Citi Bank India Credit Cards: Strategy for Profitable Growth

MARKETING 611

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...