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STAKEHOLDER MARKETING

MEETING THE NEEDS OF CREDIT CARDMEMBERS OF NATIONS TRUST BANK Prepared by,

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Task 1: 2 sides of A4 Task 2: 3,075 words Task 3: 1,767 words Total No. of words 5,630

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TABLE OF CONTENTS
Page Task 1: Summary of Audit Findings. 01 01 01 02 03 03 04 09 09 09 10 10 11 12

Key customer groups of NTB Credit Card Division Current marketing mix in relation to recognized key customers. NTBs current approach to relationship marketing..

Task 2: Report on Current and Future Marketing Mix of NTB NTBs most impactful and influential customers in the credit card division... NTBs current marketing mix in relation to key customers. Recommendations to improve the marketing mix 1. Introducing affinity cards 2. Introducing unlimited credits for top customers. 3. Waiving off charges 4. Using TV advertising.. 5. Expansion of branch network. 6. Summary Task 3: adoption of relationship marketing for NTB American Express Credit Cardholders. Customer relationship marketing. NTBs current approach to relationship marketing.. A better approach for relationship marketing... 1. Customer lifetime value approach..

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2. Introducing a share option scheme for top customers. 3. Multiple financial services from the bank... Appendix A.. Appendix B.. Appendix C... Appendix D.. Appendix E... Appendix F... Appendix G.. Appendix H.. List of References and Bibliography

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SUMMARY OF AUDIT FINIDINGS

Key customer groups of NTB credit card division Among all credit cardholders, American Express Platinum Cardholders, American Express Gold Cardholders and American Express Blue Cardholders can be recognized as three key customer groups. The Platinum Cardholders are the customers whose income level is above average level and when considered individually, has a high profit generating capability for the bank. They also have a high interest as to the benefits attached to the credit cards compared to other competition. They are the most loyal customer group who advocate the Amex Platinum Cards to others. Amex Gold Cardholders are the middle income earning customers of the bank. Currently they do not have a high influence and impact on the bank as Platinum Cardholders. But these are the customers who will soon become Platinum users in the near future. These customers also have a significant impact on the profitability of the bank and if satisfied, tend to advocate Amex to others giving a high influence to the bank. Amex Blue Cardholders are the customers with lower spending power whose ability to generate profit is far less than those Platinum and Gold Cardholders. Unlike other 2 groups, they do not have higher expectations as to Special offers, loyalty programmes and various other benefits attached to the credit card. Thus, the loyalty they have is also minimal. Current marketing mix in relation to recognized key customers Product Cards have been designed addressing credit needs of customers who fall in to various income categories. Numerous benefits have been attached to the cards such as Wallet Guard, Emergency Assistance and 0% interest instalment plan. Many offers and loyalty programmes also have been attached to the card. While competitors offer credit cards with unlimited credit for high-end customers and various affinity cards for lower income earners, NTB not addressing such needs arise as major pitfall of the product element of the mix. Price The price element of the marketer is the cost to the customer. In relation to credit card service, it is the various charges borne by the cardholder. Basic charges are interest charges, annual fee, joining fee, credit enhancement fee, etc. Depending on the card type, annual fee varies. All other charges are the same for all cardholders. According to the current trend in the industry annual fees and joining fees are waived off to create a positive image in cardholders mind about charges. In such a context, NTB should identify the need to make amendments to their pricing policy. 4|Page

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Place The bank provides utmost convenience to existing cardholders by introducing online banking, SMS banking and mobile banking. The credit applicant does not need to make any visit to the bank in order to obtain the card. Once the online application is filled and submitted, the evaluation of the suitability of the applicant is done and the card is delivered to the home. But the bank has very limited number of branches established only in Colombo and Kandy areas. Promotion The promotion element has been designed to provide adequate information to the potential cardholders, especially via the banks website. But the awareness among the public is very limited since the promotion mix does not include TV advertising to promote the cards. People The Human Resource Division of the bank ensures that the entire staff has skills and capabilities to deliver a better value to the customers and especially, the front line staff has a good compassion towards the customers. Process The process of issuing credit cards to the applicant is a one which is designed for the customers convenience. The bank has introduced an option to the customer to view their credit card statements online where the bank does not have to send paper statements to the cardholders. Physical evidence These are the tangibles of a service. When it comes to credit card service, the design of the card and the statement play major roles as physical evidence. Amex credit card and the statement are well designed according to the customers taste. NTBs current approach to relationship marketing Relationship marketing is about minimizing customer churn by enhancing customer loyalty. The bank provides some exceptional services/benefits to its cardholders which are not offered by other competitors. Few of such benefits are Wallet Guard, Global e Shop, Emergency Assistance and Zero Fuel. The Span of the merchant network satisfies almost all the needs of customers and discounts and other offers are provided to enhance customer satisfaction. Especially the loyalty programme for cardholders is very effective to retain customer since they can enjoy loads of benefits from it. Cardmembers can also convert their loyalty points to nexus points, which is the largest loyalty programme in Sri Lanka with the highest number of merchants. 5|Page

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Marketing Mix Report

Improving the marketing mix for better satisfaction of Amex Cardmembers

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To: Marketing Manager From: Marketing Assistant Date: 31st October 2011 Subject: NTBs current and future marketing mix in relation to Amex Cardmembers Reference: MKT/2011/740

