MARKETING 611
SECTION 005
CITIBANK INDIA CASE
Learning Team A5: Mohammad Al-Ali, Greta Carlson,
Patricia Ligon, Scott Schultz, Mike Xu, Max Young
Word Count: 1496
In assessing the marketing strategy of Citibank India's credit card business, Harpreet
Grewal is faced with two choices: maintain the current strategy, with its higher margins but
shrinking growth opportunities, or expand into new target segments/geographies with their
attendant challenges and uncertainties. He would likely find that a new product launch is
justified. While Citi's position in the super-affluent/affluent segment remains strong, its falling
market share combined with the growth of the emerging affluent (E.A.) and mass market
suggest a change may be worthwhile. To begin by surveying the landscape, a 5C analysis is
shown below:
ï· Company
o Historically an innovative leader in the industry, but currently restricts itself to
servicing the super-affluent/affluent in India's largest 8 metropolitan areas.
o A strong brand, seen as offering an aspirational product and service, can be
leveraged to drive differentiation
o Losing market share from 30% to 22% despite good performance in the existing
segment (topline doubled) over the past 5 years, need to reassess market
o Need to address "profitable growth" and "efficiency factor" besides mere
revenue growth going forward
ï· Customer
o Since the global financial crisis, Indian credit card users have become more
prudent, carrying less of an outstanding balance on their cards and focusing
more on value, meaning credit-loss provisions could be reduced, making lower-
segment interest fees more compelling
o Customers can be divided into "transactors" and "revolvers" - the former pay
their entire balance off every month, thus incurring no interest, while the latter
carry some balance in their account. The latter provides critical interest fees
o Consumers increasingly have multiple cards - a preferred card for primary use
focusing on convenience and service quality, and others for travel, lifestyle, and
security needs, which has implications for new product positioning
o Super-affluent/affluent consumers inclined to use cards on travel and lifestyle-
related purchases
o E.A. consumers spend on fuel and in department stores and focus on value for
money
ï· Context
o Population is growing by 17.7% per annum, while household disposable
personal income per capita is growing at 10.54% per annum
o Regulatory changes are underway that may reshape the industry - the Reserve
Bank of India is capping interest rates and interchange fees, as well as
introducing mandatory security features, implying volume growth could become
more critical
o Credit data has become widely available, making scoring people possible
ï· Collaborators
o Merchants - merchants that accept credit cards are mostly restricted to major
urban areas, and even they frequently add a 2% fee to items that are purchased
with credit cards in order to break even on interchange and association fees
o Direct sales agents (DSAs) - offer entry into untapped markets at a lower cost
than expanding branches and hiring staff, but may negatively impact branding
o Central bank - bank regulator, hostile to new branch expansions by foreign
banks compared to domestic banks
o Increasingly, credit card issuers are partnering with other companies to offer
particular rewards (e.g. Citi and National Oil Company, SBI and Indian Railways)
which differentiates the cards
ï· Competition
o Domestic public sector banks - have vast number of branches, particularly
strong in rural areas, which has implications regarding the competitive dynamics
of expanding into rural areas
o Domestic private sector banks - employ aggressive marketing tactics including a
"lifetime free" card that eliminates the annual fee, a critical variable to win the
business of mass market consumers
o Foreign private banks - have an aspirational image, focus on affluent segments
Having reviewed the critical facts, Grewal can proceed to a Segmentation, Targeting, and
Positioning analysis.
Segmentation
The credit card customer in India can be segmented by Citi's own classifications - super-
affluent, affluent, E.A., and mass market - or by India's Socio-Economic Classification (SEC)
scheme. Citi's classification is more useful, as it provides more granular data. From data in
Exhibits 7 and 10 as well as in the text, Grewal can produce Exhibits A1 & A2, which summarize
the breakdown of the Indian population by wealth as well as geographic location, i.e. top 8
cities, remaining urban areas, and rural areas. To simplify the analysis, Grewal can assume all
households are the same size - while this is not exactly the case, it provides a sufficient
approximation. There are roughly 85 million people in the largest 8 Indian cities, of which 6-7
million are in the super-affluent or affluent segments that are Citi's current focus. As its
shrinking market share demonstrates, however, growth of the Indian credit card industry is
passing Citi by, due in part to expansion of the two sectors Citi left behind after the financial
crisis.
