HSBC wants to launch their Visa Card. Market potential is not the problem. Also, Qualitative research has indicated several need gaps, which could be used as positioning options. Suggest how you would test these through further research.
Introduction
A Credit Card is a mode of cash-less transaction that allows the user
to pay for goods or
services with the actual payment being made in installments, over a
period of time.
Most of the credit cards in the market belong to either MasterCard or Visa. For principal services to the industry they are typically paid 0.025% of the transaction by the issuing bank:
HSBC wants to launch their Visa Card.
Characteristics of the Indian Market
The credit card market in India is about 3 million with a value turnover of around Rs.2500 crores. The market is expected to grow by 30% p.a. This would still be a very low penetration of a potential market of 60 million cardholders. The credit card business is a low-margin, high volume business.
Thus, given the low income per card and the high initial investments
by the bank, large volumes in terms of cards issued and the transactions
financed are required to make the operations profitable.
Research Objective
Apparent – Test positioning options, which have come up in qualitative research, as a result of need gaps.
Real - To identify a positioning option that will help maximise market share in the short term and increased profitability in the long run.
As per the research conducted, HSBC’s major problem is low awareness
level among consumers caused by their low-key advertising, very stringent
credit policies, and absence of direct selling. Lately, they have tried
to venture into co-branded (with Shopper’s Shop) and affinity cards (with
Top Gun Club) also. They have alliances with Thomas Cook, DBS lounges,
DHL tele-express services, Oberoi Hotels and Sita Travels. The bank primarily
draws upon its strength from a strong ATM network of 56 ATMs.
Credit Card holder behavior
According to Visa Internationals latest data, average Indian cardholder uses his card 9.3 times, spending about Rs. 14,700 per year. A number of card owners do not use their cards and almost 20 – 30 % cards are inactive (less than one usage every quarter).
An important fact that should be observed is that it is only in the
past few years that the Indian customer is beginning to accept ‘Credit’.
The Indian culture doesn’t promote credit, and it is this outlook change
which is the most important development for the credit card industry. ABN
Amro, for instance, backed up their launch of the ‘Freedom Card’ with research
that showed that the Indian middle class views the credit card as a potential
debt trap.
Need for a Card customized for Internet transactions:
With rapid growth of business over the Internet, there now exists a
great need for a card suitable for transacting safely and conveniently
over the Internet. The growing number of Internet users will provide a
lucrative market for this product.
Need for ‘Premium’ benefits:
Even though there are credit cards like Diners in the premium segment,
there is a dearth of ‘premium’ benefits. Examples of these are Special
airport Lounges etc.
These benefits are available to the Indian consumer once he goes abroad, but within India, he doesn’t get all the extra ‘premium’ benefits which can associated with Premium cards.
Proliferation of ATMs:
The credit card can be used for withdrawing cash from an ATM. This
revolving credit facility is also a major revenue earner for the issuing
bank (interest charges range from 1.99 % to 3 % per month). There are very
few ATMs in the metros, and are not there in most non-metro cities. The
lack of the ATMs doesn’t allow the credit card to be used to its potential.
Wider Acceptability:
Though the numbers of Merchant Enterprises are on the increase, more
ME should be included in the credit card framework.
b) High Interest Charges (& interest charges applicable on the interest itself)
c) High Annual charge
d) Grace period (mentioned, but not much importance given)
e) Lost card liability of Rs 1, 000 on non-photo card (eg. Stanchart) as opposed to nil on photo card
f) Low Value added benefits and inadequate information updates
· Lack of a strong telecom network hinders efficient card operations.
· Without the full convertibility of the rupee, internationally acceptable cards could not till recently be launched in India and full potential of the card business is still not realized.
· The average consumer is more comfortable with cash and is averse towards credit.
· Moreover, the problems of reluctant MEs and postal delays may hinder the development of the card market.
The Indian market reflects considerable diversities in income levels and lifestyles. A World Bank estimate places average annual household incomes (in terms of purchasing power) at US $6452. But there are large segments of people, whose income levels are significantly higher, growing faster and spurring a consumer revolution. It is difficult to obtain correct estimates of this group, as there is a very small percentage of India’s ‘rich’ who pay income tax and their income levels are correctly reported. Therefore to conduct this segmentation, we shall have to make use of National Council of Applied Economic Research (NCAER) data and not the estimates from the income tax department.
