Trust a good card brand to deliver a credit worthy performance
Like many other product categories in China, the credit card industry is booming An estimated 40 million credit cards are in circulation in China, compared to estimates of less than 3 million in 2003. Economic growth, growing income, urbanization and the development of organized trade have contributed to this increase.
While enjoying growth, the credit card industry needs to be concerned about several factors. How long will this natural boom last? How to deal with fierce competition? How to make the consumer spend more on the card? And what about customer retention? But most importantly – how to make a profit?
Most of these questions are related to the challenge of establishing credit cards as a brand. China’s market has already accepted credit cards as a product, but when there is no loyalty, when consumers easily swap from one card to another having been enticed by a free gift, it implies that they have not accepted credit cards as a brand. And until that is achieved, the industry is always going to be faced with disloyal consumers. By building loyalty, companies will also increase their profitability. So one of the biggest challenges today is how to establish credit cards as a brand in China.
In order to do this, companies need to differentiate their offering from the competition and establish a strong bond with the consumer. Credit card companies need to understand how the market is segmented, decide which segments they want to cater for, and offer specially designed and targeted products for each segment.Consumers need credit cards to be widely accepted in retail outlets, for example, so they look for high credit limits on their cards with small annual fees or no annual fees at all.
Image is also key. Credit cards are highly visible products and – when used in social situations – are an indicator of the user’s status. By carrying a card whose social imagery is easily identifiable, consumers are making a social statement about the social class they belong to, or how they want to be seen by others – successful, affluent, modern or even fashionable. So credit cards need to display the right social imagery for the right segment of customers. This requires banks to be innovative and to go beyond the obvious imagery of status and class, and the corresponding clichéd offer of gold and platinum cards.
Another consumer segment involves environmental awareness. This issue is becoming so important, there is likely to be an excellent market in China not just for gold or platinum cards – but a green card. Such a card would support environmental issues, and project the card holder as an intelligent, well-informed, considerate and socially responsible citizen.
Deep down, consumers look at brands as aids to satisfying strong emotive needs such as a need for control, a need for excitement or a need to bond or feel protected. By appropriately segmenting their customers, banks can create an image and personality for their brand which fits the emotive needs of their target.
Banks also need to look innovatively at functional needs. Like other visible products, credit cards can be a reflection of the user’s personality. The card can be an attractive piece of plastic that the consumer is happy to exhibit. So the very appearance of a card can develop a strong identity and bond with the consumer.
Indeed, functional needs can be merely surrogates for emotional needs. For instance, if you talk to the Chinese credit card consumer, a high credit limit is rarely mentioned as an important requirement when getting a new card. However, when you try to probe further, what comes to light is that the credit limit is actually a reflection of their status and selfrecognition as well as a source of security. The implication is that the marketers need to cater to the underlying true needs – and if providing a high credit limit is a problem, they can cater to the hidden emotive need in a different way.
Credit card issuers have invested surprisingly little in reaching their consumers or establishing a stronger relationship based on an understanding of consumer needs. The success of this business in China is dependent on the ability of credit card companies to develop a strong bond with their consumers, a relationship that extends beyond functional attributes and embraces emotive needs.