13 group seca hdfc credit cards
TRANSCRIPT
Project Title: Creation of a Marketing Plan
Product: HDFC Credit Card
Under the guidance of
Professor Dr. Pingali Venugopal
Team: Group - 13
S. No. Name Roll No.
1 Ankit Arora G10009
2 Prashant Sharma G10038
3 Subhangkar Banik G10052
4 Sumit Kejriwal G10054
Project Report Progress: -
S.No. Details Submission Date
1. Situation Analysis July 31, 2010
2. Objectives Sept 05, 2010
3. Product Strategy Sept 05, 2010
4. Marketing Programme Strategy Sept 05, 2010
5. Financials and Contingency Plans Sept 05, 2010
6. Final Report Sept 05, 2010
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Contents
Contents...........................................................................................3
Section 1..........................................................................................6
Situation Analysis............................................................................6
i) Introduction...........................................................................................................................7
ii) Defining the product and Competitor..................................................................................8
iii) Analyze the category.........................................................................................................13
1. Aggregate market factors.........................................................................................13a) GROWTH:...............................................................................................................15b) Stages in Product life cycle:.....................................................................................15c) Seasonality:..............................................................................................................16d) Profits:......................................................................................................................16
2. Category Factors.......................................................................................................17a) Threat of new entrants:.............................................................................................17b) Bargaining power of buyers:....................................................................................17c) Bargaining power of suppliers:................................................................................18d) Pressures from substitutes:.......................................................................................18e) Current rivalry in category:......................................................................................18
3. Environment Factors.......................................................................................................18
a) Macro Environment:.....................................................................................................191. Technological:................................................................................................................192. Political:..........................................................................................................................193. Economic:.......................................................................................................................194. Social:.............................................................................................................................19a) Festivals and Religious occasions.................................................................................195. Legal:..............................................................................................................................19b. Micro Environment:........................................................................................................20c. Internal Environment:.....................................................................................................20Scanning of Market Environment.......................................................................................21
iii) Company and Competitor Analysis..................................................................................221. Product Features Matrix...........................................................................................22
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Gold Credit Card Features & Benefits......................................................................222. Objectives.......................................................................................................................243. Strategies.........................................................................................................................244. Marketing Mix..........................................................................................................255. Profits.......................................................................................................................276. Value Chain..............................................................................................................27For credit card industry, value chain can be described as follows: -..................................277. Differential Advantage for each company in terms of.............................................28Ability to design new products...........................................................................................28Ability to deliver the service...............................................................................................28Ability to Market................................................................................................................28Ability to finance................................................................................................................28Ability to manage...............................................................................................................288. Expected future strategies........................................................................................29GAP ANALYSIS................................................................................................................29
iv) Customer Analysis............................................................................................................301.) Segmentation.................................................................................................................302) Consumer Behavior.......................................................................................................323) Targeting........................................................................................................................334) Positioning......................................................................................................................33
5) Assumptions in planning process................................................................................351. Market Potential..............................................................................................................352. Forecast Assumptions.....................................................................................................35
Section 2........................................................................................36
Objectives......................................................................................36
b) Objectives:.............................................................................37i. Corporate Objectives.......................................................................................................37ii. Divisional Objectives.......................................................................................................37iii. Marketing objectives....................................................................................................37
1) Volumes & Profits....................................................................................................372) Time frame...............................................................................................................37
Section 3........................................................................................38
Strategy - Product..........................................................................38
c) Strategy - Product......................................................................391. Customer Targets.............................................................................................................392. Competitor Targets..........................................................................................................393. Product/service features...................................................................................................39
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4. Core Strategy...................................................................................................................39i) Value proposition.........................................................................................................40ii) Product Positioning..................................................................................................40
Section 4.............................................................................................41
Strategy—Marketing Programmes................................................41
d) Strategy—Marketing Programmes........................................42i. Integrated Marketing Communications Programmes......................................................42ii. Pricing Strategy...............................................................................................................42iii. Channel Strategy..........................................................................................................43iv. Customer Management Strategy..................................................................................44v. Research...........................................................................................................................45
Section 5..........................................................................................….46
Controls.....................................................................................….46
e) Controls....................................................................................47i. Financial Budgets............................................................................................................47ii. Marketing Metrics...........................................................................................................47
f) Contingency Plans...................................................................48
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Section 1
Situation Analysis
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i) Introduction
About HDFC
HDFC Bank Limited (the Bank) is an India-based banking company. The Bank is engaged in providing a range of banking and financial services, including commercial banking and treasury operations. The Bank has three primary business segments: banking, wholesale banking and treasury. The retail banking segment serves retail customers through a branch network and other delivery channels. This segment raises deposits from customers and makes loans and provides other services with the help of specialist product groups to such customers. The wholesale banking segment provides loans, non-fund facilities and transaction services to corporate, public sector units, government bodies, financial institutions and medium-scale enterprises. The treasury segment includes net interest earnings on investments portfolio of the Bank. As of March 31, 2010, the Bank operated 1,725 branches in 779 cities and 4,232 automated teller machines (ATMs).
About Credit Card
Credit cards are plastic cards with scan-able magnetic strips issued by a bank or business, which allow the credit card holder to purchase goods or services on credit. Common credit cards include Visa, MasterCard, American Express, Discover, and Diner’s club. They are the most versatile form of retail lending. Credit cards have now been loaded with a lot of attractive benefits to promote the plastic card culture in India.
Need
Safety need: -
Credit card is safer than carrying cash.