The segment which have been identified are as follows:
Segments Income Group (Rs.)
Very Rich
2,15,000+
Consuming Class 45,000 – 2,15,000
Climbers
22,000 – 45,000
Aspirants
16,000 – 22,000
Destitute
< 16,000
According to NCAER reports:
· The Very Rich (annual income over Rs 215,000) will increase form 1 million to 6.2 million households by 2006-7.
· The Consuming Class (annual income of Rs 45,000-215,000) will grow from 28.6 million to 90.9 million households by 2006-7.
· The number of households in the Aspirants (Rs 16,000-22,000/year)
and Destitute (less than Rs 16,000/year) groups will decrease significantly.
Segments with high unrealized potential
· Mid-Size cities in India have low credit card penetration. The residents of such cities are affluent and they are good markets for Citibank cards. This low penetration is due to comparatively low acceptance of credit cards.
· Rich farmers who live in the rural belt but also spend quite some time in the nearby towns can be tapped. A product can be introduced to serve their specialized needs.
· The growing number of netizens represents a segment with high-unrealized potential.
Segments
Motivations
Very Rich
Convenience and acceptability, Level of service, Credit Limit
Consuming Class ‘Prestige’, Convenience
and acceptability, Level of service, Charges
Climbers
‘Prestige’, Charges
Charges include all commissions, interest rate, annual fees, which are to be paid to the bank. The motivational factor has been derived from the credit card holder behavior and income levels. This shows differentiation as we move along the various segments. Fee charges are not at all important for the ‘Very Rich’ but they assume a fair degree of importance as we move down the segments. In case of ‘Climbers’, Level of service has very little motivation to offer. This segment primarily has either the non-premium cards or cards issued by the nationalized banks. In both the scenarios, level of service is not very high. The other segments have not been considered since they do not fall into the potential customer category. However, with the introduction of ‘Kisan’ Cards (The major issuing banks are: Dena Bank, Punjab National Bank, State Bank of India Benegal Circle, State Bank of Indore, Vijaya Bank), these segments are also being brought into purview of credit card users (assumption: 65% of low-income households are associated with agriculture).
In this random sampling technique, we first divide the whole population
into mutually exclusive subgroups or strata on the basis of our three identified
target segments (Very Rich, Consuming Class and Climbers) and then units
are selected randomly from each stratum. The population herein consists
of the urban employed. The segments are based on predetermined criteria,
i.e. the demographic characteristic income. It is important that the segments
be as heterogeneous as possible.
It is considered representative if its features are characteristic or typical of the entire group. With a representative sample, you can make generalizations about the entire population with a measurable degree of precision and confidence. We have thus divided our population into mutually exclusive and exhaustive groups of like elements, or strata, and shall then select a random sample from each.
Since we are going in for a positioning statement that will be targeted
at a broad group of individuals, we do not require very high confidence
limits and so can conduct the research with a proportionately small sample
of the population in the various strata.
Concept Testing
Multiple concepts "screened" among a general audience of target consumers
In depth evaluation of single concepts using standard, projectible measures
Objective: Use a cost effective approach to identify which new ideas have the most potential and are worthy of further development Use the results in combination with product testing results in a sales forecasting model to predict:
o Likely sales take-off in year one
o Repeat purchasing levels (Multiple credit card users)
o The profile of likely buyers
(verify qualitative and secondary research)
Pricing Research
Use multiple price points to develop a simple price/sales curve in early stage concept testing to assess price sensitivity with respect to credit limit, interest charges and annual charges.
Use full profile pricing scenarios to develop a much more sophisticated category pricing model which allows us to predict the impact on purchasing when the client or competitors run discount price promotions or introduce new price points/value benefits for existing brands.
Objective: Assess alternative return on investment strategies
Laddering Research
This research method is designed to determine the rational and emotional basis for brand preference and to identify new brand positioning, equity, extensions and advertising strategy alternatives.
It will show how consumers discriminate between products in the category, based upon factors that directly affect their preference.
It also shows the means by which these discriminating factors relate to the satisfaction of higher level personal needs.
