The credit card industry in Canada has been challenged since the recession started in 2008. There has been an increase in government regulation along with a spike in consumer bankruptcies. Due to the change in market forces, a number of smaller credit issuers like GE Money have exited the industry. Relevant to this paper is the media release announcing that effective January 7th, 2011, financing for the HBC credit cards transferred over to Capital One Financial Corporation. The HBC private label credit card (HBC PLCC) has a large target market with 93% of their active cardholders being female. Geographic segmentation is similar for all market segments which are Canadian urban and suburban cities. The HBC family of stores includes the Bay, Zellers, Home Outfitters and Fields. In addition, HBC has a long-standing HBC Rewards program with an 8 million person cardholder base. It is my intention to look at the Capital One HBC PLCC, identify some key market segments, evaluate the attractiveness of each segment and share some recent market insights.
I have broken down the market for the HBC PLCC into four main segments which I’ve named the "Post-Secondary Freshmen", “Senior’s Club”, “Value Seekers” and the “Rewards Junkies”. The “Post-Secondary Freshmen” are a group of single females without children, aged18-22 years and are in their first or second year of college or university. In terms of behavior, this segment would use the HBC PLCC as a leisure card and would be considered light user. Given that this segment is young in age and newly independent, they may be unaware or uniformed about private label credit cards. However, they may be looking to establish credit experience which is often not available with major credit cards. Therefore, this young segment may be interested in a PLCC to start building credit experience. This group may not be very loyal because the HBC family of stores most likely is not their preferred place to shop. However, females would be attracted to the “Beauty and the Bay” cosmetic business who look to “offer customers an extraordinary beauty adventure with the very best and most innovative beauty brands”. The “Post-Secondary Freshmen” can be segmented psychographically based on their personality which is impulsive and they would have an air of confidence in terms of their ability to handle a credit card.
The next market segment is the “Senior’s Club”. Zellers recognizes a senior at the young age of 55. This segment is very loyal to Zellers and operates with a fixed income. In terms of behavior, they would be considered a light user because they like to save their purchases so they can take advantage of the “15% Seniors Day discount” which is on the first Tuesday of every month. This segment is very predictable. They enjoy meeting their friends for coffee in the Zellers restaurant and get their shopping at a discount. Given their age, this group may not be interested or slightly adverse to owning a credit card.
The third market segment is identified as “Value Seekers”. This group is predominately female and married with kids. They may live in a single income household making less than $80,000 per year and would be classified as in the lower to middle class. The “Value Seeker” is a medium user and is loyal customer as long as they feel they are getting more value for their dollar. The “Value Seeker” is a price shopper that is driven by deals. Specific to the HBC PLCC, they sign up for the credit card because of the 10% discount on the first purchase and may continue to use it to take advantage of “installment and deferred payment plans and Credit Exclusives” which are credit event days that offer a discount on purchases throughout the store. This group is very informed and knows exactly how much the HBC reward points are worth. They would calculate out that 80,000 rewards points...