NTBs most impactful and influential customers in the credit card division
In the credit card division of NTB, Platinum Cardholders, Gold Cardholders and Blue Cardholders can be recognized as three key customer groups. The platinum Cardholders are the highest income earning customer group (High-end customers) who generate a significant magnitude of profits, when considered individually. They have a high spending power and they are highly interested in the offers, special privileges and loyalty programmes since they always tend to compare such benefits with those given by competitors for the high-end customers. If they are satisfied with the service, they tend to become the most loyal customers of NTB, who would then advocate the Amex credit cards to others. The Gold Cardholders are the middle income earning customer group of the credit card division whose average monthly income is in the range of Rs. 150,000-100,000. These cardholders also have a significant level of interest as to special offers, privileges, and loyalty schemes offered to them through the credit card. If satisfied with the service, these cardholders also have the potential to generate more new customers to NTB. Currently these cardholders might not be having a high influence and impact on the bank like Platinum members. But those are the customers who turn in to Platinum Cardmembers in the near future. The Blue Cardholders are the lower income earning customer group (with low spending power) whose individual profit generating ability is relatively lower. These Cardholders do not hold a high interest as to the benefits attached to the credit card as Platinum and Gold Cardholders. They also do not possess a high loyalty for the bank and do not tend much to promote the card to others. As such, impact and influence of Blue Cardholders on the bank are relatively minimal.

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Since there are limited number of Platinum and Gold Cardholders (153 and 599 respectively) the power vested in such Cardholders is relatively higher than Blue Cardholders. Accordingly, Platinum and Gold Cardholders can be recognized as key players among customers and as far as Blue Cardholders are concerned, the bank has to put a minimal effort (Refer Figure B.1 in Appendix B) on them.

NTBs current marketing mix in relation to key customers

Marketing mix consists of tools used by a marketer to carry out marketing tactics to satisfy needs of target customers. Operating in the service sector, all 7Ps matter to NTB for the customers satisfaction. Following is a detailed analysis of the extent to which the current marketing mix meets the needs and expectations of credit cardholders of NTB. Product The product element describes the bundle of benefits offered to the customer in order to satisfy the customers needs and wants. As such, in product element we mainly focus on ability of the firms product to address customer needs and product portfolio offered by the organization. The Platinum American Express Credit Card The card has been designed for those who earn more than Rs. 150,000 per month. As such, the card satisfies the credit needs of high-end customers. As the credit card offered by the bank for above average income earners, the credit limit of Rs. 500,000 is questionable since such customers have the potential to settle debts of an amount more than Rs. 500,000. Such customers even may need to make purchases for more than Rs. 500,000. In a context where many international banks operating in Sri Lanka are introducing credit cards addressing such needs of high income earners (sometimes those credit cards offered by such banks do not have credit limits), NTB must take steps to enhance credit limits, especially for the high income earners. American Express Gold Card The card is basically designed to satisfy credit purchases of middle income earners whose minimum monthly income is Rs. 150,000. As such, these cardholders can make credit purchases from the merchant network up to Rs. 250,000.

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American Express Blue Card The card is available to satisfy credit purchase needs of lower income earners. For any person who earn a minimum monthly income of Rs. 30,000 can apply for the card and the credit limit is Rs. 100,000. The major pitfall of the credit card portfolio of the bank is that, it is only the Blue card which is designed for lower income earners. Many competitors have introduced various affinity cards (mostly for those who earn at least Rs. 30,000 per month) enabling their cardmembers to be recognized in relation to a group of their colleagues. (Ex: HNB Royal College RCU, Seylan Bank St, Peters College Affinity Card). While all other local banks offering affinity cards satisfying the taste of locals, NTB not introducing varieties of the Blue Card can be considered to be huge drawback of the product mix. Cardmember offers and benefits attached to all three cards are the same except for those special privileges for Platinum Cardmembers. The merchant network is wide enough to satisfy all needs of cardholders covering travelling, shopping and dining. Price Price to the marketer is the cost to the customer. As such, creating a positive attitude in the customers mind regarding the price is not an easy task. In relation to credit cards, prices include various fees charged from the customer such as, Interest charges, Annual fees, Credit limit enhancement charges, Joining fees and various other charges.

As far as credit card industry is concerned, charges are more or less standardized. This is very much true when it comes to interest charges where the current interest rate for credit cards is 24% per annum (2% per month). The current trend in the industry is that annual fees and joining fees are being waived off. Consumers are always price conscious. If they are communicated that they do not have to bare a joining cost and an annual cost, it creates a positive picture in the customers mind that he is receiving a costless service.

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The best example is HSBC credit cards which are also considered to be world class credit cards. HSBC Gold Cards, Visa Platinum Card and Premier Card are offered without charging a joining fee and an annual fee. As such, making adjustments to the charges is a must to be competitive in the market, which will make the customer feel that his needs are well addressed by NTB. Place Jobber (2010, p625) states that products need to be available in adequate quantities, in convenient locations and at times when customer wants to buy them. As such, from the customers view point, it is his convenience of obtaining the product/service. NTB has provided online facilities for the customer to apply for the cards. The online application is detailed enough to obtain all information relating to the applicant. Having obtained the e-application, the bank evaluates the eligibility of the applicant to hold the card and if accepted, the card is made available to the door step of the customer. Not even that, after obtaining the card, without making any visit to the bank, all activities related to the card such as credit settlement, obtaining statements can be done via online banking, SMS banking and telephone banking facilities. As such, place element of the mix is well designed to cater to the convenience of the customer, which is far better that the convenience provided by other local banks. Anyway, since the branch network is limited only to Colombo and Kandy areas the cardholders are very limited from other areas in the country. Promotion The main role of the promotion element is to communicate target customers about the details of the product and to increase the awareness among them. Any potential customer who is aware of American Express credit cards issued by NTB would refer the website for more details about the service. The potential customer might surf websites of all competitors shopping around for the ideal card for him. In such a case, making all relevant details available on the website is very much important as a costless effort of gathering information. With compared to other local banks websites who provide credit card facilities, NTB website is well detailed to provide the customer with all information about the suitable credit card for him. Apart from details regarding offers, the web-site contains all kinds of charges, format of the statement, credit card agreement, terms and conditions relating to membership rewards programme etc. This is the point where the bank has right hit the Information Search and evaluation of alternatives phases of the decision making process of a customer (Refer Appendix C). 10 | P a g e