Targeting
If Citi wishes to adjust its strategy, there are two sensible choices for new targets - the E.A.
and/or mass-market consumer in the top 8 cities, or the super-affluent/affluent in other
urban/rural areas within India (See Exhibit A2). The former offers a much larger potential
market (12 million new potential customers vs. 6 million currently) but does not leverage Citi's
current strengths. The latter play's to Citi's strengths, but is a smaller market (2 million) and
would require sizeable infrastructure expansion given the super-affluent/affluent's preference
for physical presence and the importance of cross-selling services. Running a contribution
analysis on each segment (Exhibit B) provides more insight. There are, of course, important
assumptions underlying this analysis, which are footnoted in Exhibit B. Key findings include:
ï· While the E.A. customer offers a lower unit contribution (margin) of INR 4,000 (37%)
than super-affluent's INR 13,700 (45%) or affluent's INR 9,420 (45%), it is still an
attractive opportunity
ï· CLV is from INR 12,000-18,000 for an E.A. consumer even assuming an industry-average
12% attrition rate and a 10% discount rate, implying that spending even the INR 5,000
high-end estimate for customer acquisition would be profitable for this segment.
ï· Breakeven cannibalization rates are around 30% for the super-affluent and 43% for the
affluent - these seem acceptable given the product differentiation in terms of rewards
and marketing.
ï· From an efficiency ratio perspective, E.A. consumers in the top 8 cities will provide a
better ratio than super-affluent/affluent consumer in other regions (63% vs 73%)
The other alternative - expanding into other geographic regions - is irreversible, comes with
significant upfront investment costs, may be opposed by the RBI, all in pursuit of a small group
of customers who live in areas where merchants are far less likely to accept credit cards.
Combined with inferior quantitative metrics (see Exhibit 2), expanding to other urban and rural
affluent consumers are second-best behind the E.A. in the top 8 cities.
Positioning
Given these facts, launching a card for the E.A. in the top eight cities is an attractive
possibility. The positioning statement would read as follows:
"For the hard-working professional within and across India's largest cities, the Citi City
card offers the rewards and competitive terms previously available only to the wealthy, all
designed and supported by one of the world's foremost leaders in customer service.
Competing cards simply cannot match the array of rewards specifically tailored for the
cosmopolitan consumer; Citi's deep understanding of urban life means rewards like cash back
on fuel and electronics, and access to exclusive Indian Premier League matches for when that
hard-earned break finally arrives."
To delve deeper into these specifics using the 4P framework:
ï· Product - The Citi City Card series offers rewards relevant the E.A. within India's 8 largest
cities, including - depending on the choice of card - fuel, department stores,
electronics, Indian Premier League tickets, and inter-city travel
ï· Place - Citibank India will continue to focus on customers in the Top 8 cities. A greater
proportion of Citi's bank branches and existing direct sales force are located in these
cities and they will be able to better support a growing customer base
ï· Price - The cards will have an annual fee of 1,000 INR and a 36% APR, but the fee for the
first year will be waived and there will also be an initial interest-free period of 3 months
to entice customers
ï· Promotion - Point of sale marketing is Citi's preferred method; high precision is
necessary given the lack of economies of scale. Given the interest in the E.A.
consumers, advertising at Premier League cricket games, and within relevant stores
(department, electronics) is most likely to garner interest without requiring a vast
increase in marketing spend. Emphasizing certain locations on a weekly or monthly
basis could conserve marketing funds while still "following" consumers to their major
destinations
Conclusion
An analysis of the credit card market demonstrates that Grewal should target the E.A.