Convenience need:-
Credit cards can be used in emergencies when we run out of cash. Apart from being a luxury for some people, credit cards come handy while travelling abroad. Credit cards not only cut the necessity of carrying cash (making our wallets lighter), they also reduce the risk of losing the cash. In case your credit card is lost, all you need to do is to report the loss and ask for replacement or termination of the previous credit card.
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ii) Defining the product and Competitor
In gist it’s a card with a cash limit preset to help the customer to meet his necessary requirements whenever and wherever even if he doesn’t have any type of cash component with him. It can be termed simply as the plastic money. So whenever the customers are looking to add their buying power conducting cashless shopping or budgeting their expenditure, they find these cards suit their needs.
Technical:
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Usage of the term "credit card" to imply a credit card account is a metonym.
a) Magnetic Strip for Transaction: Credit card has magnetic strip encoding the account number which allows merchants to rapidly and accurately enter the account numbers
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into the verification terminal. The next step is to enter the amount through the key pad and to send the entire transaction electronically to the processor. This eliminated cumbersome paper handling and rapidly improved the system ability to handle the increased transactions and reduce costs.
b) PIN Number for security
c) CVV Number for Internet transactions
d) Credit Limit: All banks have different limits set for customer depending upon the type of card in their possession. Even within a particular type of card, limits may vary depending upon the credit worthiness of the individual. This depends on the gross income of the individual and the period for which he/she is using the card.
e) Interest Charges: This is the biggest source of revenue for the issuing banks. The interest rate generally ranges from 1.99% to 3% per month. This is equivalent to around 24% - 35% per year. The interest chargers are also applicable on accrued interests. Therefore, a customer can end paying up heavily for the credit taken.
f) Annual Charge: This is the fixed amount, which has to be paid every year irrespective of the extent of usage. Over the past few years, with increase in competition, a general decline in these charges can be observed.
g) Grace Period: This is the extra period, which is offered to the consumer for repaying the credit. In the Indian scenario, the first warning is given at the end of three months, and a black mark is put against the customer in case of non-payment more than 7 months further grace period is decided on a case to case basis.
h) Lost Card Liability: If one is traveling and has lost his credit card, then reporting the loss will not be much of problem. HDFC can be reached from any corner of world for reporting the loss. After reporting the loss, customer carries zero liability on any fraudulent transaction on credit card.
Functional:
a) Value Added Benefits: These include air line ticket booking and insurance benefits on lost luggage and accidental deaths. HDFC for e.g. offers discounts of 3.5% on domestic airfares and 6.5% on international ones, if ticket are charged to their cards. The latest in line of value added features are reward programs. Here a card holder earns a certain number of points by spending a particular sum of money from their credit cards. HDFC for e.g. uses a conversion of Rs. 125 spent in India or Rs. 80 spent aboard for 1 point.
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b) Cash withdrawal from ATMs
c) Shopping – online, retail
d) Payment of bills
e) Travel Tickets Booking
Emotional:
1. Esteem: - High end Credit card provides a Social Envy status.
2. Convenience: - Customer can purchase and do shopping without carrying cash on selected outlets.
3. Pleasure: - Credit card provides pleasure to avoid giving cash while paying bills of shopping, dinner bills, and ticket bookings.
Defining Product
Parameters HDFC Credit Card Competition
Technical
1. Magnetic Strip containing customer IDs
2. PIN Number for security3. CVV Number for internet
transactions4. Credit Limit5. Annual Charges6. Interest Charges7. Grace Period8. Lost Card Liability
All Credit Cards, debit cards, charge cards etc. of different banks working in India.
Functional
1. Taking credit2. Cash withdrawal from ATM3. Shopping – online, retail4. Payment of bills5. Value added Benefits
All other forms of financial instruments for e.g. LoansATM CardDebit CardGift CardCorporate CardInternet BankingCredit given by shop owners
Emotional
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1. Esteem2. Enjoy 3. Satisfaction4. Convenience
1. Shopkeepers giving credit to customers
2. Local Money lenders3. Family member lender4. Gift Card
BrandHDFC Gold, HDFC Platinum, HDFC Titanium
ICICI, HSBC, SBI and others
Define the competitor:
Following are major competitors of HDFC in credit card industry in India:
Public sector banks:SBI Bank of Baroda Canara Bank Punjab National Bank
Private sector banks:Kotak MahindraICICI Bank Axis Bank Yes Bank
Foreign banks:American Express Citibank HSBC Amex Barclays Bank Standard Chartered Deutsche Bank ABN Amro
Local Money LenderShopkeepers giving credit
Competitors in terms of Product
Gift plus cardsMoney Plus cardsCash Credits cards only for the Business ManGold LoansMortgaged Loans
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Loan against securities.
Debit Card - Vs Credit Card Transactions in India
Just for the sake of comparison, we compiled data directly from the RBI to track Debit Card
Vs Credit Card spending habit by consumers in India. For the quarter ending DEC-2009,
Indians spent Rs 16,423.66 cr on Credit Card and Rs 7,262.95 cr on their debit cards.
The following chart illustrates the comparison between Debit Card Spend Vs Credit Card
Spend in India MoM for the Dec-2009 quarter. This was also the Quarter of Festival Season -
Shopping Season for consumers :-)
Additional data reveals that - the spend of Rs 16,423.66cr on Credit Card Plastic was done by
6.03 cr transactions thus making every transaction worthy of Rs 2,723.
The spend on Debit Card was Rs 7,262.95 involving 4.34 cr transactions thus the Average
ticket size of each Debit Card Transaction being Rs 1,673.
Though the Number of Credit Cards in circulation has gone down, the spending has increased
which implies that Banks have been able to retain just the quality customer with long standing
banking relationship.