Laddering Research shall give us –
o A very detailed and insightful understanding of the rational and emotional reasons people have for choosing specific brands (credit cards) in the categoryo A framework for discussing and choosing strategic options for positioning and advertising the brand.
o A basis for clearly differentiating the brands within the category (rationally and/or emotionally)
o A basis for comparing and contrasting the strategies behind the historical advertising and selling of brands within the category (strategies can be "mapped" on the strategic framework that has been developed)
o A much more insightful response to new ideas for the brand
The method is based on the "accepted" theory of how advertising works to inform and persuade people
o We all agree on the specific communication objectives for the advertising before proceeding with the research.o We conduct the research early enough in the advertising development process to make good use of the study results
o We conduct the study only with the target audience
o We allow people to see the advertising several times - this is not a recall test
o We measure delivery of the agreed communications strategy at all levels, both rational and emotional
o We measure attitude shift towards purchasing the product
o We utilise additional multiple measures of advertising so that we are all in a better position to assess the strengths and weaknesses of the advertising and to improve it
o We collect a great deal of information in each interview so that we have the right balance of objectivity in our analysis of the findings
1. The bank may offer more than one type of credit card based on
the segmentation and the conclusions arrived at as a result of the research.
Research needs to identify the profitability of targeting the respective
segments and the efficacy of the suggested positioning statements to
these segments.
2. The bank should be able, on the basis of the research, to ascertain the profitability of adopting a generic strategy of differentiation, based on the wide range of cards and services it may offer. The bank may then effectively target most segments of the society.
3. A clear cut cost-benefit relationship is desired with respect to the potential customers relative weightage of the provision of various services such as schemes to pay MTNL bills, customs duties, dial-a-draft facility, frequent filer program with Indian Airlines and Air India etc.
4. The ad spend will also be ascertained after testing the effectiveness of various advertising and promotion options in order to increase market share. Consideration should also be taken to the medium of advertisement and promotions so that the bank may decide upon a strategy after weighing the costs and benefits.
5. Qualitative research has indicated that HSBC has an image of non-exclusive membership, but exclusive service and has the largest number of ATMs. Positioning opportunities in this line suggested the card should be targeted at middle to senior business professionals and businessmen, positioning the card on friendly service. Attention must be paid to verify the effectiveness of the same through quantitative research.
6. Test possible Key Success factors that have come up in qualitative research
Present:
i. Brand recognition
ii. Access to major channels
iii. Marketing program
iv. Reach (target market)
Future:
i. Level of Service
ii. Acceptability
iii. Safety of use over the Internet.
iv. Value Added Benefits
7. Test Feasibility of recommended innovations and improvements in the product line.
8. Test assumed positioning objectives
a) The positioning should be so that it disassociates with the ‘elite’ image associated with the bank. The positioning may be done so as to give an image that the cards can be acquired by people from not only the upper class, but also the middle income categories. This is essentially to counter the strategy of SBI-GE. In other words, it should give a mass appeal to the cards while reinforcing the ‘clean’, and ‘dependable’ image of the bank at the same time.
b) The positioning should be such as to imply that HSBC credit cards are a part of the customer’s everyday life. It should lead the customer to keep the card with him whenever he goes out. This in turn, shall lead to more card usage as the card would be handy for the customer to use whenever he wants to make purchases or withdraw cash. For users with multiple cards, such an objective shall bring more usage for the Bank’s card, compared to others.
c) It should try to leverage HSBC’s strong perceived ATM network.
9. Test alternatives for positioning
On quality of service: After convenience and acceptability of credit cards, the most important thing for customers is quality of service. This can be defined as prompt response in issuing the card, 24 hour customer service and quick complaint and grievance redressal. A positioning based on superior quality of service would create a favorable image in the mind of the consumer leading him to not only buy the card but also use also use it more often.
Positioning based on benefits: Such a positioning has not been recommended as differentiation among credit cards fails to provide sustainable competitive advantage, as benefits offered on cards are easy to copy. However, as need gaps arose in the preliminary research, we must also test this, while giving weight to the above.
Positioning as a low cost card: This has previously been disregarded
as an option as the costs involved are higher than its competitors and
also in this industry one cannot gain an SCA by
competing on price and advantages can be gained only on the basis of
service and
innovative product features.
Positioning on use: Credit cards in India are most often used while traveling. This can be the main positioning plank because it would increase the credit card usage and as HSBC has a good brand image it won’t be thought of as a card exclusively meant for travel.
Positioning on acceptability: Acceptability is the most important factor in the minds of the consumer and so positioning on this factor will add new consumers.
Positioning as a card for transactions on the net: With the impending boom in e-commerce in India, HSBC could position itself as the best and safest medium for payment purposes.