You are advising a credit card business preparing to launch a new cash back card aimed at prime customers. The team expects the sign up bonus to be one of the biggest drivers of application volume, but also one of the largest upfront acquisition costs. A lower bonus may protect near term economics but miss growth targets, while a higher bonus may pull in more applicants, including customers who churn after earning the reward or spend too little to cover acquisition cost. Leadership wants a clear way to balance response rate, approval quality, activation, spend, attrition, and long term profitability.
If we are launching a new cash-back card, how would you determine the optimal sign-up bonus to maximize profitable customer acquisition?