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iii) Analysis of category
1. Aggregate market factors
In banking terms, credit cards come under the category of Asset section.
a) Size of the market:
Credit card in India made their debut in the year 1981 and has witnessed an unprecedented boom in the recent years. The number of credit cards has been increasing steadily from 1.5 million credit cards in 1995 to 5 million credit cards in 1999 to 12 million in 2004 and is expected to reach 35 million in 2011. This would mean a compound annual growth of 25-30% in number of credit cards.
This is against the 100 million mobile telephone subscriber, 120 million cable connection and 600 million bank account holders.
Also, the size of credit card portfolio of the banking sector is around 2000 crores which is minuscule portion of the banking sector’s hour Rs. 20 lac crore outstanding loan book. This means, on an average, a credit card holder spends between Rs. 2000 to 2500 on a card in one month.
HDFC Bank leads the path way ahead of the competitor banks. HDFC Bank captures nearly 36% of the credit card market share. The below chart describe you the scenario in details.
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During the Last Financial Year - Apr-2009 to March-2010, Indians spent a total of Rs 62,872.23 cr [USD 13.97] on Credit Cards and Rs 26,172.45 cr [ USD 5.81 Bn] using their Debit Cards. Most of the transaction was reported on VISA and MASTERCARD. Debit Card Purchases saw big leap from USD 4.1 Bn in FY 2008-09 to USD 5.81 Bn in FY2009-10.
The Total Plastics Card Market in India during the last Financial Year was USD 19.78 Bn marginally up from USD 18.64 Bn in FY 2008-09.
Additionally, we wanted to know the size ticket of each of the transactions. Data from RBI suggests us that - The Average Credit Card Transaction was worthy of Rs 2676.54 up from Rs 2517.52 in FY 2008-09. The Average Debit Card Transaction was worthy of Rs 1553.26 up from Rs 1453.52 in FY2008-09.
Indian still transact a lot in Cash due to the failure on the part of successive Governments to encourage an ecosystem for e-money and curb black money, which is running as a parallel economy with support from vested interests within the Government.
In India, 72% of Indians use their credit cards 1-2 times (or less) during a month. 23% of Indians use their cards between 3-5 times and the remaining 5% use credit cards 6-10 times in a month.
According to the consumer lifestyle survey, only 14% Indians own a credit card. This is in sharp contrast to countries like UAE and Kuwait where 63% and 50% of respondents respectively own a credit card.
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HDFC BANK 36%
ICICI Bank 0.27
SBI Bank 0.15
HSBC Bank 0.12
Other Banks 0.1
HDFC BANK
ICICI Bank
SBI Bank
HSBC Bank
Other Banks
In terms of the average monthly spending on credit cards, 73% of Indians spend less than US$35, while 25% spend between US$35 – 300. Only 2% of Indians spend over US$300 on their credit cards every month.
a) GROWTH:
RNCOS, a leading market research firm, says in its new report, “Global Credit Card Industry - Emerging Markets”, with the growing consumer spending, changing spending pattern and surging trend of online shopping, the Indian credit cards market is expected to grow at CAGR of nearly 28% by 2012-2013.
As per the report, in the last few years, spending pattern has changed drastically in India. Now people more frequently use plastic money (like credit and debit cards) for paying their day-to-day expenses. Traveling, dining and jewelry are the top three purchases that Indians make through credit cards. Fuel accounts for a very small portion of credit card purchases as these are largely paid through debit cards. Airline tickets, both domestic and international, are now bought through credit cards, making it the largest category in traveling for credit card purchases.
Utility payment is another segment where more payments are being made through plastic money since the last two years. In the last two years, the number of customers paying their electricity and water bills through credit cards has risen though the overall customer base is still small.
b) Stages in Product life cycle:
Product life cycle continues for a period of customer life span but renewable upon every 3 – 5 years depending upon individual companies credit policies.
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c) Seasonality:
This product is not at all seasonal because the product is sold throughout the year. This is as simple as WHO DONT WANT EXTRA MONEY IN HIS POCKET.
d) Profits:
HDFC Bank, which rolled out its credit card business in the beginning of 2002, has posted profits in this segment. The credit card base of the late entrant new generation private bank stood around 8 lakh and the debit card base at around 22 lakh in the first half of the current fiscal.
The credit card business is highly capital intensive with banks having to invest around Rs 200 crore upfront to get the business running. Hence, smaller and many public banks prefer to issue co-branded cards or not enter the market at all. The card industry is growing at 40 per cent a year. Last year, the bank’s card portfolio grew at over 100 per cent. Spend per card for the bank is higher than the industry average of around Rs 1,500 a month and the delinquency rate is less than the industry average of 7 per cent.
TimeProduct
DevelopmentStage
Introduction
Profits
Sales
Growth Maturity Decline
Losses/Investments ($)
($)
Sales and Profits Overthe Product’s Life FromInception to Demise
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2. Category Factors
Porter’s five force analysis: -
a) Threat of new entrants:
Entry Barrier: -
1. HDFC Bank Image2. Government Policies3. RBI Policies4. Economies of Scale5. Access to distribution channel
Moderate
b) Bargaining power of buyers:
1. Annual membership fees2. Joining fees3. Interest rate4. Grace period5. Credit limit6. Cash back and reward points7. Cash withdrawal8. Convenience of payments9. Ease of getting credit card
End consumer power: -
1. Brand switching2. Buyer knowledge3. Price sensitivity
Power of channels of distribution
1. Dependence on existing channels2. Store loyalty3. Agents
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HIGH
c) Bargaining power of suppliers:
1. Card Designer2. Technology Provider3. Database maintenance4. Supplying plastic5. Printing company6. VISA/MasterCard
Moderate
d) Pressures from substitutes:
1. Buyer can identify same product satisfying same need2. Perceived value of substitute3. Ease of changing – free
HIGH
e) Current rivalry in category:
The competition in credit card industry Number of competitors: - 15Demand for product category – Gold CategoryDegree of product differentiation – GOLD +, Advertising expenses by existing Company
HIGH
3. Environment Factors
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a) Macro Environment:
1. Technological:
New Technologies are aggressing towards Contact less Payment with mobile handsets working as credit card. This would remove the need of carrying credit card with you.
