New strategies on the cards
Marketing initiatives to boost range of transactions
Sound long-term marketing strategies should see a company through the ups and downs of the economic cycle, but it is a major advantage if the business model is built to withstand a cutback in spending on big-ticket items.
'It is not a big concern if purchases are big or small; the frequency of using the card is more important to us,' said Danny Cheung, MasterCard Worldwide vice-president and business manager for Hong Kong and Macau.
He said efforts to attract new cardholders and expand the number of acceptance locations would continue, but with about 90 per cent of merchants in Hong Kong already part of the MasterCard network and, with the 3.6million locals of working age now having close to 13million credit cards, limits had to be recognised.
'Hong Kong is a mature market, one of the three most competitive in the world, so the number of cards doesn't mean anything now,' Mr Cheung said.
Instead, the focus of most marketing initiatives is to encourage usage of 'your' card rather than a rival's, and to boost the range of transactions conducted by engineering a switch from other forms of payment.
Mr Cheung characterised this battle as card against card on the one hand, and card versus cash on the other. He said progress on either front required an in-depth understanding of the latest economic indicators, consumer psychology and the scope for applying new technology.
Since what ultimately drives company revenue is the number, not the value, of transactions - banks are charged a small fee for the global co-ordination of daily settlements on a real-time basis - the key is to give customers good reasons and new ways to keep using their cards.
In marketing terms, it is therefore essential to define clear customer segments and provide a combination of enticements that variously plays to a liking for prestige, convenience, exclusive offers, store-linked discounts or 'instant wins'. 'So, in these respects, we need to keep thinking and innovating,' Mr Cheung said. A usual starting point for any campaign was to review recent Hong Kong Monetary Authority statistics on spending patterns, in addition to the consumer confidence index, unemployment and mortgage rates, and government data on overall personal consumption.
Lately, such figures have shown a consistent upward trend for local credit card spending, at least through the first three quarters of this year. The data also showed that, compared to two years ago, Hongkongers were using their cards far more in supermarkets, hospitals and car parks - and even to pay their annual income tax.
'The different types of indicators tell us where we are now, where we are going and how the whole market will perform,' Mr Cheung said. 'We can't change people behaviourally, but we can hope to switch their mode of payment.'
In their studies and analysis, he explained, the company often thought in terms of three 'typical' consumers. One is the value-conscious shopper always on the lookout for benefits, discounts or special promotions. Another, less concerned by the prospect of a gift or 5 per cent saving, appreciates the easy transfers, clear credit limits and minimal hassles that come with using a card as part of an extended banking service.
And the third type is the niche consumer who might opt for a card showing a popular cartoon character, or announcing membership of a fan club, professional association or special interest group.
'It is [proving] effective in Hong Kong,' Mr Cheung said. 'New characters are coming out every year and, particularly when you talk about the younger generation, this is continuing to grow.'
He said the success of any campaign depended on targeting a precise market sector and setting clear objectives for increased card usage.
That means working closely with merchants and organisations to offer tailor-made benefits for different occasions and interests. High-end fashion brands, for instance, are now part of a Hong Kong 'luxury week' offering access to catwalk events and exclusive shows, while selected mass-market retailers and hotel chains are tied in with a series of short-term promotions throughout the year.
When devising these, Mr Cheung said it paid to remember that, in most households, a woman held the purse strings.
'She is the major decision maker and controls more of the family's spending power,' he said.
Though reluctant to make financial predictions in the economic climate, Mr Cheung remained sanguine about the company's prospects, provided the trend to use cards in more locations and for lower-value purchases continues.
'There are many external challenges in the business in terms of the wellness of the economy, but our past performance has been better than the market average, and people are spending with us more frequently to get added value,' he said.
Regarding technology, he added that payments with traditional 'plastic' were on the way out. The next generation of cards will have more sophisticated chips to combat counterfeiters and a new 'contactless' feature - known as PayPass and not requiring a signature - to help with small everyday purchases.