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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

2
Contents
Project Title: Creation of a Marketing Plan.................1
Product: HDFC Credit Card.........................................................................1
Under the guidance of...............................................1
Professor Dr. Pingali Venugopal.................................1
Contents ...................................................................3
Section 1...................................................................6
Situation Analysis......................................................6
i) Introduction.............................................................................................7
ii) Defining the product and Competitor.....................................................7
iii) Analysis of category............................................................................13
1. Aggregate market factors.................................................................13
GROWTH:...............................................................................................15
Stages in Product life cycle:..................................................................15
Seasonality:...........................................................................................16
Profits:...................................................................................................16
Category Factors...................................................................................17
Threat of new entrants:.........................................................................17
Bargaining power of buyers:.................................................................17
Bargaining power of suppliers:..............................................................18
Pressures from substitutes:...................................................................18
Current rivalry in category:...................................................................18
3. Environment Factors.........................................................................18
a) Macro Environment:........................................................................19
1. Technological:...................................................................................19
2. Political:.............................................................................................19
3. Economic:..........................................................................................19
4. Social:................................................................................................19
a) Festivals and Religious occasions....................................................19
5. Legal:.................................................................................................19
b. Micro Environment:...........................................................................20
c. Internal Environment:........................................................................20
Scanning of Market Environment..........................................................21
iii) Company and Competitor Analysis......................................................22
Product Features Matrix........................................................................22
Gold Credit Card Features & Benefits.......................................................22
2. Objectives..........................................................................................24
3. Strategies..........................................................................................24
Marketing Mix........................................................................................25
Profits....................................................................................................27

3
Value Chain...........................................................................................27
For credit card industry, value chain can be described as follows: -.....27
Differential Advantage for each company in terms of...........................27
Ability to design new products..............................................................28
Ability to deliver the service..................................................................28
Ability to Market....................................................................................28
Ability to finance...................................................................................28
Ability to manage..................................................................................28
Expected future strategies....................................................................29
GAP ANALYSIS.......................................................................................29
iv) Customer Analysis...............................................................................31
1.) Segmentation ..................................................................................31
2) Consumer Behavior..........................................................................33
3) Targeting...........................................................................................34
4) Positioning.........................................................................................34
5) Assumptions in planning process........................................................36
1. Market Potential................................................................................36
2. Forecast Assumptions.......................................................................36
Section 2.................................................................37
Objectives................................................................37
Objectives:...............................................................38
Corporate Objectives ...............................................................................38
Divisional Objectives................................................................................38
Marketing objectives................................................................................38
Volumes & Profits..................................................................................38
Time frame............................................................................................38
Section 3.................................................................39
Strategy - Product....................................................39
c) Strategy - Product................................................40
Customer Targets.....................................................................................40
Competitor Targets...................................................................................40
Product/service features...........................................................................40
Core Strategy...........................................................................................40
Value proposition...................................................................................41
Product Positioning................................................................................41
Section 4.................................................................42
Strategy—Marketing Programmes...........................42
Strategy—Marketing Programmes...........................43
Integrated Marketing Communications Programmes...............................43
Pricing Strategy........................................................................................43
Channel Strategy......................................................................................44
Customer Management Strategy..............................................................45
Research...................................................................................................46

4
Section 5.................................................................47
Controls...................................................................47
Controls...................................................................48
Financial Budgets.....................................................................................48
Marketing Metrics.....................................................................................48
Contingency Plans...................................................49

5
Section 1

Situation Analysis

6
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.

ii) Defining the product and Competitor

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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
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

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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.

b) Cash withdrawal from ATMs

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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
1. Magnetic Strip containing
customer IDs
2. PIN Number for security
3. CVV Number for internet All Credit Cards, debit cards,
transactions charge cards etc. of different
Technical
4. Credit Limit banks working in India.
5. Annual Charges
6. Interest Charges
7. Grace Period
8. Lost Card Liability
All other forms of financial
1. Taking credit instruments for e.g.
2. Cash withdrawal from ATM Loans
3. Shopping – online, retail ATM Card
Functional 4. Payment of bills Debit Card
5. Value added Benefits Gift Card
Corporate Card
Internet Banking
Credit given by shop owners

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1. Esteem 1. Shopkeepers giving credit
2. Enjoy to customers
3. Satisfaction 2. Local Money lenders
Emotional
4. Convenience 3. Family member lender
4. Gift Card

HDFC Gold, HDFC Platinum, HDFC ICICI, HSBC, SBI and others
Brand
Titanium

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 Mahindra
ICICI Bank
Axis Bank
Yes Bank

Foreign banks:
American Express
Citibank
HSBC
Amex
Barclays Bank
Standard Chartered
Deutsche Bank
ABN Amro

Local Money Lender


Shopkeepers giving credit

Competitors in terms of Product

Gift plus cards


Money Plus cards
Cash Credits cards only for the Business Man
Gold Loans

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Mortgaged Loans
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

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which implies that Banks have been able to retain just the quality customer with long standing
banking relationship.