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Nevertheless, the bank does not use Television advertising for promotion of credit cards, which would otherwise have increased the awareness among the general public immensely. When all other banks use TV advertising to promote their credit cards, NTB not using it highlights as a major shortfall in the promotion mix of the bank. Anyway, personal selling adopted by the bank by directly contacting corporate executives, academically and professionally qualified community is very effective when acquiring potential customers. As well, using the mostly used social network in Sri Lanka, Facebook, is also an effective use of media by NTB to enhance the awareness among the customers and potential customers. People In the service sector, the element people has become a famous topic since the degree of involvement of people in the service sector is more than in the production sector. It is not only the front line staff, but also the entire staff at different levels matter for a better value delivery for the customers. The front line staff of the credit card section consists of friendly and supportive employees who provide all assistance and guidance for the current credit cardholders and potential customers. The HR Division of the bank prepares comprehensive training plan, with particular focus on customer service, technical skills, risk management, selling skills and teamwork. Physical Evidence When it comes to credit cards, the corporate identity and the degree of recognition of the card is very much important to create a good brand positioning in the potential customers mind. Nations Trust Bank with its logo One Bank Many Solutions associated with the internationally recognized credit card brand American Express is the key drive to create a strong brand positioning in the customers mind. The picture of an American soldier printed on the cards (Refer Figure D.2 in Appendix D) help to embody the international recognition to the card which makes the customer think that he is experiencing the service of a world class credit card. The credit card statement also plays a vital role as part of physical evidence. The format of the statement, clarity of its presentation, understandability and simplicity are equally important. The credit card statement format of NTB has been designed in a manner that is highly understandable to any person. Statements are issued in all 3 main languages in Sri Lanka (Sinhalese, Tamil and English). This also can be recognized as a plus point for the statement receiver who would not get confused having received the statement in all 3 languages presented in one statement (Refer Figure D.3 and D.4 in Appendix D). 11 | P a g e

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Processes Service process is the way in which a service is delivered to the end customer. Designing the process according to the taste of the customer is very crucial for the customers satisfaction. When it comes to those customers of the credit card line of the bank (the cardholders) most of them are busy professionals and businessmen (especially, Amex Platinum cardholders who are occupied in top executive positions and who lead busy lives in improving their businesses) and they expect a more convenient process from the bank. The credit card process of the bank is well designed according to these expectations of its customers where the customer does not have to make any visit to the bank in order to obtain the card and to settle all other subsequent matters in relation to the credit card. The process of issuing credit cards is shown in Figure E.1 in Appendix E. The new programme of the bank, Inner Circle brings a new experience to the customers where financial solutions are offered at the door step of the customer. No matter whether the customer is, at home or at the office, by making a phone call, the customer can have an agent at his door step and the credit card payment can be made to the agent.

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Recommendations to improve the marketing mix

Introducing affinity cards NTB American Express Blue Card can be modified in to various affinity cards, enabling cardmembers to be recognized in relation to a group of colleagues that they are associated with. This would become a giant step of shaping the American Express Credit Cards according to the local taste of Sri Lankans. As such, NTB can collaborate with famous and well reputed colleges in Sri Lanka such as S. Thomas College, St, Peters College, and Royal College. Not only with colleges, such affinity cards can be introduced for those who are members of professional bodies such as Institute of Chartered Accountants of Sri Lanka. This will enhance the relationship with cardholders (Especially who earn less than Rs. 30,000 per month) and will satisfy customer needs better. Measuring the success Having introduced affinity cards, the success can be simply measured by counting number of affinity cardholders acquired by NTB since its commencement (rate of acquiring=number of affinity cardholders/No. of months since establishment). As well, a research can be conducted to evaluate the customer awareness of those cards and their views regarding cards to evaluate the effectiveness of the scheme. Introducing unlimited credits for top customers Introducing unlimited credits gives rise to high risk to the bank. It is not that the bank should introduce unlimited credits to all Platinum Cardholders. The bank can recognize those Platinum users who earn exceptional income levels exceeding the normal income level specified for the Platinum Cardholders and those who are very loyal to the bank. Such an improvement would satisfy needs of high income earners who actually can afford to purchase more than the existing credit limit of Rs. 500,000. Since such needs of high end customers have already been addressed by other competition (Ex: HSBC Premier Credit Card, Sampath Bank Visa Infinite), such an improvement would be a definite necessity to meet needs of high end customers. Measuring the success

