EMM Credit Card Segmentation Study

2007 - 2008

© 2008 EMM Group

Using Segmentation to Drive Organic Growth

EMM group applied its proprietary segmentation technique, ‘segmenting the market of tomorrow’ to a premium credit card. A new attractive needs-based segment, the confident entrepreneur, was identified and targeted with a Gold & More card. Insights about the target were developed and a new value proposition crafted. A new service package was created to meet the functional and emotional needs of the segment.Within a period of 6 months, we achieved:

An increase in portfolio share of premium cards from 8% to 51%.A 36% incremental increase in spends per active account.An 8% incremental increase in Actives rate.

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Executive Summary

Actionable segmentation drove organic growth!

Bank X Premium Card Project – Background

Strengths78% unaided awareness.“Trustworthiness” of Card Issuer mother brand.Rated as Best Customer Service provider in card market.

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Card Issuer 's Strengths & Weaknesses

WeaknessesBank X Premium Card owner older, with a lower income and less frequent usage.Limited appeal to the younger and more affluent.

ObjectivesIncrease portfolio share of premium cards from 10% to 40%.Increase spend/active account by 10%.Increase active cards as a % of total outstanding cards by 2%.

We got some significant A-Ha’s from research

We did not know the brand’s utility in driving consumer preference.High credit limit is not one of the most important product attributes for new customers.Unsure of Bank X Premium Card’s appeal among prospects. Competitive Card has an advantage over Bank X Premium Card due to mother brand image of Competitive Bank in all customer segments.Card Issuer can’t compete in the premium segments given its low appeal to affluent customers.

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Business Assumptions Insights from Research

Now we know that the brand name adds the highest utility.Credit limit is an important attribute for new customers.Prospects are seeking transparency of charges / fees, and Bank X Premium Card is perceived to deliver on these.The Bank X Premium Card is preferred.among the ‘revolver’ segment.Segmentation shows that Card Issuer is competitive in the affluent segments and that we can effectively target them with an enhanced value proposition.

We identified four ‘needs-based’ segments

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Segment 1

Family focused, wants to lead a Secure life

Segment 2 – Confident

Entrepreneur

Lives life to the maximum. Socially very active

Segment 3

Status conscious,

contemporary urban male

Segment 4

Maintaining the standard of

living. Providing for family

We chose this target segment based on segment attractiveness and our ability to compete.

We profiled the ‘Confident Entrepreneur’ segment

He’s a street smart businessman, like a small scale builder or second hand car dealer. He enjoys maximizing his profit. He could be paying rent for a small office. He believes in living for the moment and does not care about the future. Though he believes in living big and drives a car, he keeps avoiding his creditors. He likes flashy things and would take loans for something like a bigger television. Likes to build contacts and enjoys throwing flashy parties for his friends.He would take a loan against properties to invest in his business, provided the invested amount is safe.Would love to take his family for an overseas vacation.

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Usage Indices:Revolver Index = 140Multi Card Index = 122

We understood the drivers of the target segment

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Accurate billing statement, Fair price/rate, high credit limit, credit

payment quickly

Freedom

Confident Entrepreneur

Terminal Values

Features & Attributes

Functional Benefits

Emotional Benefits

Credit card selection and usage reflects the ultimate goal: Live Large and In the Moment

Hierarchy of Needs:

Feel unrestrained, earn respect

Easy credit

Transparency, high spending power

We identified relevant improvement opportunities

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Segment characteristics Bank X Premium CardBank X

Premium Card Versus Market

Brand EquityHigh multi-cardingGood fit with Card Issuer brand (PQI)

Perceived quality high among prospects and weak among owners. Product/service not meeting expectations.Competition offering assured cash back.

►

Credit Limit High spends Revolver needs higher credit limit

Competition offering high credit limit and better card type. ▼

Accessibility High penetration inself-employed

Current sale force has access to this segment for new acquisitions. ►

Rewards High spends High utility of cash back. Competition already offering cash back. ▼

Pricing Looks for fair pricing Pricing similar to other players. ►▲ Above Par ► At Par ▼ Below Par

The value proposition met target segment needs

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Confident Entrepreneur Value Proposition – Gold & More Card

Target Progressive, confident entrepreneur

Core need Who wants to feel free and unrestrained

Offering Name The Bank X “Gold & More” Card

Frame of Reference Is a convenient payment mechanism

Benefits That provides him instant gratification and freedom

Point of Difference With his first premium card, offering “Assured Cash Back”

Support

Because only Bank X “Gold & More” Card offers -•Assured cash-back on regular spends like fuel, groceries, departmental stores, restaurants & utility payments.•With no conditions of minimum monthly spends or ticket size. •Convenient automatic credit of the cash-back.

The Results

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KPI 1: We grew portfolio share of Premium cards

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Goal: Increase portfolio share of premium cards from 10% to 50%

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Percentage (Premium Products/

Total Accounts)

Share of Premium Cards in Total portfolio = 51% in 6 months

0%

15%

30%

45%

60%

8/7/07 9/7/07 10/7/07 11/7/07 12/7/07 1/8/08 2/8/08Percentage (Premium Products/Total Accounts)

Previous cardGold & More

KPI 2: We achieved Higher Spends per Active Account

Goal: 10% incremental spends per Active Account for new product

↑ 36%

↑ 72%

Gold & More 8,753 3,129

Previous Card 6,423 1,820

Incremental Spends per Active Account = 36%

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KPI 3: We increased actives rateGoal: 2% Incremental actives rate for new products vs. old products

Incremental Actives Rate > 8% versus target of 2%

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Previous CardGold & More

Incremental Active Rate ~ 9%

Incremental Active Rate 8%

Actives Rate – Gold & More

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Summary and Conclusion

Using Needs based segmentation enabled the discovery of a valuable segment…The Confident Entrepreneur.

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Aligning the benefits of the new Gold & More card with the functional and emotional needs of that segment drove positive results. The card is positioned for strong growth.

Every major objective was exceeded within 6 months:Grew portfolio share of premium cards from 8% to 51%.Achieved 36% incremental spend per active account.Increased Actives rate by over 8%.

Actionable segmentation drove organic growth!