Citibank: Launching the Credit Card in Asia Pacific (A) Case Solution

1. Examine consumer behavior is the credit card category. What are some of the cross-cultural differences pertaining to this category?

Australian consumers frequently used credit cards, and it had become a common thing in the country. These consumers were not concerned with the image and prestige that was commonly associated with it. Instead, it was viewed as “extension” of bank services. This is due to the low power distance prevalent in the Australian society. On the other hand, in India, a country where high power distance is prevalent, credit cards were viewed as a status symbol. It gave the upper-class the luxury of getting rid of cash.

Like India, Indonesia also has a high power distance society. So, credit cards were viewed as a social status symbol in the country. However, the Indonesian upper-class was more attracted to promotional offers than the luxury of not carrying cash. In Malaysia, there was a very specific law that was related to credit cards. The law stated that consumers with a yearly income of USD 9000 were allowed to have a credit card. Singaporean and Taiwanese customers also viewed them as a status symbol and as a matter of pride and prestige.

It can be clearly seen that consumers in various countries had varying behavior pertaining to credit cards. The core utility that credit card provides of revolving credit was not the only major factor that made consumers get this facility; cultural variables also played a significant role.

2. What are Citibank’s strengths and weaknesses as a brand in Asia Pacific vis-à-vis the US? Is it a global brand? Why or why not?

The company has a global financial structure, which it has developed with decades of experience in the banking sector. It helps the bank in making its operations smooth on a global platform. In case, some SBU is weak in a country. The parent company can shuffle resources to rescue it. Secondly, the company had a whole array of consumer preferences to attend the Asian market. The bank had the first move advantage in offering some of the revolutionary services (specifically in Asian markets). These services include automated teller machines, branchless banking, privilege customer facilities, auto loans (car financing), and foreign currency accounts. So, it has a brand image of an upscale, technologically equipped, and premium brand, unlike in the US.

Despite all its strengths, the bank had its weaknesses. Compared to its strengths, weaknesses might seem insignificant, but it is important to attend them before they start posing serious threats. It was not performing well when it came to merchant discount (1% versus 3%). Local banks had a firm grip over local consumers as they were familiar with their preferences. The bank fell low on resources as it was aggressively pursuing its expansion strategy. The company faced some serious problems in Korea due to rigid law and regulations. Citibank is a global brand as it has been aggressively penetrating foreign markets. As mentioned earlier, the bank has a global presence via its global financial infrastructure.

3. Evaluate the research in the case. What has been learned? In your opinion, what additional information is required to determine whether Citibank should launch the credit card or not?

The research suggested that Citibank would require a multidimensional marketing campaign in order to get 25,000 customers in Singapore. The campaign would require direct mail and personal selling along with take-ones and bind-ins. The forecasted study showed that out of the prospective customers who would respond to personal contacts, about 66.6% would fulfill the requirements needed to attain a card. Out of the qualifying people, more than 80% would become actual customers.

Apart from direct selling methods, TV advertising worth $1.6 million would also be needed in Singapore, for 300 advertisements of 30 seconds each, on national occasions. $1.6 million to $2.5 million would be needed for advertising in each country.

Apart from the marketing expenditures, Citibank would also to cater for the fixed costs, equipment and personnel to be hired. These infrastructural costs would be around $35 million per year for 250,000 customers. For each marginal addition of 250,000 customers, the costs would rise by $10 million to $15 million, each year. Direct costs would be $25 per card in 1989, but would fall to $6 to $8 per card as a result of economies of scale, when the milestone of a million cards is reached.

4. Should Citibank launch the credit card or not? What are the qualitative and quantitative reasons for either of the two recommendations?

For any given company, it is very important to take calculated risks if it wants to expand and grow. Same is the case with Citibank. The bank needs to launch credit cards in the Asian markets in order to expand its customer base rapidly. There is a large portion of Asian market that is unattended by local banks, which do not offer innovative products or services. The company would be able to cut back its cost related to brick-and-mortar branches, which demand huge sums of money for maintenance and operations. The bank can easily achieve economies of scale, when it comes to software development, which is an integral part of maintains and developing a credit card system. The company has an existing central system that integrates the bank’s operations. There would be no need for customized credit card software for each country. Furthermore, the bank would be able to use credit cards as a distribution channel to sell its other products like mortgage loans, car loans, and other various privileged services. Citibank is a mature company. It has already developed its base in developed countries. It is equipped with strong human resources that can assist it in achieving competitive advantage in underdeveloped markets.

5. What should be the segmentation and positioning strategy and what should be the marketing mix if you recommend that Citibank launches the card?

A major chunk of Asian countries has high power distance societies, which means that it is very important for consumers to maintain their social status and position. They must communicate their superiority by using upscale products and adopting an upper class lifestyle. Social status is mostly directly linked with wealth and money that a consumer possesses. So, Citibank must use socio-economic segmentation for its credit cards. For the initial phase, SEC-A needs to targeted, and when SEC-A is fully catered, SEC-B should be targeted. This needs to be carefully done so that the bank’s brand image does not get ruined in SEC-A consumers’ mind.

The bank needs to maintain an upscale image of its brand in consumers’ mind; a bank that offers premium services that specially tailored for customers’ need.