Case Study - HSBC

HSBC Credit Card Reward Program

6 April 2010

AsliMarceloPaolaTed

Summary

2

Company profile & mission 1

HSBC 4 P’s 2

Credit Card Market in Honk Kong 3

Situa@on audit – Rewards program 4

SWOT 5

Problem/Decision statement 6

Alterna@ves 7

Cri@cal issues 8

Analysis & Mul@-‐ARribute Chart 9

Recommenda@ons 10

Louisa

3

1865: Named after Hong Kong & Shangai Banking Corporation

Limited was established.

1993: Headquarter in London.

1998: `Your world of finance services.`

2001: `The World’s local bank.`

2005: More than 9,800 offices in 77 countries Europe, the Asia-Pacific, the Americas, the Middle- East and Africa.

Company Profile

Company Mission

4

5 core business principles:

outstanding customer service effec:ve and efficient opera:ons strong capital and liquidity economical lending policy technological infrastructure and service packages

HSBC 4Ps..

5

Products

Promotions Price

Place

• Credit card, • Loans, • Insurance & Investment promo:ons and • Services

• Generic cards • Co-‐ branded affinity cards • Private label cards.

• Retail stores • Restaurants • Shopping stores • E-‐ commerce channels

• Classic • Gold • Premier

• Pla:nium

Credit Card Market in Hong Kong

6

• Usage of credit card growing rapidly.

• 1998 – 2003: Number of transaction 112%

Value of transaction 68%

• Wider acceptance of credit cards in retail outlets. • The ability to do low-value transacations. • The growth in e-commerce.

Reasons

7

Situation audit – Rewards program

1995-1996

1997-1998

1999-2001

2002-2005

Early years

• First point-based loyalty programs introduced. • Cardholders earned bonus points and used them to redeem against a selection of items from the catalogue.

8


1995-1996

1997-1998

1999-2001

2002-2005

The Downturn

• Redemption items went out stock because of supply issues. • Products become outdated. • Long waiting periods for redemptions. • Competitors began offering cash vouchers.

9


1995-1996

1997-1998

1999-2001

2002-2005

Recovery

• Began expanding its market share and usage rate of campaigns. • New catalogues were issued. • Customer’s perception improved

10


1995-1996

1997-1998

1999-2001

2002-2005

Best-in-Town

• Cash multiplier • Rewards multiplier • Point share within friends and family. • Special of the month items (%40 discounts) • In 2003, online redemption service was launched. • The ability to pay income taxes with HSBC credit cards.

SWOT

11

Strength

• Profitable from issue Credit Card

• Awareness to the customer

• Partnership with Hong Kong merchants

• Interna:onal Finance • China Market

Weakness

• Huge costs involved • Record profits ending • Complexity usability of the program

SWOT

12

Opportuni:es

• Gaining a larger share of receivables

• Be aware of the cost • Revolvers segment

Threats

• Direct cash-‐rebate and instant redemp:on systems

• Commodi:za:on of rewards programs

• Email viruses

Problem/Decision statement

13

How HSBC sustain its leadership in terms of market share and

customers percep1ons,

increase the balance of revolvers

and did not significantly raise costs

Op@on 2 Low communica:on

+ Differen:ated benefits

Status quo Low communica:on

+ Standard benefits

Op@on 3 High communica:on



+ Standard benefits

Communica@on of the program + benefits

high low

Bene

fits of th

e program

differen

:ated

standard

14

Alternatives

Critical issues

Overall costs Customer percep@on Market share

ARrac@veness Awareness

brand

rewards program 15

Critical issues

Overall costs • Communica:on expenses • Larger number of redemp:on items • Bigger rewards for a given level of spending

25%

Cri@cal Issues Influencers Weight

Customer percep@on • Communica:on efforts: posi:oning, campaigns, etc • Benefits offered from the program

12.5%

Market share • Communica:on efforts and benefits offered from the program focusing in “revolver” segment

12.5%

ARrac@veness

• Direct cash rebates or instant cash back • Broad selec:on of rewards • Easy to understand • Differen:a:ons and improvements

25%

Awareness • Media and non-‐media efforts to communicate the rewards program and its benefits

25%

BRAND

REWARD

S PR

OGRA

M

16

Analysis



High costs related to new benefits

Good customer percep:on

Leadership, but stable market share

Differen:ated a[rac:veness of the rewards program

Regular awareness of rewards program


+ Standard benefits

Low overall costs



Regular a[rac:veness of the rewards program




High overall costs

Higher customer percep:on

Leadership and increasing market

share


Higher awareness of rewards program


+ Standard benefits

High costs related to communica:on





17

Analysis



High costs related to new benefits






+ Standard benefits

Low overall costs







High overall costs

Higher customer percep:on

Leadership and increasing market

share




+ Standard benefits

High costs related to communica:on





18

“OK, SINCE WE ARE THE LEADERS

LET’S KEEP EVERYTHING THE

WAY IT IS…”

“I DON’T WANT TO BE STANDARD, BUT I ALSO CAN’T SPEND A LOT OF

MONEY…”

“I WANT TO BE DIFFERENT AND THAT EVERYBODY KNOWS ABOUT ME. SHOW ME THE MONEY!!!”

“EVEN CONSIDERING THAT OUR REWARDS PROGRAM PROVIDE STANDARD

BENEFITS, LET’S AT LEAST MAKE THE CONSUMERS KNOW MORE ABOUT IT…”

Multi-Attribute Chart

Cri@cal Issues Weight Status quo Op@on 1 Op@on 2 Op@on 3

Overall costs 25% 1.0 0.5 1.25 0.25

Customer percep@on 12.5% 0.6 0.5 0.75 0.625

Market share 12.5% 0.5 0.5 0.5 0.625

ARrac@veness 25% 0.75 0.75 0.5 1.25

Awareness 25% 0.75 1.25 0.75 1.25

Total 3.5 3.5 3.75 4.0

19

Recommendations

20

Increase the budget related to the rewards programs

Reduce costs in the future

21

Recommendations

Surveys

Provide a mix of redemp:on catalogues + instant

redemp:on program

CSD

22

Recommendations

Online pla\orm for the rewards program

Online catalogues

Extend the validity of points for 5 years

Iden:fy the “revolvers” in the customers database

AsliMarceloPaolaTed

Thanks!!!

Business

Case Study - HSBC