segment in the same eight cities, which offers a sizeable new market with outstanding growth
prospects. Quantitative and qualitative analysis shows the E.A. consumer to be clearly superior
to super-affluent/affluent customers outside the top 8 cities. As for simply maintaining the
current strategy, the spending growth and improved credit profile of the E.A. mean Citi has an
opportunity to participate in an expansion of wealth with strong CLVs and contributions, if it
can differentiate itself. Through targeted marketing initiatives, Citi can reach the E.A. in a way
no other bank has, and position itself for future success.
Exhibits
SOURCE: Case information
⪠72% rural population and 28% urban
population
⪠[From Exhibit 7] % distribution by
affluent level for all
India and top 8 cities
⪠Among super affluent and affluent, 75%
cluster in top 8 cities
Top 8 Cities
Other urban
areas
Rural areas
6.74%
Super
Affluent
Affluent Emerging Affluent
Mass Total %
Key info from case Geo location
Wealth level
0.06% 0.62% 3.10% 96.22% 100%
21.26%
72%
Total %
0.052% 0.46% 1.02% 5.21%
0.17% 93.09%
EXHIBIT A1: % breakdown of the Indian population by wealth level as well as geographic location
SOURCE: Case information
⪠[From Exhibit 10] Population from top 8
cities adds up to ~85
million by 2011
⪠Use the ~85 mil to play back with %
distribution from
EXHIBIT 1A to
calculate the actual #
of population for
each sector
⪠[From case] India's overall population
surpass 1.2 billion by
2011, reconcile with
our calculation
Top 8 Cities
Other urban
areas
Rural areas
85,170
Super
Affluent
Affluent Emerging Affluent
Mass Total populationKey info from case
Geo location
Wealth level
758 7,832 39,163 1,215,579 1,263,333
268,563
909,600
Total
population
654 5,788 12,903 65,824
2,147 120,181
EXHIBIT A2: Actual number breakdown of the Indian population by wealth level and by geographic location
(Unit: ,000 population)
Citi's current mkt focus Mkt expansion option 1
Mkt expansion option 2 Irrelevant - would come
after expanding either
geography or segment
EXHIBIT B: Financial & Contribution Analysis
T o
p 8
C it
ie s
O t
h e
r U
r b
a n
& R
u r
a l
S u
p e
r A
f f
lu e
n t
A f
f lu
e n
t E
m e
r g
in g
A f
