Citibank: Launching the Credit Card

Recommendations:

* Launch the credit card operation in Asia Pacific.

* Use a customized marketing strategy/customized offerings; Focus on customer service;

* Enter Australia, India, Indonesia, Philippines, Singapore, Thailand, Taiwan, Malaysia, India, and Indonesia; Further develop Hong Kong market; Enter Korea - whenever regulations allow it.

* Use different appeals/ value prepositions: in India, Indonesia, Taiwan, Thailand, Malaysia emphasize status; target upper and upper-middle class; use Citibank and Dinners database to qualify customers and minimize credit risk; create strategic alliance with high-end retailers, providers of luxury services; in Australia, Singapore, Hong Kong emphasize service, perks, value; use mass-marketing strategy; tailor the product to customers' needs; address the business community to enroll more retailers.

* Employ multifaceted direct marketing; employ greenfield market development; use premium product pricing; use one processing center; Use trials/experiments to decide the best price/fee levels; modify the operation following best practices.

Citibank should launch the credit card operation in the Asia Pacific since the proposal promises a great ROI as well as strategic positioning, increased company value, and the ability to market products to broader customer base. The initiative is a logical step for a number of reasons. First, the decision aligns with the Citibank's mission in the Asia Pacific - "to be the most preeminent provider of a wide array of financial services to an increasingly affluent upper- and middle-income market" (page 1). Citibank positions itself as a global company that "views the world as one marketplace and had consistently pursued a global strategy for growth." The initiative is a strategic match with Citicorp's organizational philosophy and vision. In addition, to achieve its ambitious goals of 30% or 30 million revenue growth by 1990 and undisputed leadership in the region, Citibank has to create new growth opportunities and offer new financial services, Second, many of the countries are emerging markets or markets with large population, steady economic growth, and great market potential in the near future. AMEX's early entrance in Hong Kong and Singapore allowed the company to maintain its leadership in the credit card business in these countries, something Citibank should do for the entire region. If Citicorp credit card launch is successfully executed, it promises tremendous returns, considering the market size and in some cases, the absence of large competitors. Another reason, I believe, the project is a winner is the fact that Citibank already has established itself as a prestigious, consumer-oriented international bank and as the undisputed leader in most marketplaces. Therefore, the new initiative is another way to capitalize on its brand name by offering again the best financial product, a Gold Citibank Card to its most influential customers and successful professionals. The bank's 11 years in the market, to a great degree minimizes a major backdrop associated with emerging economies, the lack of reliable credit information in the consumer sector. In some countries, there are no established credit-reporting systems, while in others the information provided by the credit-reporting agencies is unreliable. Citibank by now should have generated a signifiacant customers' database, and it will easily identify credit-worthy customers to minimize the credit risk. At the moment, Citibank has offers substantial credit in the form of mortgages and car financing to some clients. Citibank customers has an average income several times higher than the one in the particular country. It has a Citigold club with clients with substantial purchase powe. Citicorp does not need to compee on price instead it should charge the highest prices in each market. The launch of the Citicorp credit card operation is less risky because the Asia Pacific is a well-established market for the company and the concept of credit offers is not new for the bank. Even more the company's Dinner Club cards and the Hong Kong credit card operation will provide more relevant point of reference to create a winning strategy. The plan allows Citicorp to increase its distribution to customers in locations that currently it is impossible as a result of government regulations. This is a legitimate way of overcoming restrictions and growing the existing business. Cross-selling is a major benefit which will be difficult to monitor.

Financial Analysis:

The financial analysis further support my recommendation to launch the operation. The company should comcentate on the top two income population group as shown in Table 4 and Exhibit 8. These are the groups with income between 12,500-25,000 and above 25,000 and which totaled to 65 million consumers. The company target market follows the recommendation to market the product as a stutus symbol and value product. The third group(6000-12500) with 58 mellion population is also of interest and has the potential to become Citibank's cardholders later on. According to the data that Citibank has collected its credit card customers in Honk Kong with these levels of income contribute annual revenue of approximately $200 and $250 respecively (Table B). In addition, the case provides the acquisition costs in Singapore (Table A).The last, I use as a cost estimate, but the numbers

are not a meaningful indicator of the expected response rate across the market for several reasons. First, Singapore is highly saturated market, which explainas the difficulty of attracting new customers. The country also has target market of only 270 thousand customers in comparison to Idia's 24 million income qualified consumers. Furhtemore, American Express is the early comer and a market leader so Citibak