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  1. Analysis
July 26, 2011

Targeting the few to acquire the many

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.

By Verdict Staff

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.”

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