraging a discrete choice exercise and our Smart Choice analysis was executed in order to find the ideal product configuration at the intersection of what small business consumers want and what would be profitable for the bank. Over 1,500 small business owners from our National Panel were interviewed.

A profitability formula was built into the analysis and a simulator included information collected from the respondents (spend on potential card across MCC’s), the annual profitability of rewards (interchange, cost, recurring bonus, bonus cap, standard earn), and population projection assumptions (assumed product exposure, etc.). Ideal product constructs were developed using Smart Choice across different small business sizes.

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