In an increasingly competitive environment,
card issuers are focusing on more targeted approaches to acquire
and retain consumers by looking at their lifestyle interests and
preferences. Truong Mellor reports on how some of the
leading issuers are standing out from the crowd.

As consumers have become more financially
sophisticated, the marketing of credit products has come to reflect
this changing awareness. Across the globe, banks are now
increasingly spending substantial resources on analysing and
segmenting their customers to comprehend how the various sectors of
their customer base are receptive to certain product offerings, and
the way these offerings can be marketed to those groups.

This current widespread trend for segmentation
can in one sense be seen as a rolling back of the standardisation
that took hold of modern society at large following the Industrial
Revolution. The ‘one size for all’ approach was exemplified by
factories and mass production, as well as the education system and
the media. However, the rise of the increasingly diversified
approach by financial institutions towards their consumer base is
indicative of the fact that the customer can no longer be
classified under such broad categories. In order to capture and
retain cardholders in an increasingly splintered marketplace, the
segmentation of card products now involves the analysis of the
individual consumer’s attitude as well as their personal
preferences.

Increased spending

The targeting of consumers through marketing that is based on their
lifestyle preferences, leisure interests and income has also been
associated with a rise in consumer spending and an increase in
customer retention. A segmented approach to marketing can also help
increase overall profits. Apart from allowing financial
institutions to focus on the most lucrative segments of their
consumer base, it also helps them form a clearer understanding of
the various segment motivations. This can help them better develop
their offerings and better target communication in order to raise
solicitation levels in an increasingly competitive
environment.

The most basic form of segmentation is the
personalised card – one where the cardholder can create their own
image for the product. Spanish bank
La Caixa has issued more than 1.5 million personalised cards,
and has launched the idea of a tandem of cards, which allows the
holder of a credit card contract as well as any of the
beneficiaries to have up to 3 additional designs. La Caixa cards
also come in various shapes, and the bank was the first in Europe
to launch the ‘Mini Card’, which is almost half the size of a
regular card and can be attached to key rings or purses. A
spokesperson for the bank told CI that customers with such products
spend on average 16 percent more than other cardholders.

The more specialised cards that incentivise
customers for spending on frequent-use categories such as fuel,
telecom or travel also exhibit higher levels of customer
involvement leading to increased spend, according to RL Prasad,
general manager of credit cards and personal loans at Standard
Chartered Bank, India.

“Typically, a customer of such a card prefers
using this product for spend on other categories as well, making it
his primary card,” he told CI, citing the example of the
Standard Chartered Super-Value Titanium card, which offers 5
percent cashback on two of the most frequently used categories in
the Indian market – fuel and telecom expenditure. “This proposition
has shown higher engagement from our customers and spend on this
card is significantly higher as compared to other cards.”

Premium segment

Similarly, Prasad believes that cards which are tailored to suit a
certain income segment also increase a customer’s loyalty towards
the product and results in increased card spending.

“The SCB Platinum card is a ‘by invite only’
upgrade proposition for existing card members. The product has been
designed to cater to the lifestyle needs of the premium segment,”
he explains. “Here again, we have observed that the card member’s
spend increases post-upgrade to the Platinum product. The customer
has a higher engagement to a product that caters to their needs and
this follows through in behaviour, resulting in a consolidation of
spend onto the card.”

Furthermore, the prospect of tangible added
value on a product makes it feasible that a cardholder would be
willing to pay for these cards, generating further earnings.
Standard Chartered India currently offers a co-branded Emirates
card in conjunction with Emirates Airlines that comes with an
annual fee of $250, against which the customer gets 25,000 bonus
skywards miles as well as a host of other benefits related to air
travel. The bonus miles are renewed annually to ensure the
continued value of the product.

However, Prasad is quick to assert that for a
proposition to be successful, a genuine added value must be
perceived by the customer. If consumers are targeted with affinity
products – those borne of a partnership between a bank and a social
group such as a club, association or charity – that do not offer a
strong value proposition, he notes that spending generally falls
off after the initial novelty of the product wears off. Therefore a
segmented proposition without a strong value offering may not be
sustainable in the long term. It is worth noting that in many
markets, a credit card in general is seen as a premium consumer
product for those who travel abroad. Robert Wright, board member
for retail business at
Raiffeisen Bank, notes that in a developing market like Albania
where the bank is very active, the average customer does not need a
credit card yet for day-to-day spending.

“A debit card with an overdraft is the same
sort of facility. That goes back to affordability as well, and
Albanian consumers are not buying big ticket items on credit
cards,” he told CI. “There are big opportunities for things like
affluent and VIP cards, and also co-branded cards. That is where I
see serious growth for us in Albania.”

Different segments

While Raiffeisen is currently focused on the affluent segment of
the marketplace in Albania, Wright sees the bank moving into the
mass market through co-branded cards.

“There are big supermarkets here who have
loyalty cards. We are also talking actively to Vodafone, because
they see it as a good way of funding their postpaid mobile phone
customers. With big brands like ourselves and Vodafone or the
Albanian supermarkets, I see co-branding as a good way into the
mass market, as well as selling cards through our branch network,”
he explains.