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.

13
Other Banks 10.00%

HSBC Bank 12.00%


HDFC BANK 36%

SBI Bank 15.00%

HDFC BANK
ICICI Bank
ICICI Bank 27.00% SBI Bank
HSBC Bank
Other Banks

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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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.

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.

2005 2006 2007 2008 2009 2010


HDFC BANK 18.00% 26.00% 33.00% 23.00% 36.00% 38.00%
ICICI Ba nk 19.00% 26.00% 34.00% 12.00% 13.00% 15.00%
SBI Ba nk 8.00% 12.00% 14.00% 11.00% 13.00% 14.00%
HSBC Ba nk 12.00% 14.00% 16.00% 11.00% 14.00% 14.00%
CITI Ba nk 6.00% 12.00% 18.00% 16.00% 11.00% 14.00%
Othe r Ba nks 2.00% 8.00% 12.00% 7.00% 9.00% 11.00%

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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($)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Development
Stage
Sales and Profits Over
Losses/ the Product’s Life From
Investments ($) Inception to Demise

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.

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.

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tegory Factors
Porter’s five force analysis: -

Threat of new entrants:

Entry Barrier: -

1. HDFC Bank Image


2. Government Policies
3. RBI Policies
4. Economies of Scale
5. Access to distribution channel

Moderate

Bargaining power of buyers:

1. Annual membership fees


2. Joining fees
3. Interest rate
4. Grace period
5. Credit limit
6. Cash back and reward points
7. Cash withdrawal
8. Convenience of payments
9. Ease of getting credit card

End consumer power: -

1. Brand switching
2. Buyer knowledge
3. Price sensitivity

Power of channels of distribution

1. Dependence on existing channels


2. Store loyalty
3. Agents

17
HIGH

Bargaining power of suppliers:

1. Card Designer
2. Technology Provider
3. Database maintenance
4. Supplying plastic
5. Printing company
6. VISA/MasterCard

Moderate

Pressures from substitutes:

1. Buyer can identify same product satisfying same need


2. Perceived value of substitute
3. Ease of changing – free

HIGH

Current rivalry in category:

The competition in credit card industry


Number of competitors: - 15
Demand for product category – Gold Category
Degree 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 regulations


b) RBI guidelines
c) 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 Provider


b) Card Designer
c) Master Card and Visa

2. Buyers:

a) Credit Card holders of another bank

3. Competitors:

a) New Players coming into market


b) Another financial products of banks
c) 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 Latest Technology T Tie up with Technology service providers W
related services
Smart Cards T Issues credit card with customer information W
(identification and customers, data storage)
that can be used at for other purpose.
Credit Card cum O Make product strong with suitable S
Debit Card advertisement and brand endorsement
Functioning Knowledge of using T Generic Marketing needs to be done. W
/ use related Credit Card
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. S


Dining O Credit card for people who are eating outside. S
Traveling O Credit card for frequent travelers. S

Not Acceptability of T Do collaborations with local shop vendors W


credit cards at small
shops
Utility Safety O Trusted Brand S
Convenience O Easy to use. S

Payment to Merchants O Do transaction settlements fast. S

Grace Period O Company has good financial capability to S


increase grace period.
Emergency Cash O HDFC can increase cash withdrawal limit S
Withdrawal based on good transaction records
Demand Working Professional O Market to Corporate. W
Tourism/Dinning O Different type of cards to various tourism W
industries and hotels.
Collaboration with O Collaboration with other banks and other S
another banks financial institutions.
Age Group T Target different age groups’ needs and offer W
credit cards.