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Introduction of such a scheme would enhance the loyalty of existing Platinum Cardholders immensely. Measuring the loyalty is not an easy task to measure the success. NTB can conduct focus group discussions, in-depth interviews to dive in to thoughts, attitudes of such cardholders to find how their loyalty has increased. Alternatively, the success can be simply measured by counting number of Platinum Cardholders and new customers acquired by introducing the scheme. Waiving off charges The bank can waive off charges, especially the annual fee and joining fee which would make the credit card service of NTB competitive in relation to charges. Instead, a scheme such as maintenance of savings or time deposits can be introduced (with a minimum limit for various card types). By introducing such a scheme, the bank can promote its deposit service as well as waived off charges can be recouped from those charges made for deposits. Measuring the success The success can be measured by taking the amount of savings/time deposits opened by cardholders in to consideration (with a particular period of time). Also, a survey to evaluate credit cardholders views regarding such a scheme can be conducted after a particular period of time by sending mails to them. Using TV Advertising Introducing TV advertising using celebrities will be very effective to attract customers. It will enable the bank to address very large number of customers impersonally. This would help to enhance the customer awareness through repeated exposures to a TV commercial (i.e. low involvement information processing) as explained in passive learning theory (Schiffman and Kanuk, 2007). Measuring the success NTB can measure the success of those TV advertisements using Media Evaluation. Using media evaluation, the content of the advertisement, as well as the efficiency of the media selected can be measured. NTB can get Lanka Marketing Research Bureau (LMRB) to evaluate the effectiveness of the advertisement content and measure the number of viewers of a particular programme (During which the NTB advertisement if broadcasted) measuring the number of people who are aware of NTB credit cards. Tracking studies can also be used in order to document the apparent effect of advertising over time. 14 | P a g e

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Expansion of Branch Network The credit card service of the bank is limited only to Colombo and Kandy areas. As such, credit card needs of those who live out of these areas are mainly satisfied by other competitors (Especially, HNB, Sampath Bank). In such a context, the bank can expand its activities in each and every corner of Sri Lanka (by pursuing an expansion strategy) by establishing more and more branches. NTB will be able to acquire more loyal Amex cardholders from those areas by satisfying their credit card need. Measuring the success The success can be measured by identifying number of branches opened within a particular time period (Ex: per month, per year) and by measuring the number of cardholders acquired by each branch within the period from the date of establishment to the end of financial year.

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Summary
American Express Platinum Cardholders, Gold Cardholders and Blue Cardholders were recognized as three key customer groups in the credit card division of NTB. An audit was conducted evaluating the marketing mix to find out degree to which the current mix meets the needs of those three customer groups. The audit findings indicate many gaps in the current marketing mix, especially in the elements of Product, Price, Place and Promotion. These gaps were identified by deeply analyzing each element. Under the product element, lack of unlimited credit facilities and lack of affinity cards, under place element lack of a widely spread branch network and under promotion element, lack of TV advertising were recognized as major pitfalls. Recommendations were then given such as introducing unlimited credits to the most loyal Platinum Cardholders, introducing affinity cards, waiving off charges, including TV advertising to the communication mix and expanding the branch network to improve each element together with the measurements to recognize the success of each recommendation given.

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Relationship marketing

Discussion Paper on

Adoption of Relationship Marketing for NTB American Express Credit Cardholders

Prepared by

W.G.K.C. Kaushalya 01st November 2011

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Abstract Competition in the credit card industry is ever increasing. Local, as well as international banks day-byday come out with new plans, programmes and schemes in order to delight cardholders that go beyond general expectations of them. In such a context, NTB, being franchisee of American Express Credit Cards in Sri Lanka should seek ways of improving its relationship with credit cardholders. In order for the bank to pursuit better approaches to strengthen relationships, first it must be thorough in basic concepts in relationship marketing such as Loyalty Ladder, Key Mediating variable Theory (KMV) and Customer Lifetime Value Approach. Having understood such basics and its current approach to relationship marketing, the bank can utilize such theories in a better way (which are not adopted by the competition) to build a life time relationship with cardholders.

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CUSTOMER RELATIONSHIP MARKETING

With the increased competition in the business world, the concept Relationship Marketing has transcended the concept Transactional Marketing. In transactional marketing, the transaction with the customer is seen as the ending point of the relationship with the customer where as in relationship marketing, such a transaction is considered to be the starting point of creating a life time relationship with the customer. John Egan (2008, p37) defines relationship marketing as identify and establish, maintain and enhance and when necessary, terminate relationships with customers and other stakeholders, at a profit so that objectives of all parties involved are met. Building a life time relationship with the customer generates numerous benefits to any organization that can be briefed in the following manner. Ensure long term sustainability and growth of sales and profitability Positive word of mouth, which is the least cost advertising method (Advocacy) Increased switching cost to the customer Ability to obtain a competitive edge over rivals through customer satisfaction and retention

How relationship marketing differs to traditional transactional marketing can be shown in the following manner. Transaction Marketing Single purchase Focus on product features Limited customer contact Limited customer service Goal of customer satisfaction Quality is a responsibility of the manufacturing Relationship Marketing Repeated purchase Focus on product benefits to the customer Frequent customer contact High level of customer service Goal of customer delight Quality is responsibility of the entire organization

Relationship marketing can be recognized a tool used to move the customer up, from a Prospect to a Partner in the loyalty ladder which was adapted by Payne et al (1995, pviii) to create a relationship (Egan, 2008). (Refer Appendix F).