f lu
e n
t M
a s
s M
a r
k e
t R
u r
a l
S u
p e
r /
A f
f lu
e n
t (
1 )
C a
s e
S o
u r
c e
/ A
s s
u m
p t
io n
s
A v
e r
a g
e M
o n
t h
ly C
a r
d S
p e
n d
( a
) IN
R 5
0 ,0
0 0
IN R
2 5
,0 0
0 IN
R 1
0 ,0
0 0
IN R
3 ,0
0 0
IN R
1 5
,0 0
0 E
x h
ib it
7
A n
n u
a l
C a
r d
S p
e n
d (
a *
1 2
= b
) IN
R 6
0 0
,0 0
0 IN
R 3
0 0
,0 0
0 IN
R 1
2 0
,0 0
0 IN
R 3
6 ,0
0 0
IN R
1 8
0 ,0
0 0
A n
n u
a li
z e
d m
o n
t h
ly s
p e
n d
in g
B a
n k
I n
t e
r c
h a
n g
e R
a t
e (
c )
1 .5
% 1
.5 %
1 .5
% 1
.5 %
1 .5
%
C it
i In
t e
r c
h a
n g
e E
a r
n in
g s
( b
* c
= d
) IN
R 9
,0 0
0 IN
R 4
,5 0
0 IN
R 1
,8 0
0 IN
R 5
4 0
IN R
2 ,7
0 0
E x
h ib
it 1
: 1
.5 %
w it
h h
e ld
f o
r b
a n
k
A v
e r
a g
e R
e v
o lv
in g
B a
la n
c e
R a
t e
( e
) 3
0 .0
% 3
7 .0
% 4
5 .0
% 6
5 .0
% 3
6 .9
% E
x h
ib it
7
A v
e r
a g
e R
e v
o lv
in g
B a
la n
c e
( b
* e
= f
) IN
R 1
8 0
,0 0
0 IN
R 1
1 1
,0 0
0 IN
R 5
4 ,0
0 0
IN R
2 3
,4 0
0 IN
R 6
6 ,4
7 4
A n
n u
a l
P e
r c
e n
t a
g e
I n
t e
r e
s t
R a
t e
( g
) 3
6 .0
% 3
6 .0
% 3
6 .0
% 3
6 .0
% 3
6 .0
% 3
% m
o n
t h
ly r
a t
e *
1 2
m o
n t
h s
A v
e r
a g
e M
o n
t h
s u
n t
il B
a la
n c
e P
a id
D o
w n
( h
) 3
.0 4
.0 5
.0 6
.0 4
.0 T
e a
m a
s s
u m
p t
io n
In t
e r
e s
t E
a r
n in
g s
o n
R e
v o
lv in
g B
a la
n c
e (
f *
g *
h /
1 2
= i
) IN
R 1
6 ,2
0 0
IN R
1 3
,3 2
0 IN
R 8
,1 0
0 IN
R 4
,2 1
2 IN
R 7
,9 5
7
A n
n u
a l
C a
r d
F e
e (
j) IN
R 5
,0 0
0 IN
R 3
,0 0
0 IN
R 1
,0 0
0 IN
R 1
,0 0
0 IN
R 1
,0 0
0 T
e a
m a
s s
u m
p t
io n
b a
s e
d o
n p
a g
e 6
T O
T A
L R
E V
E N
U E
P E
R C
U S
T O
M E
R (
D +
I +
J =
K )
IN R
3 0
,2 0
0 IN
R 2
0 ,8
2 0
IN R
1 0
,9 0
0 IN
R 5
,7 5
2 IN
R 1
1 ,6
5 7
A n
n u
a l
M a
in t
e n
a n
c e
C o
s t
( l)
(I N
R 1
,5 0
0 )
(I N
R 1
,5 0
0 )
(I N
R 1
,5 0
0 )
(I N
R 1
,5 0
0 )
(I N
R 2
,5 0
0 )
P a
g e
6
A v
e r
a g
e %
D e
li q
u e
n c
y (
m )
2 .5
% 3
.3 %
4 .5
% 6
.7 %
3 .3
% E
x h
ib it
7
D e
li n
q u
e n
c y
L o
s s
e s
( b
* m
= n
) (I
N R
1 5
,0 0
0 )
(I N
R 9
,9 0
0 )
(I N
R 5
,4 0
0 )
(I N
R 2
,4 1
2 )
(I N
R 5
,9 2
6 )
T O
T A
L C
O S
T S
P E
R C
U S
T O
M E
R (
L +
N =
O )
(I N
R 1
6 ,5
0 0
) (I
N R
1 1
,4 0
0 )
(I N
R 6
,9 0
0 )
(I N
R 3
,9 1
2 )
(I N
R 8
,4 2
6 )
T O