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Style T Associate HDFC Credit Card Brand with W
Style.
Acceptance Acceptance by O HDFC launched Corporate Card. S
Working
Professionals
Acceptance by O Brand endorsed by role models W
Celebrities
Visibility O Increase Visibility of product in market W
Acceptance by Low T Educate customers and use for advertisements W
and middle income
Group
High Social T Educate customers and use for use for W
Acceptance advertisements
Marketing Distribution Channel : O Wide network of DSAs W
mix related -Direct Selling Agents
(DSA)

iii) Company and Competitor Analysis

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
Accepted at over 23 million Merchant Establishments around the world, including 110,000

22
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 card


If 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 HDFC Gold Credit HDFC Titanium


Card Card 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 2.95% per month 2.65% per month
Intro Rate: 0.00% Intro Rate: 0.00%
Intro Period: Intro Period:
1 months 1 months

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Balance Transfer 0.00% per month 0.00% per month 0.00% per month
Rate Min.: Rs 100.00 Min.: Rs 100.00 Intro Rate: 0.00%
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 2.5% on amount A transaction fee of
Transaction Fee withdrawn or Rs. 2.5% (Minimum Rs.
300/-, whichever is 300) would be levied
higher on the amount
withdrawn and would
be billed to the
Cardmember in the
next statement.
Finance charges on 2.5% of amount 2.5% on amount
cash advances withdrawn or Rs 300 withdrawn or Rs.
/extended credit whichever is higher 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.


24
d) Catalog based reward programs.

e) Women specific Credit Cards.

Marketing Mix

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 Location


Above 18 years Greater than 120000 Metro, semi urban
locations.

Varieties of credit cards are offered to customers: -

a) Gold Card
b) Silver Card
c) Platinum Card
d) Titanium Card
e) 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 Fees
b) No Annual Fees
c) Incentives to retailers and agents

PLACE:

25
Banks need to take into consideration the place factor as it decides the volume of
business for them.

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) Standardization
b) Customization
c) Number of Steps
d) Simplicity
e) 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.
26
Profits

HDFC has STRONG financial position. It has profit of Rs. 2948 crore for the year ended
March 31, 2010.

Value Chain
For credit card industry, value chain can be described as follows: -

Primary Activities: -

a) Service Design
b) Knowledge Management
c) Delivery Systems Management
d) Moment of Truth Management
e) Service Competition Management

Support Activities: -

a) People
b) Process Information
c) Physical aspects
d) Punctuality and Reliability

Differential Advantage for each company in terms of

27
Ability to Ability to Ability to Ability to Ability to
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new the
pro serv
duct ice
s

HDFC Moderate High Moderate High Moderate


Citibank High Very High High Moderate Moderate

ICICI High Moderate Very High High Low

Standard Moderate Moderate Moderate High Moderate


Chartered
SBI Low Low Moderate High Low
HSBC Moderate High Low High High

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Expected future strategies

GAP ANALYSIS

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GAP Analysis
Parameter Variable O/T S/ W Counter strategy
Product related Latest T W Collaboration with Cell Phone
Technology Manufactures and latest technology
services service providers
Smart Cards T W Credit cards to be provided with a
chip having complete information
about customers
Credit Card cum O S Launch a new credit card product
Debit Card with debit card features
Functioning / Knowledge of T S Educate the rural and semi urban
use related using Credit Card 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.
Not Acceptability T W Incentive schemes to small shop
of credit cards at owners depending on sales.
small shops
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 O S Decrease transactions settlement


Merchants period.

Grace Period O S Can utilize its financial strength to


increase grace period for its selected
customers.
Emergency Cash O S Can utilize its financial strength to
Withdrawal reduce withdrawal charges or
introduce grace period for cash
withdrawal from ATMs.
Demand Working O S Additional benefits to corporate
Professional customers.
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Collaboration O S To collaborate with other banks and
with another other financial institutions.
banks
Age Group O S Introduce various type of cards for
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
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 users
2. Metro, tier-1 cities

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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.

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).

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2) Consumer Behavior
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 IMPORTANCE


1. 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 IMPORTANCE


1. 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 IMPORTANCE


1. 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.

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

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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.

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

35
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

37
Objectives:

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.

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.

Marketing objectives

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.

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

39
c) Strategy - Product

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)

Competitor Targets

d. 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.

e. There are some banks providing credit cards to lower to medium income group,
but penetration in this market is less right now.

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.

Core Strategy

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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.

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

42
Strategy—Marketing Programmes

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.

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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Channel Strategy

Channels

Tele Retailers/Di
marketing- stributors(F
Branch Internet
Direct ertilizer,aut
Banking Banking
Selling omobile,oil
Agents companies

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.

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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).

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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Research

Behaviour based predictive modelling by external specialists to identify future risks &
targeting customers on their purchase habits.

46
Section 5

Controls

47
Controls

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.

Marketing Metrics

Cost Per Acquisition (RS) CPA

Average revenue per ARPU


user(RS)

Customer cancellation
Rate-Churn(%) Churn

Life time Value per


customer (RS) LTV

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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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