2. Political:
Tax and Government policies towards Credit Card Industry, affects bank policies and schemes for credit card issues.
Government legislations may shift Credit Card Industry to unprofitable level of risk.
Region Instability: - Some regions of India are politically unstable so banks would not issue credit cards in that regions.
3. Economic:
a) Per Captia Income: - High Per Capita income would be an opportunity for industry.
b) Inflation: - High inflation would affect consumers and they would spend less through credit cards.
c) Recession: - During Recession, Consumer spending would be less. Credit Card Defaulters would increase.
d) Consumer Spending Capacity
4. Social:
a) Festivals and Religious occasions
b) Credit Card Company Image in Society
c) Drift towards Western Life Style
5. Legal:
a) Regulators rule and regulationsb) RBI guidelinesc) Boards of Banks and FIs to closely monitor submission of data to CIBIL.d) Consent to be obtained for all old and new loans, to avoid the legal litigation in future.e) Penalties could be imposed on banks for non-submission of data to CIBIL.
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f) Banks are warned against non disclosure of borrower accounts.
b. Micro Environment:
1. Suppliers:
a) Technology Service Providerb) Card Designerc) Master Card and Visa
2. Buyers:
a) Credit Card holders of another bank
3. Competitors:
a) New Players coming into marketb) Another financial products of banksc) Other Credit Card Provider
c. Internal Environment:
1. Financial Position
HDFC has STRONG financial position. It has profit of 2948 crore for the year ended March 31, 2010.
2. Design
Good: - HDFC bank is providing cards with good aesthetic look.
3. Budget
Good: - HDFC Bank has progressive budget for its credit cards business segment.
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Scanning of Market Environment
Parameter Variable O/T How to address S/ W
Product related
Latest Technology services
T Tie up with Technology service providers W
Smart Cards T Issues credit card with customer information (identification and customers, data storage) that can be used at for other purpose.
W
Credit Card cum Debit Card
O Make product strong with suitable advertisement and brand endorsement
S
Functioning / use related
Knowledge of using Credit Card
T Generic Marketing needs to be done. W
Data Quality T No Control – HDFC is dependent on agencies W
Rural Market T Educate rural customers W
Shopping O Credit Card with shopping schemes. SDining O Credit card for people who are eating outside. STraveling O Credit card for frequent travelers. S
Not Acceptability of credit cards at small shops
T Do collaborations with local shop vendors W
Utility Safety O Trusted Brand SConvenience O Easy to use. S
Payment to Merchants O Do transaction settlements fast. S
Grace Period O Company has good financial capability to increase grace period.
S
Emergency Cash Withdrawal
O HDFC can increase cash withdrawal limit based on good transaction records
S
Demand Working Professional O Market to Corporate. WTourism/Dinning O Different type of cards to various tourism
industries and hotels.W
Collaboration with another banks
O Collaboration with other banks and other financial institutions.
S
Age Group T Target different age groups’ needs and offer credit cards.
W
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Style T Associate HDFC Credit Card Brand with Style.
W
Acceptance Acceptance by Working Professionals
O HDFC launched Corporate Card. S
Acceptance by Celebrities
O Brand endorsed by role models W
Visibility O Increase Visibility of product in market WAcceptance by Low and middle income Group
T Educate customers and use for advertisements W
High Social Acceptance
T Educate customers and use for use for advertisements
W
Marketing mix related
Distribution Channel : -Direct Selling Agents (DSA)
O Wide network of DSAs W
iii) Company and Competitor Analysis
1. Product Features Matrix
Gold Credit Card Features & Benefits
Attractive Reward Points
With effect from 1st July 2010 HDFC provides 1 Reward Point for every Rs.150 for spends up to Rs. 10,000 per statement cycle. For incremental spends above Rs. 10,000 in a statement cycle, 50% more Reward Points would be given to customers i.e. 1.5 Reward Points per Rs. 150.
Rewards points redemption After earning all the reward points on HDFC Bank Gold Credit Card, customers can redeem them for exciting gifts and services. Customers could even convert them to airline miles with India's leading airlines through the My rewards programme.
Worldwide acceptance
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Accepted at over 23 million Merchant Establishments around the world, including 110,000 Merchant Establishments in India.
Revolving credit facility Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200) of customer’s total bill amount or any higher amount whichever is convenient and carry forward the balance to a better financial month. For this facility customer pays a nominal charge of just 3.25% per month (39.0% annually).
Free Add-on card One can share these wonderful features with one’s loved ones too - HDFC offers the facility of an add-on card for customer’s spouse, children or parents. HDFC offers add-on cards to customers FREE OF COST.
Interest free credit facility HDFC gives up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant).
Zero liability on lost cardIf the customer loses the card, he can report it immediately to HDFC 24-hour call centre. After reporting the loss, he carries zero liability on any fraudulent transactions on his card.
