Marketing strategy: Big fish need more tempting bait

Marketing strategy: Big fish need more tempting bait

Burhanuddin Abe, Contributor, Jakarta

The credit card business has become a gold mine for the
issuing banks in Indonesia as each year the number of cardholders
increases.

Data recorded by the Indonesian Association of Credit Cards
(AKKI) as per November 2003 show the number of cardholders as 4.8
million, a 24 percent increase from the previous year.

The association forecasts further growth this year and in the
coming years based on the market potential here. Currently, a
reasonable figure for the potential target market is about 11
million, according to its latest report.

With this huge potential, it is not surprising that many banks
devote their marketing efforts to the card business. Their
strategies consist of, not only smart advertising and promotions,
but various enticing gifts, giveaways and so forth. Some offer
low interest rates on payments, while several others attract
customers by helping them pay the outstanding payments for cards
that they are still using.

The physical appearance of the card is also enhanced by some
banks as their edges are not sharp, but roundish, while one or
two are even not too rectangular.

"With so many credit cards to choose from, each bank has to
come up with unique ideas. A "me-too" look or strategy will not
get any attention. We realize we are not the first issuer in the
country, so we create elements both in the card and the benefits
that will stand out. Only then can customers easily remember and
make their choice," said one senior marketing officer of Bank
Internasional Indonesia (BII) during the launch of its credit
card in Bali a few months ago.

Two aspects are interesting in the frequency of credit card
use. One is that a new credit cardholder usually is a frequent
user. The second element is that the large number of merchants
listed by the issuing bank also boosts sales, as well as the use
of credit cards.

The association (AKKI) also recorded the total credit made
available by banks for their credit cardholders here from June
2002 to November 2003 was Rp 12 trillion (about US$1.4 billion).
This figure is estimated to rise by about 25 percent this year.
The number of issuing banks has also increased, from 17 in 2002
to 20 banks as of November 2003. All major cards are available in
Indonesia, such as Visa, MasterCard, American Express and JBC.

Competition in the credit card business is becoming keener,
because while it may take some time for the market to expand the
issuing banks have to "make do" and grab whatever portion
possible from the available number of customers.

A number of the customers may already have one or even two
credit cards. This makes the decision-making process more
complicated and challenging for the banks. To lure customers,
reward points -- one of the standard benefit features, including
discounts for exclusive items -- are now complemented with other
more lucrative offers, such as a Mercedes Benz, Ferrari or even
Porsche. A luxury villa is also thrown in to their promotions, or
"be a billionaire" is another slogan issued by some banks.

The tight competition is not only for the classic silver card,
but apparently even the gold cards have to be aggressively
promoted with every kind of customer-oriented service -- tangible
or otherwise. All sorts of special facilities and services are
made available for these demanding customers.

GE Gold Card, issued by Vadyo together with GE Consumer
Finance Indonesia, offers another special feature. The
cardholders are given more flexibility in their payments. Next to
a 30 percent discount for shopping and restaurant or hotel bills,
the cardholders also get privileged treatments at certain hotels
that are the company's merchants. For minimum payments (not full
payment or settlement) the interest rate is only 0.99 percent.

Citibank's Gold and Platinum cards meanwhile have numerous
superior features for customer satisfaction. Customers can pay
Garuda Airline tickets through Citibank EazyPay, which means 12
installments without any additional fee.

Citibank's privileged customers for air travel also enjoy
other facilities, such as extra or excess baggage, priority
waiting list, exclusive waiting lounge, life insurance, coverage
for loss of baggage and flight delay. A lucky draw with the prize
of a New Beetle Volkswagen is another gimmick to enrich the list
of benefits.

Banks are quite aware of the attitudes and lifestyles of their
privileged customers. For these extremely high-income people,
excellent service on the verge of pampering is a must. Standing
in line and the like is a definite "no-no". Although the number
of these highly demanding clients is not large, the kind of money
that they spend is worth all the attention and paraphernalia.
Handi Irawan, a marketing expert with Frontier, a survey company
here, said although they constitute about 20 percent of the total
customer base, they are revenue makers as they contribute almost
80 percent to any bank's profits.

By giving this type of customers the very best, and often
exceeding their expectations, what banks wish for in return is to
retain them as permanent customers, who entrust the bank with all
their funds and financial needs. With the kind of profits
estimated from these "20/80" customers (20 percent in number
contributing 80 percent of profits), it is only logical that
banks are stopping at almost nothing to net the big fish.