Egg’s Q3 results show a slowdown in customer acquisition.
When Egg launched its credit card in September 1999, it created waves in the credit card market. Not only did it offer a phenomenally low standard rate, at 9.9% APR, it gave cashback of up to 2% and was intended to take advantage of the growth of online shopping. This was an original idea back then, and Egg managed to gain 219,000 customers by the end of 1999 through its teaser rates and market-leading proposition. Despite increases in the interest rate and a lower cashback level, the Egg card remains a market leader.
Offers such as 0% on balance transfers and its co-branding with Boots have allowed Egg to build up a sizeable customer base – at the end of September 2001, the card had attracted over twice as many customers as any other Egg product. Even in Q3, the net acquisition rate on its cards was higher than the overall product range.
The slowdown in customer acquisition was inevitable. Egg has managed to ‘buy’ business with its headline introductory rates of 0% and the slow withdrawal of these offers was bound to impact acquisition. Combining this with the events in September, it is unsurprising that acquisition has fallen.
There are a couple of points that show the success of the card portfolio. The average interest rate charged on its credit card portfolio has increased marginally, showing that people are staying beyond the interest free offers. But what is more interesting and profitable is that the average balance on these cards is one and a half times that on a standard card.
However, if it is customer acquisition that shareholders want, Q4 could keep them happy. The reintroduction of the 0% balance transfers and 0% on purchases offers, combined with a high profile advertising campaign, will undoubtedly attract customers. If Egg can maintain its customers beyond these teasers while maintaining higher than average card balances, the card portfolio looks set to remain Egg’s star.