HDFC Silver Credit Card
HDFC Gold Credit Card
HDFC Titanium Credit Card
Isuuer HDFC Bank HDFC Bank HDFC Bank
Card Class Standard Gold Platinum/Titanium
Card Type Classic Premium Premium
Rewards Lifestyle Lifestyle
Card Type Offered MasterCard Visa MasterCard
Interest Rate 2.95% per month Intro Rate: 0.00% Intro Period: 1 months
2.95% per month 2.65% per month Intro Rate: 0.00% Intro Period: 1 months
Balance Transfer Rate
0.00% per month Min.: Rs 100.00
0.00% per month Min.: Rs 100.00
0.00% per month Intro Rate: 0.00%
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Intro Period: 3 months
Joining Fee Rs 300.00 Rs 500.00
Annual Fee Rs 700.00 Rs 2000.00 The annual fee is Rs 3,000 and Rs 2,500 for HDFC Bank clients.
Cash Advance Limit 30% of credit limit 40% of credit limit
Cash Advance Transaction Fee
2.5% on amount withdrawn or Rs. 300/-, whichever is higher
A transaction fee of 2.5% (Minimum Rs. 300) would be levied on the amount withdrawn and would be billed to the Cardmember in the next statement.
Finance charges on cash advances /extended credit
2.5% of amount withdrawn or Rs 300 whichever is higher
2.5% on amount withdrawn or Rs. 300/-, whichever is higher
2. Objectives
Currently HDFC Credit Card has 36% market share with high margin of profits. HDFC wants to look for new segments for credit cards by which it can increase market share about 50% in next 5 years.
As many competitors are entering into market and profit margin is decreasing. HDFC wants to maintain or increase its profitability for credit card business.
3. Strategies
a) Removal of Insurance coverage: - As HDFC is offering Free for Life Credit card they are letting their annual fees go. This loss is being made up with elimination of insurance covers and adding cash back facility to the credit cards as this feature which has hire visibility as value addition and less dissatisfaction of customers due to process of filing and settling insurance claims.
b) Tie up with Medium scale Industries for Corporate Cards.
c) EMI offered on purchases to be given on all credit cards.
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d) Catalog based reward programs.
e) Women specific Credit Cards.
4. Marketing Mix
1. PRODUCT:
The business has to produce a product that people want to buy. They have to decide which ‘market segment’ they are aiming at – age, income, geographical location etc.
HDFC and other competitors are aiming for middle to high income groups.
Age Annual Income Geographical LocationAbove 18 years Greater than 120000 Metro, semi urban
locations.
Varieties of credit cards are offered to customers: -
a) Gold Cardb) Silver Cardc) Platinum Cardd) Titanium Carde) Co branded Cards
2. PRICE:
The price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies.
HDFC is offering credit card with: -
a) No Joining Feesb) No Annual Feesc) Incentives to retailers and agents
3. PLACE:
Banks need to take into consideration the place factor as it decides the volume of business for them.
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The 2 important decision making areas are:
• Making available the promised services to the ultimate users • Selecting a suitable place for bank branches
HDFC Bank has 1,725 branches and over 4,232 ATMs, in 779 cities in India, and all branches of the bank are linked on an online real-time basis.
HDFC also has 24x7 customer care support throughout the country.
4. PROMOTION:
Promotion mix includes advertising, publicity, sales promotion, personal selling and telemarketing.
5. PEOPLE:
HDFC is conscious in its potential in internal marketing - the attraction, development, motivation and retention of qualified employee-customers through need meeting job-products. Internal marketing paves way for external marketing of services.
HDFC understands the needs of customers and therefore it is leveraging technology to service customers quickly and conveniently. HDFC aims at providing and enabling favorable environment to foster growth and learning for their employees.
6. PROCESS:
All the major activities of banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations.
Flow is as: -
a) Standardizationb) Customizationc) Number of Stepsd) Simplicitye) Customer Involvement
7. PHYSICAL EVIDENCE:
The physical evidences include the logo, the layout of the branch, ,the furniture, the reports, punch lines, other tangibles, employee’s dress code etc.
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5. Profits
HDFC has STRONG financial position. It has profit of Rs. 2948 crore for the year ended March 31, 2010.
6. Value Chain
For credit card industry, value chain can be described as follows: -
Primary Activities: -
a) Service Designb) Knowledge Managementc) Delivery Systems Managementd) Moment of Truth Managemente) Service Competition Management
Support Activities: -
a) Peopleb) Process Informationc) Physical aspectsd) Punctuality and Reliability
7. Differential Advantage for each company in terms of
PlayersAbility to design new products
Ability to deliver the service
Ability to Market
Ability to finance
Ability to manage
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HDFC Moderate High Moderate High ModerateCitibank High Very High High Moderate Moderate
ICICI High Moderate Very High High Low
Standard Chartered
Moderate Moderate Moderate High Moderate
SBI Low Low Moderate High LowHSBC Moderate High Low High High
8. Expected future strategies
GAP ANALYSISGAP AnalysisParameter Variable O/T S/ W Counter strategyProduct related Latest
Technology services
T W Collaboration with Cell Phone Manufactures and latest technology service providers
Smart Cards T W Credit cards to be provided with a chip having complete information about customers
Credit Card cum Debit Card
O S Launch a new credit card product with debit card features
Functioning / use related
Knowledge of using Credit Card
T S Educate the rural and semi urban people with different strategies.
Data Quality T S Develop internal capability for data collection.
Rural Market T W Increase rural branches and educate the rural people.
Shopping O S Increase collaboration with small shopping vendors.
Dining O S Increase collaboration with local and small food joints and chains.
Traveling O S Collaborate with travel agencies as Cox and Kings, Thomas Cook, Country Vacations, Mahindra Club , Indian Railways etc.
