Citi Bank India Credit Cards: Strategy for Profitable Growth
SECTION 005
CITIBANK INDIA CASE
Learning Team A5: Mohammad Al-Ali, Greta Carlson,
Patricia Ligon, Scott Schultz, Mike Xu, Max Young
Word Count: 1496
In assessing the marketing strategy of Citibank India's credit card business, Harpreet
Grewal is faced with two choices: maintain the current strategy, with its higher margins but
shrinking growth opportunities, or expand into new target segments/geographies with their
attendant challenges and uncertainties. He would likely find that a new product launch is
justified. While Citi's position in the super-affluent/affluent segment remains strong, its falling
market share combined with the growth of the emerging affluent (E.A.) and mass market
suggest a change may be worthwhile. To begin by surveying the landscape, a 5C analysis is
shown below:
Company
o Historically an innovative leader in the industry, but currently restricts itself to
servicing the super-affluent/affluent in India's largest 8 metropolitan areas.
o A strong brand, seen as offering an aspirational product and service, can be
leveraged to drive differentiation
o Losing market share from 30% to 22% despite good performance in the existing
segment (topline doubled) over the past 5 years, need to reassess market
o Need to address "profitable growth" and "efficiency factor" besides mere
revenue growth going forward
Customer
o Since the global financial crisis, Indian credit card users have become more
prudent, carrying less of an outstanding balance on their cards and focusing
more on value, meaning credit-loss provisions could be reduced, making lower-
segment interest fees more compelling
o Customers can be divided into "transactors" and "revolvers" - the former pay
their entire balance off every month, thus incurring no interest, while the latter
carry some balance in their account. The latter provides critical interest fees
o Consumers increasingly have multiple cards - a preferred card for primary use
focusing on convenience and service quality, and others for travel, lifestyle, and
security needs, which has implications for new product positioning
o Super-affluent/affluent consumers inclined to use cards on travel and lifestyle-
related purchases
o E.A. consumers spend on fuel and in department stores and focus on value for
money
Context
o Population is growing by 17.7% per annum, while household disposable
personal income per capita is growing at 10.54% per annum
o Regulatory changes are underway that may reshape the industry - the Reserve
Bank of India is capping interest rates and interchange fees, as well as
introducing mandatory security features, implying volume growth could become
more critical
o Credit data has become widely available, making scoring people possible
Collaborators
o Merchants - merchants that accept credit cards are mostly restricted to major
urban areas, and even they frequently add a 2% fee to items that are purchased
with credit cards in order to break even on interchange and association fees
o Direct sales agents (DSAs) - offer entry into untapped markets at a lower cost
than expanding branches and hiring staff, but may negatively impact branding
o Central bank - bank regulator, hostile to new branch expansions by foreign
banks compared to domestic banks
o Increasingly, credit card issuers are partnering with other companies to offer
particular rewards (e.g. Citi and National Oil Company, SBI and Indian Railways)
which differentiates the cards
Competition
o Domestic public sector banks - have vast number of branches, particularly
strong in rural areas, which has implications regarding the competitive dynamics
of expanding into rural areas
o Domestic private sector banks - employ aggressive marketing tactics including a...
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