HSBC –Credit Card Rewards Program

HSBC - IntroductionHQ in London and is one of the world’s largest

banking and financial services organizationsSpread across Asia-Pacific region, Americas,

Africa and middle eastHSBC ltd was established in 1865Foremost emphasis – build up representation in

China and Asia-Pacific region.Branding Strategy

o 1998 : your world of financial services• 2001 : the world’s local bank

Credit card IndustryJourney from 1998 to 2003

Number of transactions increased by 112% Value of transactions increased by 68%

Highly concentrated competition 82% transaction accounted by 5 credit card manufacturers

Growth(2003) : - 0.2%

Targeting narrow market segments Cardholders who carried balances for large amount of

time.

Credit Card Industry cont.Differentiation in cards on basis of

positioning pricing features customer acquisition strategies

Card issuers held Visa/Master card franchises

Reason for growth Acceptance of cards in retail outlets, supermarkets. Ease in settling low value transactions Growth of e-commerce

The credit card products Worst to best!

Hong Kong credit card market statisticsHSBC had to broken into this market and

now had to sustain it’s position

HSBC – Credit Card business Market Segmentation based on demographic

information like income, life stage.Within segments, differentiation done based

on profitability.- Transactors : Customers who use credit cards to build up reward points and pay back at end of each month.- Revolvers : Customers who use a high percentage of their credit limit and carry a balance from month to month.

HSBC Offers - Features Variety of credit cards types

- Classic, Gold , Platinum, iCan- Interest free repayment program, 24x7 Customer

service, lost card protection, global cash access, special cards for online purchases(iCan).

Rewards Program- Bonus points, Discounts on purchases.

Usage Benefits : Retailer cards- Store Discounts, Complimentary Parking, Free Delivery, pre- sales invitations, complimentary gift-wrapping services.

Managing Rewards ProgramMarketing department : Types of Reward Partners, Rewards and

Redemption Levels.

Regional Card Systems (RCS): Marketing changes + IT Integration

Retail Banking Personnel – Program features and benefits.

Group Purchasing Unit (GPU) :• Procurement of redemption items.• Contractual aspects of transaction.

Customer Service Dept – CSD• Daily operational aspects of program• Process redemption orders, Monitor inventories, Monitor Call

centre

HSBC Reward Programs – (a)

Customer reaction: excitement, novelty, attraction

Strengths

Point based systemHigh end customersBranded household goodsAir milesNovelty: success

Opportunities

Only differentiator when interest rates and fees are similar

Weaknesses

Accumulated till expiry date, unspent gone

Threats

Competitors also started rewards

HSBC Reward Programs-(b)

Customer reaction: Dissatisfaction and complaints

Strengths

Practical items offeredHigh demand for rewards

Opportunities

More awareness of the program

Weaknesses

Stock-outNo guaranteed supply contract with vendorsDelay – CSD staff less

Threats

Items outdated + price high by year endCompetitors: cash rebate, instant redemption

HSBC Reward Programs –(c)

Customer reaction: Gradual change from ‘bad’ to ‘maybe ok’

Strengths

Large scale acquisition + usage campaignsExpiry date acc. to card: Processing time less

Opportunities

Competitors: cash burden on bottom lineCompetitors: catalogue only to select customers

Weaknesses

Awareness of changes lowPerception change less

Threats

Customers want cash rebate / instant cash redemptionNot different from others

HSBC Reward Programs-(d)

Customer reaction: “Best in Town”

Wide range of attainable practical products

Rewards Multiplier : length of relationshipCash Multiplier: spending level: Frequency/PointsSpecial of the month : 40% discountPoint Share: Pooling of pointsQuarterly redemption : new itemsOnline redemptionTaxes through credit cards

TV campaign

Successful ProgramsRewards + level of redemptions = loyalty

Keep it simple : Complexity = lack of participation

Variety: Numerous vendors with vast product selection

Establish a timeline : Redemption eligibility and expiry

Vary your communication: Actively market -> direct mail, statement reminders, web site, mass media, and personal communications

Target your message: Online redemption, taxes, pooling

And keep reminding them : Ongoing dialog – “Special of the Month”

Measure : quantitative research : “Best in Town”

Consumer BehaviorBoost in card usage Customer acquisition and retentionEnhance consumers’ perceptions of firm’s

offeringPositive reinforcement of consumers’

purchase behaviorStay in relationshipCross-sell possible: investments and

insurance

CompetitorsAmerican Express Global travel, financial and network services provider. Focus on charge cards, expanding towards credit cards. Target Market: Mid to upper income segment.

Bank Of China Locally incorporated bank, a vast local network in Hong Kong. Positioned as mass product. Target Market: Grass root/Mass market

CompetitorsCitibank Positioned as relationship product. Services include consumer banking, corporate banking, investment banking and asset management. Target Market: Mid to Upper income segment.

HASE Subsidiary of HSBC, operating as a direct competitor. Mass product strong in over 50 market, lagging n 25-35 age category. Target Market: Mass market(skewed towards younger consumers.

COMPETITORS DBS Largest bank in Singapore, 5th largest in Hong Kong. Emerged strong locally after acquiring Kwong On bank. Services include consumer banking, treasury & market asset management, equity and debt fund raising. Target Market: Mass Market(price sensitive and pragmatic)

What numbers say ?(2000-2003)Competition is fast catching up on HSBC

• Growth in Number of Transactions• HSBC -1.83 %• Hang Seng Bank Ltd. -20.83%

• Growth of Market Share in Value of transactions• HSBC –constant • Hang Seng Bank Ltd – constant• Next competitor – 18.8%

COMPARISON OF REWARD PROGRAMS

Card Issuer Fee Waiver Cash Credit No. Of rewards

HSBC Classic($220) -40,000 pointsGold($480)-80,000 pointsPlatinum($1000)-1,50,000 points

Yes$27,000 points = HK $100

213

Bank Of America

NIL Yes$35,000 points=USD 20 Travelers cheque

234

Bank of China

Classic($220) – 20,000 pointsGold($550) -40,000 points

71

Citibank Classic($220)-37,000 pointsGold($550) -92,000 pointsPlatinum($1500)-250,000 points

111

FUTURE CONCERNS

High competition in increasing customer s and not only the no. of transactions. Focus on revolvers i.e. customers who maintain a balance. Increasing cost of loyalty programs. Introduction of direct cash rebates and instant redemption programs.

FUTURE CONCERNS ..contd

Loyalty programs becoming a standard feature of every credit card. Complex reward programs making them difficult to understand. Issuers raising promotional gifts to acquire more and more customers.

IDEAS FOR FUTUREOffering good mix of CRM and new, innovative promotional programs.

NEW POINTS CURRENCIES Giving mobile minutes ,free messages and ringtones in lieu of points.

POINT EXCHANGES Buy, sell and exchange points on eBay, or anywhere else.

IDEAS FOR FUTURE

LOYALTY AFFILIATES Offer shoppers incentives like cash back or reward points for shopping with businesses. Benefits partners for access to these shoppers creating a win win situation for both the issuer and the affiliate.

GIFT REMINDER SERVICE Offer ing a gift reminder and suggestion service will strengthen the customer relationship.

IDEAS FOR FUTURE

EMAIL ONLY PROMOTIONSOffer exclusive and complex offers through emails once a customer reaches the threshold required for that particular offer.

MAILING VOUCHERS Eg. Esprit.com mails a $5 voucher for every $125 you spend online or in-store.

THANK YOU