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NTBS CURRENT APPROACH TO RELATIONSHIP MARKETING

Currently, the bank mainly adopts following approaches in order to strengthen the relationship with customer and to minimize customer churn. Buddle of benefits attached to the credit card for customer satisfaction The bank offers many benefits to the customer, especially by considering his convenience. Free overseas travelling insurance, Platinum Access, Global e Shop benefits, emergency assistance, Nexus Loyalty Programme, 0% interest instalment plan and Wallet Guard that give special privileges to NTB credit card holders over the others. (Refer Appendix G: Special privileges). Such special privileges exclusively offered to NTB credit cardholders have made it difficult for him to switch to another card offered by competitors. Thus, it has increased customer loyalty by reducing customer churn to a greater extent. Special offers are given to cardholders time to time where they can shop, dine and travel with money off discounts. The merchant network of the bank forms exquisite places such as Odel, Cinnamon Lodge Habarana & Azmara Spa, Hilton Colombo, Brook Botique Hotel, etc. that give cardholders the opportunity to experience the fine environment in such places. Card members who prefer to obtain such experiences find no reason to go seeking better offers given by competitive cards. As well, potential customers have a stimulus to be a member of NTB credit cards in order to get such benefits, which makes prospects to customers and clients. Loyalty programmes Nowadays, loyalty programmes have become part and partial of credit card services. As such, NTB adopts a membership reward scheme as a loyalty programme. For every Rs.100 spent using NTB credit cards, cardholder is rewarded 1 point. The points have no expiration date and can be redeemed at local merchants or at a range of global frequent traveler and frequent guest programs. Also, the members have the opportunity to convert those points in to their Nexus points and redeem them at any Nexus partner outlet. It is the trust and commitment of NTB that has made its customers to hold on to their credit cards. Delivery of all benefits as they have promised (as communicated to the customer), has improved customer loyalty towards NTB. Especially, overseas travelling benefits attached to Platinum Credit Card give enormous benefits to high income earners such that, relationship termination has become very high. As well, continuous communication with the customer as mentioned in the KMV theory (Refer Appendix H: the KMV theory) has strengthened the long term relationship with the customer. 20 | P a g e

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A BETTER APPROACH FOR RELATIONSHIP MARKETING

There is no argument that the competition prevails in the credit card service sector is ever increasing. All banks are competing for the income of customers who fall in to different income level category. In such a context, banks cannot remain silent by satisfying themselves with already implemented programmes to strengthen the relationship with customers. Innovative ideas must be generated continuously either internally or externally, in order to improve the life time relationship with the customer. NTB, being the exclusive provider of American Express Credits to Sri Lankans, can take following steps to strengthen the relationship with the customer even more. Customer lifetime value approach The life time value concept suggests that a company should avoid taking a short term view of the profit of any individual but rather should consider the income derived from that companys lifetime association with the customer (Egan, 2008) .As such, through existing customers (credit card holders, savings and time deposits holders or loan borrowers) the bank can create a chain of financial solutions, targeting their children (even new born ones) that will be beneficial for those children at different stages of their lives. It is well demonstrated in figure 3.1.

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AMEX PLATINUM CARD

AMEX GOLD CARD

AMEX BLUE CARD

LOANS Especially loans for higher education (academic or professional), with more flexible terms and conditions for those who already possess savings accounts with the bank, for them to attain high income earning opportunities

SAVINGS ACCOUNTS FOR TEENAGERS (With more benefits for those who converted the account from minor savings)

MINOR SAVINGS ACCOUNTS (Age between 0-12 years)

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Figure 3.1: building a life time relationship with the customer

Cost benefit considerations Unlike acquiring new customers, when up trading existing customers, they always expect a special offer from the bank since they perceive that they deserve such special offers for being loyal and long term customers throughout their lives. But the benefits from such relationships exceed those costs due to the fact that even if the bank is to lose its other customers, those loyal ones will form the core customer base of the bank generating profits that will last for a long time period. Besides, those loyal customers will tend to advocate the bank to others creating a positive word of mouth. Introducing a share option scheme for top customers In many of the service sectors such as banks and hotels, the firms have the opportunity to recognize high income earning customers based on their spending pattern. NTB can get the benefit of such information they hold in their hands (about income level of card holders) and can introduce a share option scheme for the most loyal customers who have been with the bank for a long period of time and give them the opportunity to be partners of their success. Specially, Amex Platinum cardholders would be the customers who want such a relationship to be built with the bank. At the consent of the cardholder, shares can be issued at a price less that the market price of the shares. Being promoted up the ladder (Refer Appendix F: Loyalty Ladder), they get the chance of reaching the highest position in the ladder, i.e. partner. Cost benefit considerations Issuing shares at a discount will reduce the amount of capital flowing in to the company. And of course, being owners of the bank, they would expect more advantages and benefits from the card at the expense of the bank. Despite such costs, benefits can be immense. They would tend to stick to the bank sharing values of the bank due to high corporate reputation and recognition possessed by the bank. It will ensure their long term association with the bank creating a core of loyal customers. As well, they will tend to promote credit cards of the company together with their benefits to the others. Multiple financial services from the bank If the bank can convince those credit cardholders to enjoy other services provided by the bank, it can create a magnet where the customer will find it difficult to switch to another bank. Most of the customers tend only to use the Amex credit cards provided by the bank due to American Express brand without using other financial services provided by the bank.

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Some believe that credit cards are all about spending. Even without cash in hand, credit cards convince people to spend and when the debt is not settled on time, a high interest is charged. The bank can introduce a scheme where this perception of customers is changed. Instead of accruing points to the customers that becomes another stimulus to spend, the bank can save a specific sum in a savings account opened in the name of the cardholder, for every specific amount spent by the customer using the credit card. (Ex: for every Rs.100 spent, Rs.1 is saved in the savings account). Such a programme will create a positive feeling in the customers mind that all what they do with their credit card is not only spending; but also saving. Cost, benefit considerations Benefits derived from such a programme will be immense. First and foremost, NTB will be the first one to introduce such a scheme which will become a factor of differentiating its credit cards from competitors credit cards. It will also increase the loyalty of cardholders where they will find it difficult to switch to another competitors being a user of many financial services provided by the bank. Anyway there will be a high cost involvement for maintenance of accounts and paying interest for the savings.