Segmented card products can also be a lot more
specific when it comes to launching retail offerings. Portuguese
bank
Caixa Geral de Depósitos (CGD), the largest bank in the country
by assets, currently offers a credit card aimed at consumers who
buy products at pharmacies. The Portuguese Pharmacies card allows
cardholders to accumulate points based on their frequency of visit
and their purchases of pharmaceuticals services and products.

CGD was the first bank in Portugal to issue
credit and debit cards. It currently offers a variety of consumer
and commercial cards, each with a different list of benefits for
cardholders. CGD also offers international student and teacher
identification credit cards, and a Visa-branded product in
partnership with the International Student Travel Confederation
that comes with benefits and discounts in various locations of
cultural interest such as museums and theatres.

Bangkok-based
Krungthai Bank is another institution that has taken to this
type of specialised marketing for its card products. The bank
currently offers around 100 card products which are co-branded with
other companies.

Last year, Krungthai launched one of its more
controversial card offerings – the KTC Titanium MasterCard. An
advertising campaign from last year seemed to suggest the bank was
primarily aiming the product at the lucrative gay and metrosexual
market (see CI 380).

Throughout the saturated Thai market, there has
been an increased focus on boosting individual customer spend as
opposed to acquiring new cardholders, something which ties in with
greater segmentation of the marketplace. Titanium customers are
rewarded with double reward points for card spending in Indonesia,
Hong Kong, Malaysia and Singapore.

One segment that has been heavily targeted by
banks is women. La Caixa has had a very successful card product –
Caixa Woman – aimed at the female market that consists of a debit
card with the option of a credit card as well. One of the key
benefits of the Caixa Woman offering is that both cards are
integrated into the same account and both contribute towards the
loyalty schemes. These include discounts of up to 5 percent at
supermarkets, and the bank has forged partnerships with companies
that are active in women’s interests such as spa resorts, florists
and interior decorating firms.

The meCards range from
Emirates Bank in the UAE also have a meLady range that offers a
variety of card products aimed at women, as well as other consumer
finance products such as loans and fixed deposits.

This range offers discounts on various
categories such as restaurants, cafes and leisure facilities. The
bank currently offers a variety of segmented products, including a
card geared towards university students to help them finance their
education, as well two offerings for nonresident Indians and
Lebanese workers in the United Arab Emirates, run in conjunction
with
ICICI Bank and
Bank of Beirut respectively.

Different markets

These last two offerings are interesting, as they demonstrate how
banks will identify customer sectors that are often unique to or at
least more pronounced in their domestic market. The opportunities
for consumer segmentation will in many cases be dictated by local
demographics and circumstances.

Although there has been a tendency for some
European financial institutions to look at a pan-continental
consumer in terms of income, lifestyle and interests, CGD are clear
about their current focus on the domestic Portuguese market for the
time being. The bank currently has around 5 million debit and
credit cards in the local market.

“The big part of that is still debit cards,”
explains Fernando Jorge, cards manager at CGD. “However, we are
investing a lot of time, money and resources in our credit card
operations. We are also quite happy to have a lot of partnerships
with local merchants and associations,” he told CI, adding that the
bank intends to launch several new co-branded and affinity cards in
2008 and 2009.

Additionally, the maturation of the market in
question will also play a role in how successful any segmented
product offerings will be. In emerging markets such as India where
there may be a rapidly growing middle class, segmented card
products offer a competitive advantage for banks.

The country currently has a wide range of
institutions offering their customer base a variety of different
specialised card products, from
Bank of Baroda subsidiary Bobcards and local stalwart ICICI
both offering segmented cards aimed at women, high net worth
individuals, frequent fliers and the youth market. ICICI also have
several co-branded ventures with a wide range of local
retailers.

The distinction between products that are
offered either through affinity or co-branding partnerships and
those that come integrated into the proposition by an issuing bank
through cashback schemes and accelerated rewards programmes is an
important one, as is the divide between local and multinational
issuers.

While global players undoubtedly have an
advantage when it comes to leveraging business relationships, local
issuers will have a wider geographical reach within a market,
giving them an edge when it comes to forging co-branding
partnerships with national retailers. According to Prasad,
multinational issuers in India have preferred taking the route of
segmentation through product proposition across a category, rather
than through specific merchant partnerships.

In the case of Standard Chartered India, there
is the aforementioned Super Value Titanium card which offers fuel
and telecom discounts, and the Manhattan Platinum card, which
offers the customer cashback across all departmental stores and
supermarkets. In both cases, the customer has the advantage of
being able to shop with a merchant of his choice and is not
restricted to the issuing bank’s programme partner.

“In the context of the Indian market we will
see the emergence of more segment-specific cards such as retail,
insurance and mutual funds co-brands,” says Prasad. “Some of these
exist today as well, but we will see more competition in the
co-brand and partnership space.”

Raiffeisen’s Wright also agrees that it is the
localised issuers that are more effective when it comes to
segmenting the customer base and launching new products tailored to
these groups, as it is the market knowledge that proves crucial in
the success of these schemes.

“A one-size-fits-all approach won’t work,” he
says. “It’s not just time but issues of wealth, demographic
profiles, credit bureau facilities – all these issues are different
in different markets. There are some things we can cut and paste
and copy, but you have to localise it for all the factors mentioned
before.”