Hsbc Credit Card Solution

Q4) How likely is it that HSBC will be able to continue market dominance on the basis of its superior rewards program?

Real Picture of HSBC Credit Card:

Honkong Shangai Banking Corporation headquartered in London. HSBC had gone from being rated worst to rated best by Hong Kong consumers. Credit card was growing rapidly in Hong Kong. From 1998 to 2003, the number of transactions increased by 112 per cent whereas the value of transactions increased 68 percent. The main factor driving growth was the wider acceptance of credit cards in retail outlets, such as supermarkets, and the ability to settle low- value transactions. Competition within the Hong Kong market was highly concentrated, with 82 percent of transaction volume in 2003 accounted for by five card issuers. HSBC introduced its first point-based loyalty programs in 1994, and started its journey in the rewards program.

The start of rewards program

HSBC introduced its first point-based loyalty programs in 1994, in response to bonus -point programs introduced by chase and American Express.

*The initial program enabled card holders to redeem points for a limited number of branded household products.

*Cardholders earned bonus points by using their credit card for purchases.

*The first programs had high redemption threshold targeted at high-end customer segments.

*HSBC offered cardholders to convert their bonus points into air miles on a selected number of airlines.

Air Miles Reward Program

Air Miles is a loyalty program that rewards your business for your corporate spend. The benefits of the Air Miles are allocated to individual Cardholders. The Air Miles collected can be redeemed against a range of exciting rewards including air tickets, hotel accommodation, cruises, digital diaries and much more.

*But, early programs were restrictive in the sense that all points unspent after a two-year period would expire.

As HSBC started this rewards program on 1994 and it was new for customers and it also excited them on getting such offers, at the same time the bank was cautious by giving them time limit of two years.

Sprout of problem

By mid-1997 HSBC started facing a peculiar problem as they were giving away electrical and electronic items they had no proper deals with the vendor of guaranteed orders. And at the same time by the end of the year when people redeem the products either the product was outdated as new product came in or the price of the product went down due to short product life cycles. At this time of period HSBC faced

*customer dissatisfaction and complaints started flowing by (Dec 31, 1997)

*HSBC even had a thought of withdrawal from this program due to customer dissatisfaction.

At this time HSBC decided to do something and they included few more attractive products including a super market. They even reduced the points from 50,000 to 25,000 as redemption point.

But, then now other credit card issuers also started snatching ideas and where they made a thorough study which made them in bringing up a new concept injected to the rewards program. They started launching direct cash-rebate schemes and instant redemption systems. This was achieved by chip-based card technology. Because of this incident and other competitors entering the scene HSBC rewards program dropped to rock bottom and they were considered worst in the Hong Kong market.

Come back of HSBC rewards program

Later HSBC managed to come up with the able workmanship of Miss. Louisa and her management team developed new strategy. They became pioneers in credit card market and they became best-in-town. They released new catalogues and they have adapted direct cash rebates and instant cash back.

Thus the HSBC introduced many new attractions and they enhanced the richness and attractiveness of the program like

* Rewards Multiplier, which offered redemption discounts to cardholders based on the length of their relationship with HSBC.

* Cash Multiplier, a cash-rebate scheme for cardholders who achieved a specified spending level

* Special of the Month items for redemption with 40 per cent discount on the points required to redeem the item

* Point Share, which allowed the pooling of points from friends and family to redeem higher value items

* Quarterly redemption boosters featuring new redemption items

So this shows a clear picture of HSBC perfect entry into market. It can be seen clearly that HSBC has come into the reward program on 1994 and soon by 1997 they faced downturn followed by customer dissatisfaction but they had a good management team and which was lead by Louisa they had a perfect come back. Because of their faster recovery they were able to get back the customers.

HSBC focused on retaining customers rather than concentrating on inviting new customers. They regained a new customer confidence and customer loyalty became a wide part in HSBC.

Market Dominance

The three main concerns as stated by the case study plays the main role in determining the future market dominance of HSBC

Louisa thought that the competitive scene, both in terms of loyalty programs and the market overall, would intensify in several key areas. First, issuers were increasingly focused on gaining a larger share of receivables rather than on acquiring new customers. Current loyalty programs typically did not affect the level of debt held by customers, but rather

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