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Not Acceptability of credit cards at small shops
T W Incentive schemes to small shop owners depending on sales.
Utility Safety O S Leverage its brand image as trusted brand.
Convenience O S Search for new ways to provide convenience to customers.
Payment to Merchants
O S Decrease transactions settlement period.
Grace Period O S Can utilize its financial strength to increase grace period for its selected customers.
Emergency Cash Withdrawal
O S Can utilize its financial strength to reduce withdrawal charges or introduce grace period for cash withdrawal from ATMs.
Demand Working Professional
O S Additional benefits to corporate customers.
Collaboration with another banks
O S To collaborate with other banks and other financial institutions.
Age Group O S Introduce various type of cards for different age groups.
Style T W Associate HDFC brand image with style.
iv) Customer Analysis
1.) Segmentation
Segmentation of Credit Card Industry:
a) Demographic Customer Segments:
The segmentation of the card industry can be done on the basis of income and on the basis of motivation towards a common set of needs and wants. 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, a case in point being the rise of software and IT enabled services. It is
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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.
1. Income
The segments which have been identified are as follows: (Source: NCAER)
Segments Income Group (Rs.)
Rich 2,15,000 +
Consuming Class 45,000-2,15,000
Climbers 22,000-45,000
Aspirants 16,000-22,000
Destitute Less than 16,000
According to NCAER reports:
o The Rich (annual income over Rs 215,000) will increase to 9.2 million households by 2009-2010
o The Consuming Class (annual income of Rs 45,000-215,000) will grow to 120 million households by 2009-2010.
o The number of households in the Aspirants (Rs 18,000-22,000/year) and Destitute (less than Rs 16,000/year) groups will decrease significantly.
Age: Currently, Customers are mainly between age from 25 to 55 years.
Occupation: Currently, main customers are salaried employees and business professionals.
b) Geographic Customer Segments:
1. No. of users2. Metro, tier-1 cities
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 Credit 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.
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c) Psychological Segments: -
1. Party-hoppers: - Young generation is party lovers and number of occasions of parties is also increasing. This is a new segment which is increasing day by day.
2. House wife: - Housewives are a big segment. HDFC can link house wives credit cards to their husband’s bank account or with add-on card facility.
3. Shoppers: - Credit Card users have psychological feeling to use it for shopping purposes.
The growing number of netizens represents a segment with high-unrealized potential.
b) Segmentation according to perceived utility of credit cards:
Preliminary qualitative research by NCAER has identified certain motivators differentiated on the basis of the income segments.
Segments Motivations:
Rich Convenience and acceptability, level of service, Credit limit.
Consuming Class Prestige, convenience, charges, service level.
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 ‘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 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).
2) Consumer Behavior
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To the extent that there are differences in behavior of the income groups, lower income consumers may be more inclined to take the loan they are offered without question because they believe it is the only loan they will be offered.
A survey was conducted by credit card management consultancy (CCMC) of 10000 people who hold either a credit card or a charge card in 15 cities across India reveals the following facts:
78% were unaware of the difference between charge card and credit card 67% were unaware of the financial loss to be borne if they lost the card and that they
would have to bear all expenses incurred on the card until the loss is reported. 70% were unaware of the action to pursue in case of loss of the card. 84% believe that they are entitled to 30 days of free credit or more in all situations. In
reality, this is applicable only in those cases where monthly bills are settled in full. 70% were unaware of the charge on outstation chouse 35% were unaware that bank charge an annual fee Nearly 60% were unhappy with the credit limits offered on the card. 65% were unaware of the high interest rates charged on outstanding balances. 70% were unaware that outstanding balances are waived on the death of the card
holder.
According to a survey conducted by ORG MARG in association with Business Today, the features that are considered most important by customers in the case of credit cards in India are convenience, acceptability, and the quality of service in that order. Other features that are considered important are also given in following table: -
(Importance of features of credit cards in India)
S.No. FACTOR IMPORTANCE1. Convenience 66%2. Acceptability 58%3. Quality of Service 52%4. Cash Advance / Credit Limit 48%5. Annual Fees 42%6. Special Privileges 35%7. Interest Rate 25%
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At the same time the important reasons for purchase of a credit card are travel & entertainment followed by cash advance. Other reasons that are considered important are also given in following table: -
S.No. REASON IMPORTANCE1. Travel and Entertainment 56%2. Cash Advance and Credit Limit 49%3. Credit Period 38%4. Emergency Services 32%5. Special Privileges 28%6. Status 25%
The various occasions where cards are used in India naturally flow from the reasons for purchase of cards. Still the majority of card spending was on Travel, Hotels and Restaurants. Other occasions of credit card use are: -
S.No. REASON IMPORTANCE1. Travel, Hotels and Tickets 68%2. Restaurants 56%3. Clothes Store 49%4. Provisions Store 41%5. Consumer Durable – TV, Refrigerator, etc. 32%6. Petrol Pumps 29%
3) Targeting
Following are the key segments areas where HDFC should target:
a) Target affluent families in rural areas.b) Target SME segment with collaboration for corporate cards.
c) Target customers of other banks having low market share.
d) Target customers moving from low income group to middle income group.
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4) Positioning
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 and project it as a need and a smart way to manage finances rather than being a debt trapper. In other words, it should give a mass appeal to the cards while reinforcing the dependable and trusting image of the issuing bank at the same time.
The positioning should be such as to imply that the issuing bank’s credit cards are a part of the customer’s everyday life. This in turn, shall lead to more card usage as the card would be handy for the customer to use whenever he wants to. Linking benefits to frequent use will help generate volume and will motivate consumers to use card even in circumstances they would not use it.
