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.