T A
L U
N IT
C O
N T
R IB
U T
IO N
( K
+ O
= P
) IN
R 1
3 ,7
0 0
IN R
9 ,4
2 0
IN R
4 ,0
0 0
IN R
1 ,8
4 0
IN R
3 ,2
3 1
% M
A R
G IN
( P
/ K
) 4
5 .4
% 4
5 .2
% 3
6 .7
% 3
2 .0
% 2
7 .7
%
C u
s t
o m
e r
L if
e t
im e
V a
lu e
A n
a ly
s is
( 3
)
5 -
Y e
a r
C L
V IN
R 4
1 ,8
6 7
IN R
2 8
,7 8
8 IN
R 1
2 ,2
2 4
IN R
5 ,6
2 3
IN R
9 ,8
7 5
Q u
ic k
C L
V IN
R 6
2 ,2
7 3
IN R
4 2
,8 1
8 IN
R 1
8 ,1
8 2
IN R
8 ,3
6 4
IN R
1 4
,6 8
8
C a
n n
ib a
li z
a t
io n
B r
e a
k e
v e
n A
n a
ly s
is
E m
e r
g in
g A
f f
lu e
n t
U n
it C
o n
t r
ib u
t io
n IN
R 4
,0 0
0
B r
e a
k e
v e
n %
C o
m p
a r
e d
t o
:
T o
p 8
S u
p e
r A
f f
lu e
n t
U n
it C
o n
t r
ib u
t io
n IN
R 1
3 ,7
0 0
2 9
.2 %
T o
p 8
A f
f lu
e n
t U
n it
C o
n t
r ib
u t
io n
IN R
9 ,4
2 0
4 2
.5 %
( 1
)
N o
t e
t h
e "
O t
h e
r U
r b
a n
& R
u r
a l
S u
p e
r /
A f
f lu
e n
t "
i s
b a
s e
d o
n a
c o
m p
o s
it e
o f
t h
e T
o p
C it
ie s
S u
p e
r A
f f
lu e
n t
a n
d A
f f
lu e
n t
s e
g m
e n
t s
, a
lt h
o u
g h
a s
s u
m in
g l
e s
s s
p e
n d
in g
d u
e t
o l
o w
e r
c a
r d
a c
c e
p t
a n
c e
r a
t e
s ,
a n
d h
ig h
e r
c o
s t
s f
o r
C it
ib a
n k
t o
s e
r v
e g
iv e
n i
t s
l a
c k
o f
f o
o t
p r
in t
i n
t h
e s
e a
r e
a s
. (
2 )
T
h e
c a
s e
t e
ll s
u s
m o
n t
h ly
i n
t e
r e
s t
r a
t e
s a
r e
a r
o u
n d
3 %
, f
o r
a 3
6 %
A P
R .
W e
a s
s u
m e
t h
e d
if f
e r
e n
t s
e g
m e
n t
s r
a n
g e
f r
o m
3 -
6 m
o n
t h
s t
o p
a y
b a
c k
a n
y r
e v
o lv
in g
b a
la n
c e
s ,
a s
t h
e s
e n
u m
b e
r s
p a
s s
p
u r
e ly
q u
a li
t a
t iv
e "
s m
e ll
t e
s t
"
g iv
e n
t h
e d
if f
e r
e n
t r
e v
o lv
in g
b a
la n
c e
d a
t a
a v
a il
a b
le b
y s
e g
m e
n t
. (
3 )
A
s s
u m
e s
1 2
% a
n n
u a
l c
h u
r n
s t
a r
t in
g i
n y
e a
r 2
, a
n d
d is
c o
u n
t s
e a
c h
p e
r io
d b
a c
k t
o c
u r
r e
n t
N P
V a
t 1
0 %
d is
c o
u n
t r
a t
e
EXHIBIT C: Consumer Lifetime Value, Cannibalization
T o
p
8
C i
t i
e s
O t
h e
r
U r
b a
n
&
R u
r a
l
S u
p e
r
A f
f l
u e
n t
A f
f l
u e
n t
E m
e r
g i
n g
A
f f
l u
e n
t M
a s
s
M a
r k
e t
R u
r a
l
S u
p e
r /
A f
f l
u e
n t
C a
s e
S
o u
r c
e
/
A s
s u
m p
t i
o n
s
C L
V
A N
A L
Y S
I S
D i
s c
o u
n t
R
a t
e 1
0 .