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, we must also test this, while giving weight to the above. However, networking with big retailer, airliners, hotels etc will certainly sustain competitive advantage if not increase it.
Positioning as a low cost card:
This has previously been disregarded as an option as the costs involved are higher and one cannot gain by competing on price and advantages can be gained only on the basis of service and innovative product features. There is a limitation on the APR (annual percentage rate) being reduced beyond a certain point.
Positioning on use:
Credit cards in India are most often used while making expensive purchases, traveling, online shopping and utility payments. This can be the main positioning plank because it would increase the credit card usage in each of the segments and hence exclusive cards can be introduced for the purpose the customers wants to or would benefit from using the card. Example: Cobranded cards like 15% discount on airfare (on HDFC-Kingfisher co-branded card) for people who frequently travel, or Citibank-Shopper Stop card for discount and loyalty points on store purchases, HDFC-HPCL co branded card for waiver on fuel surcharge etc.
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Positioning on acceptability:
Acceptability is the most important factor in the minds of the consumer and so positioning will help in retaining and acquiring more users. This can be achieved through zero liability policy on fraudulent transactions, ethical collections policy, complete and accurate disclosure of fee, interest rate and all other hidden charges during the application stage itself so as to build a trustworthy brand and loyalty amongst card users.
Positioning on security:
Positioning as a card for transactions on the net: With the impending boom in e-commerce in India, credit card issuers could position themselves as the best and safest medium for payment purposes by projecting them as users of advanced encryption technology especially in case of online transactions using secured socket layer technology and multiple security features for online use and otherwise which should be conveyed to the users in laymen terms.
5) Assumptions in planning process
1. Market Potential
Latest data used in the report from 2003-2009. For 2010, data has been approximated.
2. Forecast Assumptions
Forecast for 4 to 5 years has been assumed on constant growth phase. And it is assumed that no external factors would hamper the growth of credit card industry in India.
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Section 2
Objectives
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b) Objectives:
i. Corporate Objectives
a) To maintain the number one position by providing customer delight.
b) To tap untapped market and untouched segments to increase market share from
36% at present to 50% present in the next 3 years.
c) To provide high standard of services to all credit card customers.
d) To provide continuous innovation for better customer services.
ii. Divisional Objectives
a) HDFC bank has 1,725 branches in all over India. Each branch under each division would be assigned its individual branch target as per capita income of people of that region.
b) Each division would be assigned the task of increasing its customer base in rural branches.
iii. Marketing objectives
1) Volumes & Profits
HDFC Bank has profit of Rs. 2948 crore for the year ended March 31, 2010. Marketing objective is to launch “HDFC Rural Credit Card” successfully in at least 500 villages in its first year of operations.
2) Time frame
Time frame for Marketing Division of HDFC bank is 3 years. From its first year of operation to 5 years in future HDFC bank wants to capture 20-40% rural market in India.
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Section 3
Strategy - Product
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c) Strategy - Product
1. Customer Targets
a. Rural farmers who purchase seeds/ rice shellers/ farming equipments/ harvesters for their agricultural needs.
b. People having annual income between Rs. 2,00,000 to Rs. 3,00,000 per annum.
c. All the employees of SMEs (Small and Medium enterprises)
2. Competitor Targets
a. There are no credit card companies in the rural market space. Though there are schemes such as ‘Kisan credit card’ by SBI and other microfinance companies providing micro-loans such as SKS Microfinance, there are no banks who are offering rural credit cards to farmers.
b. There are some banks providing credit cards to lower to medium income group, but penetration in this market is less right now.
3. Product/service features
a. If the credit repayment discipline is found satisfactory, the credit limit of the customer will be increased (based on the payment made by customer) so the customer can become eligible for higher cards.
b. The customer can make the credit card payment in installments. But the interest rate would be slightly higher compared to if he makes the entire payment in one go.
c. Interest rates will be charged on reducing balance.
4. Core Strategy
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i) Value proposition
HDFC Credit Card Value Proposition: -
HDFC provides value proposition to its customers through: -
a) On tractors purchased through HDFC credit card, farmers are getting 2% cash back.b) Income group having income less than 2 lacs per annum would get card of credit limit
of 25000 with validity of 12 months.c) SMB segment focused corporate credit cards with collaboration to SMB corporate
houses.
ii) Product Positioning
In a 2 dimensional perceptual map – two attributes would be “benefits v/s cost to maintain” the credit card. For Titanium and Platinum cards, cost to maintain card would be higher but benefits would be much higher. In case of rural credit cards cost to maintain would be very less but benefits would be also be less in comparison to premium cards.
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Section 4
Strategy—Marketing Programmes
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d) Strategy—Marketing Programmes
i. Integrated Marketing Communications Programmes
e) Media Advertising: - HDFC Bank would use Television, Newspaper, Radio and Magazines for advertisements of its new type of cards. Television channel and Radio would be an ideal medium to educate farmers in rural area. Also, low income group and employees of SMB segment would be educated by mass advertisements.
f) Direct Marketing: - HDFC Bank would use a number of direct marketing techniques as Infomercials, Catalogs, and Telemarketing etc.
i. Infomercials in form of short 5-10 minutes videos would be used to educate customers about HDFC credit card and how it is ahead from other credit cards.
ii. Catalogs would show all features of credit card to customers. It would also give a comparative study of all credit card categories of HDFC bank to its customers, so that customer can choose a specific category which maps to his requirement.
iii. Telemarketing- Selling by phone can be a communication strategy for bank if it uses for customers who want information about HDFC credit cards.
