Introduction
Alpen Bank intends to launch its credit card business in Romania. However, it is facing several challenges, which include an underdeveloped market, low income levels, and high entry costs. These challenges have made it difficult for the bank to select the best positioning strategy and the marketing tactics to use to launch its credit card. This paper will provide recommendations that can be adopted by the bank to position its credit card appropriately. Moreover, various marketing tactics will be recommended to market the credit card.
Positioning Strategy
The bank should position its credit card as a premium service that offers unique benefits at an affordable price. The company has already established a strong brand image that is known for premium banking services. Deviating from this brand image by positioning the credit card as a purely low cost product is likely to result into brand dilution (Amstrong & Kotler 2011, p. 56). Specifically, the affluent customers are likely to associate the card with negative attributes, thereby reducing its brand equity.
On the other hand, the card cannot be positioned as a purely premium product that targets the affluent only. The affluent market segment is small and is likely to reach mature stage in the near future. This will limit growth in revenue (Kazmi 2007, p. 67). Thus, the company should also serve customers in the middle class market. This means that the company should reduce its interest rates and annual fees to improve the uptake of the card among the middle class who are price-sensitive.
Given the difficulty in providing premium banking services at a low price across the board, the company should launch the card as a tiered product. This means that the benefits that will be available to various market segments will differ (Kazmi 2007, p. 70). This strategy will enable the company to offer more benefits to its affluent customers who are willing to pay a high price.
Similarly, it will enable the company to offer limited but valuable benefits to the middle class customers. Overall, the company will be able to maintain its premium positioning strategy in both the middle class and the affluent market segments. The company’s marketing communications initiatives should reinforce the positioning strategy by clearly highlighting the unique benefits that the credit card provides to each market segment.
Marketing Tactics: Recommendations
Pricing
Given the low rate of uptake and utilization of credit cards in Romania, the company should adopt a penetration pricing strategy in the first two years of entry into the market. The penetration pricing strategy involves charging low prices in order to attract customers, which in turn leads to an increase in market share (Amstrong & Kotler 2011, p. 89). This strategy is very important in the middle class market segment where expenditure is low.
The company can eliminate its joining fees to encourage more customers to acquire the credit card. Similarly, the penalty fees should be low to avoid discouraging customers from using the card. The uptake of the credit card is likely to be high if it offers more benefits than those of the competitors at a low interest rate. The rationale of adopting the penetration pricing strategy is that it will enable the company to increase its sales, thereby realizing high profits in the long-run.
Product
The credit card has to be differentiated to enable the company to satisfy the needs of each market segment in a profitable manner. The company’s product development strategy should take into account the customers’ credit ratings, expenditure behavior, and card utilization patterns. In the affluent market segment where the default rate is likely to be low, the company can offer a high maximum credit card limit to encourage expenditure.
This will increase the company’s revenue. By contrast, the maximum credit that customers in the middle class market segment can access should be limited. This will enable the company to avoid high default rates. In order to compensate for the limited access to credit, the company should provide additional benefits such as flexible repayment schedules to its customers.
Promotion
Promotional activities should be aligned to the card’s positioning strategy and the company’s objective of achieving a profit of five million Euros in two years. This calls for adoption of several promotional tools to market the card (Kazmi 2007, p. 112). Specifically, the company should use brochures, direct sales, and branch cross-selling to acquire customers.
The brochures are inexpensive and will enable the company to reach the middle class. Direct sales have high response and qualification rates. In addition, direct sales will enable the company to offer personalized services to its customers. The resulting improvement in customer satisfaction will improve customers’ loyalty. Similarly, branch cross-selling has high response and qualification rates, which will enable the credit card to penetrate the market quickly.
Since the market is underdeveloped, the company should focus on creating brand awareness through advertising in print and electronic media (Kazmi 2007, p. 116). The adverts should provide adequate information about the card’s benefits to encourage customers to acquire and use it. The social media should be part of the electronic media mix that the company will use to advertise the card. Marketing through popular social media websites such as Facebook and Google+ is cheap and will enable the company to obtain valuable feedback from its customers about the card.
The bank should also use sales promotion and loyalty programs to increase the uptake and use of the card. Sales promotions should involve provision of favorable interest rates and fees to customers who will be able to pay their debts in time. Loyalty programs, on the other hand, should involve rewarding customers for using the card regularly.
Distribution
The bank should use a two-level distribution channel to sell its credit card services. The main channel should be its branch network where the sales team will sell the card directly to customers. The second channel should be select retailers whose customers are likely to use the card. By partnering with retailers to distribute the card, the bank will be able to improve its product visibility.
Conclusion
Alpen Bank should position its credit card as a service that offers superior benefits at a low price. This positioning strategy will enable the bank to serve the affluent and the middle class market segments. In this regard, the pricing strategy should focus on market penetration, whereas the product strategy should focus on satisfying the needs of each market segment. The company’s promotional activities should support the positioning strategy by creating brand awareness, thereby encouraging acquisition and utilization of the card.
References
Amstrong, G, & Kotler, P 2011, Marketing: an introduction, Pearson Education, Upper Saddle River.
Kazmi, S 2007, Marketing management, Sage, London.