This is a Marketing Revolution

The solution, says Connelly, was "to elevate this beyond the immediate transaction level. If I'm a phone associate, my mission is to meet my customer's needs. And people have a pretty wide range of needs. If I've got this great product, it might save a customer some money, or it might create convenience. If I'm committed to service, there's no way I'm not going to consider offering that product."

Within three months of that first brainstorming session, live reps started fielding calls during which they both serviced and sold. Today Cap One does almost every cross-selling effort in partnership with another company. It makes a deal to market a product: The Hartford provides the insurance, MCI provides the long-distance service, Damark International provides the catalog clubs.

"The creativity comes in how we do that," says Rich Fairbank. "We do three things that other companies in the industry don't do. First, every interaction is a selling opportunity -- although I don't want to give the impression that we can't wait to get through your problem before we try to sell you something. Second, it's done in an information-based way: What's sold and how it's sold are decided statistically, according to information that we have. And third, we are totally committed to selling products that are of very high value. I say this with passion, because it's easy for companies to trap themselves into selling low-value things."

(For his part, Jory Berson says that he "feels better" about the auto-insurance offering, the mortgage deal, and the long-distance service than he does about Privacy Guard or about the catalog memberships. But even the latter, he says, "are presented fairly, at a fair price -- usually a lower price than other issuers offer.")

What ultimately kicked Cap One's cross-selling into high gear was Greg Gannon's intelligent call-routing system. It was a perfect fit: The same computer that predicts why you're calling can also predict what product you might want to buy. In fact, where your call gets sent often has as much to do with what Cap One wants to sell you as it does with how you will get your question answered.

Customers who are judged most likely to buy are sent by the computer to Cap One's most skilled sellers -- to Barbara Brannon's group. Every one of the three dozen non-credit-card products that Capital One offers has a statistical model behind it that outlines which kinds of customers will find it most appealing, and under what circumstances. A specific "product offer" comes to a customer-service rep in the same data burst as a caller's account information. So the decision about what to offer is made the instant someone calls. "It's got to be real-time," says Berson. "If normally I'd sell you long distance, but you're calling because you lost your card, I'd be a fool not to sell you credit-card registration."

Capital One doesn't reveal how much of its revenue or profit comes from non-credit-card sources. "It's a huge part of our business," says Berson. "We now make more than 1 million sales in a year through customer-service marketing -- not including inserts, or telemarketing, or automated calls." Those sales occur during the 30 million live calls that Capital One handles each year. In 1998, for the first time, half of all new Cap One customers bought another product from the company within 12 months of signing up for their credit card. "That's amazing penetration," says Berson, "and it leads to tremendous profitability."

"A cell-phone is just a credit card with an antenna."

When is a credit-card company not a credit-card company? That's the question now facing Capital One. If the company can serve its customers faster and smarter than its competitors can, if it can sell products unrelated to credit cards, then why continue to think of itself as a credit-card company at all?

According to cofounders Fairbank and Morris, Capital One's real capital resides in the hundreds of terabytes of data that the company has collected on the behavior of current and potential customers, and in the vast testing experience of its analysts, who know how to figure out what really matters to (and about) those customers. The company's knowledge base positions Capital One to tackle all kinds of other information-rich businesses.

Already, a Capital One subsidiary, America One, is selling cell-phone service in much the same way that the mother company offers credit cards -- by offering a slightly different deal to each type of customer. (Quips Morris: "A cell-phone is just a credit card with an antenna.") Cap One doesn't confuse its customers with choices. Instead, it tries to figure out what its customers will want. "Our secret," says Fairbank, "is that we are trying to deliver very simple solutions to the customer."

Fairbank claims that within two or three years, most people will know Capital One for reasons other than its credit-card business. "Fifty percent of what we're marketing now did not exist at this company six months ago," he says. "And 95% of what we're marketing today didn't exist two years ago. I'm proud of that fact -- until I reflect on its implications. It means that 50% of what we'll be selling six months from now doesn't exist yet."

Says Jory Berson: "We're becoming a company that people can turn to for just about anything. When you get ready to buy a car, the first thing I want to go through your mind is, What kind of deal can Capital One get me on an auto loan or on auto insurance?"

What about the car itself? "Oh, sure," he says. "A car-buying service is on my list."