Purpose of Integrated Marketing communication would be to make customer switch from Cognitive stage to Affective Stage to Behavioral Stage. Measurement of all promotional strategies would be essential for HDFC bank so that it can measure effect of promotion spending on sales, consumer awareness and consumer purchase.
ii. Pricing Strategy
HDFC bank would use “Value based Pricing Strategy”. HDFC bank has many types of credit cards as Silver, Gold, Platinum and Titanium etc. Each credit card would be priced on the basis of result HDFC bank would achieve from each credit card category.
New credit card category as Rural Credit Card would be priced at lower price or free to join for farmers to attract them. For Rural Credit card it would be “Psychological Pricing”. To penetrate into rural regions, pricing would be decided on the basis of perceptions of rural population but price would be enough higher than costs to cover reasonable variations in sales volume. Pricing strategy would be designed such that it simultaneously creates a customer’s incentive to buy that product and the HDFC bank incentive to sell that product.
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iii. Channel Strategy
Branch Banking: Pure bank retail customers & non customers who visit the branch in both rural and urban sectors. This will also cater to older, non computer literate persons who value personal relationships. As manifested by the banks’ branch network, this has been the emergent strategy for most banks. Hence, this is the distribution channel structure they are used to, and this is where their competencies lie. It is suitable for delivering services based on face-to-face interaction, and it targets a very large segment of bank customers. However, the problem with this strategy is that it is expensive and likely to lead to a decreasing number of customers.
Internet Banking: This segment is growing as it is providing convenience to the busy executives. The customers belonging to the PC segment are all computer literate, they have a modem and many of them are Internet users. Most of them have a credit card and do not value the personal interaction in a bank branch. They like the convenience and the time saved.
Tele Marketing: Because the telephone banking strategy has the telephone as it’s most important distribution channel, it relies on a more impersonal form of contact than the branch banking strategy. This will be used in combination with the branch banking strategy. The advantages connected with this strategy are that all people with access to a telephone are potential customers and that it is less costly than the branch banking strategy. Thus, it gives access to a large segment and a large geographical coverage without large-scale investments. It also relies on thoroughly tested and secure technology. The disadvantages, though, are that it has attracted the most price-sensitive customers and that this segment is likely to shrink.
Channels
Branch Banking
Tele marketing-
Direct Selling Agents
Internet Banking
Retailers/Distributors(Fertilizer,automobile,oil companies
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Others- Tie ups with various retailers & distributors for distribution of co-branded cards. (Spencer’s, shopper’s stop, metro cash and carry, automobile dealers, oil companies & fertilizer companies).
iv. Customer Management Strategy
1:1 CRM for Cardholder Acquisition:
It is critical to keep the first step of the credit life cycle in place during times of crisis. Continuous “good customer” acquisition efforts are needed in order to maintain profitable customer accounts and begin the process of portfolio cleansing. Rules-based campaign tools by assessing prospective cardholders’ ability, stability and willingness to pay. Scoring of applicants to identify extremely qualified or unqualified applicants. The Gray zone customers to be analyzed in more detail such as geography, demographics, mortgage status, medical payments, job changes, address changes and check-writing history, plus other key information to assess the risk.
1:1 CRM for Account Maintenance
Account maintenance and collection avoidance, 1:1 CRM to assess the health of credit card portfolio. On one front, systems in place to closely monitor credit risk and address customers who are either showing signs of trouble or already at risk. On the other front, in order to maximize portfolio value, credit card division needs to actively convert inactive accounts, retain customers at risk of churn and drive increased activity among loyal customers.
Behavioural modelling, accessing traditional data sources such as demographics and credit history, as well as less traditional data like spending patterns and payment history will be used to drive improvements in risk assessment and the ability to predict churn. Automated communications- Phone calls, personalized statement messages, e-mail and SMS (short message service) alerts to drive account activation, notify customers approaching credit limits and remind customers with late-payment habits. Loan officers will review existing accounts (both active and inactive) and initiate contact with customers to update demographic information and determine overall loan health. To provide risk-management action—lower interest rate programs, fee waivers or even one time settlements (OTS) if cardholders make statements on bankruptcy or financial hardship.
1:1 CRM for Collections
Off-the-shelf marketplace tools to determine which accounts to target and establish which payment offers or settlement offers to make because these accounts are otherwise unlikely to pay and/or destined to roll to charge-off. Settlement offers to accounts with 90 days of delinquency.
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v. Research
Behaviour based predictive modelling by external specialists to identify future risks & targeting customers on their purchase habits.
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Section 5
Controls
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e) Controls
i. Financial Budgets
HDFC bank would allocate 20% of its total marketing budget to rural credit card marketing. HDFC bank would spend money to educate rural people about its rural credit card.
ii. Marketing Metrics
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ARPU
CPACost Per Acquisition (RS)
Customer cancellation Rate-Churn(%)
Churn
Average revenue per user(RS)
f) Contingency Plans
This marketing plan is just that, a plan. Plans may not always work out and HDFC Bank should be ready to deal with the likelihood that HDFC rural credit card won’t be successful among rural population. HDFC Bank also needs to be ready for overwhelming success. The following are some of the possible scenarios: -
1) Under-Acceptability by rural population OR Revenue misses projection
If HDFC Bank misses its projections it may have to re-double our marketing efforts. The danger in this scenario is that the first reaction to missed projections is to decrease spending, particularly marketing expenses. HDFC bank should not do that. HDFC bank has to get its message out to the target market, and it can't do that if it stops spending on marketing.
2) Overwhelming acceptance by rural population OR Revenue exceeds projection
A serious increase in revenues over projections will give HDFC Bank an opportunity to increase its marketing budget above the allocated budget.
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Life time Value per customer (RS)
LTV