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Appendix A
NATIONS TRUST BANK Company Background Nations Trust Bank (NTB) was established in July 1999 acquiring the Colombo branch of Overseas Trust Bank Ltd. Since then, the bank has grown rapidly by expanding its client base using strategic acquisitions to its portfolio. One such critical movement is the acquisition of Commercial Banking Business and Foreign Exchange Business of American Express Bank in Colombo. Credit card business has grown leaps and bound during the eight years it has been in issuance in Sri Lanka and has contributed well to the banks overall bottom line. The bank provides employment for 1,600 people over its 40 branches established in Colombo and Kandy areas. Customer Base of the Credit Card Line The Credit Card customer base of the bank can be mainly segmented based on the income level, which is one of the demographic aspects that can be used in segmenting customers. The total number of cardholders (Excluding supplementary cardholders) is 3740, where, the composition can be given in the following manner. Credit Card Platinum Cardholders Gold Cardholders Green Cardholders Blue Cardholders Total
Table A.1 (Customer base categorized based on the income level)

Income Level (LKR) 150,000 100,000 50,000 30,000

No. of cardholders 153 599 852 2136 3740

The bank has established its branches only in Colombo and Kandy regions of the country. As such, the geographical dispersion of the customer base has limited only to Colombo, Gampaha and Kandy Districts of Sri Lanka. Credit Cards Offered by NTB

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The credit card line offers a fine range of American Express Credit Cards touching different income levels of card users. The credit card portfolio consists of 4 cards with varying credit limits. The interest free period for all cards is 50 days and interest is charged @ 24% per annum. (Contd.) Credit Card Expected Income Level (LKR) Amex Platinum Amex Gold Amex Greed Amex Blue 150,000/pm 100,000/pm 50,000/pm 30,000/pm Credit Limit (LKR) 500,000 250,000 200,000 100,000 Annual Fee (LKR) 5,000 2,900 1,900 1,000

Table A.2 (Amex Credit Cards for Different Income Levels)

Credits cards are attached with ample of offers, benefits and privileges. The merchant network consists of a fine combination of merchants addressing differing needs of the cardholders including shopping, dining, travelling and hotel. Competitive position in the credit card market The competition in the credit card industry is an ever increasing one. Day-by-day, competitors introduce new advance cards with more and more offers, loyalty programmes, privileges for their credit cardmembers. In such a context, continuous improvement to the card portfolio is a must for the long term survival and growth. The position of NTB in relation to other competitors based on the asset base in the credit card lines can be shown in the flowing manner.

6.75% HNB Commercial Bank 12.28% 4.66% 15.17% 30.33% 5.09% 25.72% HSBC Sampath Bank SCB Seylan Bank NTB

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Figure A.3 (Market position of NTB relatively to competitors)

Appendix B PREPARATORY WORK

Key customer groups of the nations trust bank Among the cardholders, American Express Platinum Credit Cardholders (Amex Platinum), American Express Gold cardholders (Amex Gold) and American Express Blue Cardholders (Amex Blue) can be recognized as key customers/accounts of the bank. More than 50% of the annual fee income is generated by those cardholders. Amex Platinum Credit Cardholders Among all credit cardholders, Platinum card members can be recognized the most impactful and influential customers among all cardholders. If satisfied, they tend to advocate cards to the others. As such, they have a high influence over the bank. These are the customers with the highest spending power due to high income they earn. Among all cardholders, Platinum Cardholders have the highest interest on the bank as they expect a higher service level with more benefits attached with compared to credit cards issued by competitive banks for the same level of income earners. Amex Gold Credit Cardholders Though these cardmembers do not have a high spending power as Platinum Cardmembers, those are the ones who would later become Platinum Cardholders. Profit generating capabilities of them is moderate at present. These two customer groups, if delighted (for receiving benefits more than what they expected) tend to advocate credit cards to others, which is a costless advertising method to the bank. As such, they possess relatively high level of power compared to Blue Cardholders. As such, keep them satisfied is very crucial for the success of the business. Amex Blue Credit Cardholders These are the cardholders with less spending power. As such, the profit generating capability of such customers is minimal. Therefore, they have a little impact over the bank. These credit cardholders do not have higher expectation levels as to the benefits attached to the credit card as Gold and Platinum cardholders and do not tend to advocate credit cards to others. As such, they have less influence over the bank. Having recognized the key customers of NTB, these customers can be plotted on the Mendelow Matrix identifying their different levels of power and interest. If the stakeholders are plotted regularly, the matrix can be used to highlight possible threats (or assistance) as strategies are proposed or modified by the organization.

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Level of Interest
LOW

HIGH

LOW

Amex Blue Cardholders

Power

Amex Platinum Cardholders HIGH Amex Gold Cardholders Figure B.1 The Mendelow Matrix

Current marketing mix in relation to key credit card holders Providing credit card facilities is one of the major financial services provided by NTB. As such, all 7Ps matter to meet the needs of credit card holders. 7Ps currently adopted by the bank can be demonstrated in the following manner. Product The product element in relation to credit card holders include the bundle of financial benefits received by them being associated with the card. Here are the benefits attached to the credit cards issued for the above identified key customers. All 3 cards provide the facility to purchase goods/services from the merchant network of the bank up to following credit limits.
The Platinum Card The Gold Card 500,000 250,000 50 50 Table B.2 credit card limits The Blue Card 100,000 50

Credit limit (LKR) Credit period (Days)

Cardmember benefits attached to all 3 cards Travel insurance Wallet guard Global e shopping e- statement Online payment solution Emergency assistance Automated bill settlement 0% interest instalment plan Extended settlement plan Concierge service Membership rewards Nexus loyalty programme Dining specials Payment services Cardmember online services Convenient cash withdrawals 28 | P a g e