0 %
1 0
. 0
% 1
0 .
0 %
1 0
. 0
% 1
0 .
0 %
1 0
. 0
% T
e a
m
a s
s u
m p
t i
o n
C u
s t
o m
e r
A
t t
r i
t i
o n
R
a t
e 1
2 .
0 %
1 2
. 0
% 1
2 .
0 %
1 2
. 0
% 1
2 .
0 %
1 2
. 0
% P
a g
e
6
Y e
a r
1
I N
R
1 2
, 4
5 5
I N
R
8 ,
5 6
4 I
N R
3
, 6
3 6
I N
R
1 ,
6 7
3 I
N R
2
, 9
3 8
Y e
a r
2
I N
R
9 ,
9 6
4 I
N R
6
, 8
5 1
I N
R
2 ,
9 0
9 I
N R
1
, 3
3 8
I N
R
2 ,
3 5
0
Y e
a r
3
I N
R
7 ,
9 7
1 I
N R
5
, 4
8 1
I N
R
2 ,
3 2
7 I
N R
1
, 0
7 1
I N
R
1 ,
8 8
0
Y e
a r
4
I N
R
6 ,
3 7
7 I
N R
4
, 3
8 5
I N
R
1 ,
8 6
2 I
N R
8
5 6
I N
R
1 ,
5 0
4
Y e
a r
5
I N
R
5 ,
1 0
1 I
N R
3
, 5
0 8
I N
R
1 ,
4 8
9 I
N R
6
8 5
I N
R
1 ,
2 0
3
Y e
a r
6
I N
R
4 ,
0 8
1 I
N R
2
, 8
0 6
I N
R
1 ,
1 9
2 I
N R
5
4 8
I N
R
9 6
3
Y e
a r
7
I N
R
3 ,
2 6
5 I
N R
2
, 2
4 5
I N
R
9 5
3 I
N R
4
3 8
I N
R
7 7
0
Y e
a r
8
I N
R
2 ,
6 1
2 I
N R
1
, 7
9 6
I N
R
7 6
3 I
N R
3
5 1
I N
R
6 1
6
Y e
a r
9
I N
R
2 ,
0 9
0 I
N R
1
, 4
3 7
I N
R
6 1
0 I
N R
2
8 1
I N
R
4 9
3
Y e
a r
1
0 I
N R
1
, 6
7 2
I N
R
1 ,
1 4
9 I
N R
4
8 8
I N
R
2 2
5 I
N R
3
9 4
5 -
Y e
a r
I N
R
4 1
, 8
6 7
I N
R
2 8
, 7
8 8
I N
R
1 2
, 2
2 4
I N
R
5 ,
6 2
3 I
N R
9
, 8
7 5
1 0
- Y
e a
r I
N R
5
5 ,
5 8
6 I
N R
3
8 ,
2 2
1 I
N R
1
6 ,
2 3
0 I
N R
7
, 4
6 6
I N
R
1 3
, 1
1 1
Q u
i c
k
C L
V
( I
n f
i n
i t
e )
I N
R
6 2
, 2
7 3
I N
R
4 2
, 8
1 8
I N
R
1 8
, 1
8 2
I N
R
8 ,
3 6
4 I
N R
1
4 ,
6 8
8
B R
E A
K E
V E
N
C A
N N
I B
A L
I Z
A T
I O
N
A N
A L
Y S
I S
E m
e r
g i
n g
A
f f
l u
e n
t
C o
n t
r i
b u
t i
o n
I N
R
4 ,
0 0
0
B r
e a
k e
v e
n
%
C o
m p
a r
e d
t
o :
S u
p e
r
A f
f l
u e
n t
I N
R
1 3
, 7
0 0
2 9
. 2
%
A f
f l
u e
n t
I N
R
9 ,
4 2
0 4
2 .
5 %
EXHIBIT D: Sample Advertisement