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In addition to that, special privileges are provided to Platinum Cardholders such as Platinum Privileges, Platinum Access and Concierge benefits. Price Price includes interest and various other fees charged by the bank from the customers for the provision of services. From the customers view point, charges made by the bank are costs to them. The current interest rate for all credit cards is 2% per month (24% per annum). Annual fees vary according to the credit card held by the customer. Annual fee is Rs. 5,000, 2,900 and 1,000 for Platinum, Gold and Blue cardholders respectively. While all other competitors (HSBC, Sampath and HNB) waive off charges for credit cards, the pricing strategy of NTB has to be reversed accordingly to match with competitors strategy. Place Place is the convenience of the customer in obtaining the service provided by the bank. In relation to all three credit cards, the customer can apply for the cards online without visiting the bank. All information pertaining to the cards are available on the bank website and individuals can view the card account, check the activities and balances online. The bank currently provides its financial services through 45 branches and 59 ATMs established in Colombo, Kandy, Kurunegala, Galle and Mathara areas. In addition to that, card holders can obtain services via telephone banking, SMS banking and Mobile banking. Promotion Promotion mix includes various communication tools used to communicate with target customers. The main elements are advertising, public relation, personal selling and sales promotions. NTB credit cards are advertised on its own website, detailed enough for the customer to get an idea about the ideal credit card for him. Also, the cards are advertised in the most popular social network; Facebook, which has supported to increase the awareness among customers to a greater extent. Personal selling plays a key role in communicating to the customer where target customers such as executives, academically and professionally qualified customers are contacted (via telephones, e-mails) and they are a given details about credit cards. The bank uses hoardings as one of the advertising media to advertise its credit cards. People Staff at every level matters for a sound delivery of services to the customers. For this purpose the bank has invested in a considerable amount of resources in placing trained people in empathy with the customer in front of them and ensure that the back-office is also a partner in this effort. The front-line staff also consists of those are very friendly, polite and helpful to the customer. Processes Process is referred to the procedures, mechanisms and flow of activities by which the service is delivered. Customers can apply for the credit cards online as the starting point of obtaining a credit card. All other negotiations with the customer take place over the phone and the card is made available to the door step of the customer. As such, the customer does not have to visit the bank in order to obtain the card. As well,

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the bank has reduced its activities to a greater extent by making the statements available online (estatement facility). Physical evidence These are the tangibles of a service; things that can be seen and touched by the customer. NTB logo with the phrase One Bank Many Solutions is significant for creating visualization and corporate identity. When it comes to credit cards, the design of the card and the statements issued to the card holder matter for a good impression. The card is well designed to give an impression to the customer that he/she is using a card with an international recognition. NTBs approach to relationship marketing Customer relationship marketing is about building a life time value to the customer which would minimize customer churn through customer satisfaction. NTB has taken following steps in relation to their credit cards as approaches to customer relationship marketing. Buddle of benefits In relation to credit cards, the main approach of relationship marketing is to offer a buddle of benefits to the card holder, making it difficult for the customer to switch to another credit card offered by the competition. Numerous benefits attached to the credit card make it an incomparable to those cards offered by the competitors. Benefits attached to the cards can be lined up in the following manner. Travel insurance Global e shop Emergency assistance Automatic bill settlement 0% interest installment plan Concierge services Membership rewards Zero fuel Payment services

Numerous discounts are offered at various shopping and dining centers all over Sri Lanka such as Odel, New Asian Textile, New Kandy Shoe Palace, Cinnamon Lodge Habarana & Azmara Spa, Chaaya Wild Yala and Chaaya Tranz Hikkaduwa, Autogrill Lanka Duty Free Shops and Hilton Colombo. Not only that, especial money off discounts are available on Qatar Airways and can fly to Bangkok, Singapore or Malaysia on SriLankan Airlines by redeeming part of FlySmiLes points and paying the difference. Loyalty programmes Membership rewards scheme is the main customer loyalty programme used by NTB to create an extra benefit for the American Express Cards holders. Accordingly, for every Rs. 100 spent using American Express card, the customer can collect 1 loyalty point and these points can be redeemed at any redemption partner with whom NTB has partnered with. Such partners include shopping centers, beauty and wellness centers, wine and dine centers, and various other centers. The bank has partnered with Nexus, which is the main loyalty scheme available in Sri Lanka where, the card holder can add his points to his nexus account. The unique benefits which are exclusively enjoyed by Amex Cardholders (Emergency Assistance, Zero Fuel, Global e Shopping) together with its exquisite merchant network have made it difficult for the customers to switch to another competitor. As such, these strategies have been very effective in reducing customer churn to a greater extent. 30 | P a g e

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Appendix C DECISION MAKING PROCESS OF A CUSTOMER

Need recognition and problem awareness

Information search NTB website details

Evaluation of alternatives

Purchase

Post-purchase evaluation

Figure C.1 (Decision Making Process)

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Appendix D
Nations trust bank logo

Figure D.1 (Bank Logo)

Credit cards issued for the cardmembers of the bank

American Express Paltinum Credit Card

American Express Gold Card

American Express Blue Card

Figure D.2 (appearance of credit cards)

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(Contd.) Vertical presentation of basic details in the Credit Card Statement such as Card Number, Statement Period, Credit Limit, Available Credit Limit, Minimum Payment Due etc. helps to distinguish account summary and transaction details from those basic details, which are presented in a horizontal format. Statements are issued only in the language familiar to the customer.

Figure D.3 (Credit Card Statement of NTB)

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(Contd.) The Credit Card Statement of Seylan Bank The statement is presented in all three languages and some fields are given only in the language of English.

Figure D.4 (Credit Card Statement issued by Seylan Bank)

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Appendix E
THE PROCESS OF ISSUING CREDIT CARDS Customer obtains all the required information relating to the credit card

Customer fills the application form available on the banks website

Upon submission, automatic update of the banks database

Evaluation of details against pre-set criteria (done by the expert system)

If criteria are met

No

Seeks Possibility to offer another card

Communicate the customer about the acceptance

Delivery of the card to the door step of the customer

Figure E.1 (Process of issuing credit cards)

YES

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Appendix F THE LADDER OF LOYALTY

The Ladder of Loyalty describes the development of a business relationship between its customers. It recognizes different levels of customer loyalty from prospect to partner that can be improved through relationship marketing.

PARTNER

Those Amex Cardholders who would work alongside NTB for mutual benefit

ADVOCATE

Amex Cardholders who refer other people to NTB

SUPPORTER

A customer who uses only Amex credit cards

CLIENT

Those who make purchases using Amex credit card repeatedly

CUSTOMER

Existing Amex credit cardholders

PROSPECTS

Those who do not use credit cards of NTB or those who use credit cards of competitors

Figure F.1 (Ladder of Loyalty)

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Appendix G ESPECIAL PRIVILEGES TO CARDMEMBERS

Global e Shop Under Global e Shop, Sri Lankans have the opportunity to make online purchases at many of their favorite U.S. based online stores. As such, American Express Card members in Sri Lanka can shop from over 300,000 U.S. websites. The card member simply needs to use the U.S. address provided by global e shop when shopping on the U.S. website and update the purchase details on the global e shop page. Once the online vendor ships the product, global e shop brings the product to the door step of the member. Emergency assistance Designed to offer peace of mind to the cardmember, whenever he travels overseas. Following services can be enjoyed. Reporting of lost or stolen card Information on American Express ATM locations Referrals to medical services Dispatch of doctors Hospital admission Lawyer referrals Information on preparing for a journey Referrals to American Express travel service location worldwide Referrals to embassies and consulates Referrals to interpreters Urgent message relay Luggage assistance Assistance for return trips

Wallet guard The bank has partnered with Allianz Insurance Lanka Ltd to offer American Express cardmembers with Wallet Guard which is considered to be the safest and most comprehensive insurance cover for credit cards. Wallet Guard is tailor made to protect against the fraudulent use of the American Express Card after theft, loss or both in Sri Lanka and overseas.

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Contd. It also helps to recover other lost or stolen valuables such as passport, driving license, keys and NIC as well as any cash loss incurred at a NTB ATM locally or ATM globally. 0% interest instalment plan From participating service establishments (Computer & accessories, electronic & home appliance, furniture & interiors, phones and telecommunication, gem and jewellery and various other places) the cardholder can obtain their preferred product or service with an extended payment period of 3, 6, 9 or 12 equal monthly instalment at 0% interest rate. Nexus loyalty programme Nexus is a subsidiary of John Keells Holdings, which is considered to be the largest loyalty progeamme in Sri Lanka with a network of more than 50 outlets. An American Express cardholder has the opportunity to convert his membership rewards to Nexus points and use those points at any Nexus outlet.

Privileges available only for Platinum Cardmembers

Platinum Access This provides an opportunity for the Platinum cardholders to walk in as guest of American Express Platinum Card partner venues, such as Silk, Sopranos Music Lounge and Bar, Club Mojo Colombo. Platinum Privileges Upon becoming members, Platinum Cardholders are gifted vouchers worth over Rs. 150,000 that can be redeemed at high profile resident retailers and restaurateurs. Such retailers and restaurateurs include well famous brands such as Adidas, Bridgestone, La Moda, Mas Villa, Paris Gallery, Michelle Therese, Vision Care and many others. Concierge American Express Platinum cardmembers can enjoy concierge services at a variety of establishments in Sri Lanka. Purchase and delivery of gifts on cardmembers behalf is available at the following establishments. Goodies: Hilton Colombo, Cinnamon Lake Side and Mahaweli Reach Florists: Supreme Flora, Shirohanas and Mahaweli Reach Housewarming gifts: Shirohana and Mahaweli Reach

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Appendix H THE KEY MEDIATING VARIABLE THEORY

The theory was developed by Morgan and Hunt in 1994 that recognizes commitment and trust as 2 key areas of creating a strong relationship with customers. According to the theory, there are 5 factors that influence commitment and trust and 5 outcomes from commitment and trust, which are shown in the following diagram.

Relationship termination cost + + Relationship commitment

Acquiesce nce +

Relationship benefits

Propensity to leave

+ Shared values + Co-operation + Trust + Communication + Functional conflict +

Opportunistic behavior

Uncertainty

Figure H.1 (The KMV Model (Adapted from Morgan and Hunt, 1994))

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LIST OF REFERENCES AND BIBLIOGRAPHY

References Egan, J. (2008) Relationship Marketing: Exploring Relational Strategy in Marketing. 3rd Edition. England, Pearson Education. Jobber, D. (2010) Principles and Practice of Marketing. 6th Edition. England, McGraw-Hill Schiffman, L and Kanuk, L. (2007) Consumer Behavior. 9th Edition. India, Prentice Hall

Bibliography text sources Nations Trust Bank Annual Report 2010 Stakeholder Marketing Text Book by Strategy

Bibliography - websites Nations Trust Bank website: http://www.nationstrust.com/ HSBC website: http://www.hsbc.lk Sampath Bank website: http://www.sampathbank.lk

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