Proposed Business Goal
The business goal set for the proposed co-branded credit card service is to promote environmental awareness and motivate consumers to buy green products that have a minimal impact on the environment. The Green Card company will incentivize consumers to make green choices on purchases they already make with a co-branded credit card that offers “reward” incentives for such purchases. In addition, the financial objective of the proposed business is to earn growing profitability based on the revenue streams identified in this report.
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Global warming is one of the severe phenomena that is affecting the lives of millions on this planet. It is estimated that if global warming continues at its current pace, then many water resources will dry up soon (Garthwaite). Therefore, the collective responsibility to take measures for protecting the environment has become crucial than ever before. The increased emphasis on the corporate social responsibility of companies suggests that they should adopt newer technologies that could help to reduce the adverse impact of their operations on the environment.
The proposed business aims to introduce a new credit card that offers incentives to consumers for buying environmentally friendly products and services, keeping in view the importance of environmental protection. Green Card is the proposed name of the company which will provide a co-branded credit card to the existing and new customers of the credit issuing company. The concept of this co-branded card is similar to other cards issued by various retail companies in association with major credit card processors such as MasterCard, VISA, and UnionPay. The proposed credit card will be offered to customers through co-branding with the trusted names of Citibank and MasterCard.
It implies that the Green Card will work with both companies to launch the branded card. The proposed credit card is different from other co-branded cards that only allow customers to use or redeem at points of sale of the issuing company. Green Card can be used in all participating vendors’ stores. The company will charge a yearly membership fee of $30 after the first year. The reason for keeping a low membership fee is to motivate customers and create a large client base in the next two to three years. The features of Green Card are summarized in the following table.
Table 1. Green Card Features.
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The company will seek participation from multiple vendors to offer great shopping and benefits experience to its customers (see table 1). It will positively influence consumer behavior to make green choices.
The primary target market for Green Card is the United States (US). The card will be issued to customers in all U.S. states jointly by the company and MasterCard. In the launch stage, the company will issue cards in New York and California. The reason for selecting these sub-markets is that they are two of the largest financial hubs of the US.
Moreover, they have a significant number of high-income earners and knowledgeable customers. Consumers are increasingly becoming aware of the harmful effects of certain products and activities. Therefore, it is considered an appropriate strategy to start from two locations and later expanding the company’s operations to other U.S. states. The company will accept applications from individuals with a credit score of 700+. Students with low or no credit history can also own this credit card, but with lower credit limits and financial guarantee to be provided by their parents or guardians with a high credit score.
The primary industry selected is the credit card industry, and its sub-market of co-branded credit cards is analyzed in this section. The market of co-branded credit cards has reported significant growth over the years as many retail companies now offer their credit cards. It is reported that one in every two credit card holders in the U.S. holds a co-branded card (Le Lab New York). The critical factor is the feeling of belonging that motivates customers to own a branded card.
The segmentation of the industry is based on population demographics. A recent survey conducted by Creditcards.com indicated that only 23% of wealthy individuals and 22% of Whites in the U.S. have credit cards as compared to just 2% of African Americans (Holmes). There are several challenges faced by the industry, such as high-interest cost, strict credit score, low acceptability, fierce competition, and difficulties in differentiating credit cards based on their features.
The competition in the co-branded credit card market is intense as many companies already offer their cards to customers in the US. The competition is not limited to one type of companies with their co-branded cards. In fact, companies from all sectors, such as retail, travel, gaming, and transport, have launched such cards. It is reported that retail co-branding is growing significantly as all major retailers have introduced their credit cards. Green Card will face competition from these companies, as it will also offer redeemable points, cash-backs, and other services to customers who buy green products and services from retail stores and technology-related stores.
Moreover, most of the companies offer zero membership fee. However, Green Card has a small annual subscription, as it will require additional funding for expanding its network and getting new vendors to enlist into its program. It can be removed once the company reaches 150,000 subscriptions.
Industry SWOT Analysis
- The co-branded credit card market is growing at a high pace.
- There is low or no competition for environment-focused co-branding.
- Co-branding helps to achieve lower risk level of credit balances.
- Co-branded and affluent credit cards contribute $860 billion in purchases to the U.S. Gross Domestic Product (GDP) (Globe Newswire).
- Co-branded credit cards enhance customer loyalty.
- Co-branding of credit cards highly depends on few issuers such as MasterCard and VISA. It implies that co-branding companies have low bargaining power.
- A small percentage of credit card ownership among ethnic groups.
- Consumers’ weak perception of the loan facility provided by issuers.
- High-interest charged by issuers on pending payments.
- Substantial business relationship building opportunities.
- There are opportunities for premium own-branded cards.
- Companies can introduce new co-branding ideas.
- There are no barriers to launching co-branded cards offering similar features.
- Significant opportunities for premium own-branded cards.
- Mobile payments are increasing, which could reduce the demand for credit cards.
Although Green Card is a unique proposition, and its value is different from other co-branded cards, its benefits strategy is similar as customers will receive redeemable points and cash-backs on purchases of green products. The market positioning of Green Card in the co-branded credit cards market based on two factors, including membership fee and benefits is depicted in the following figure.
Green Card will be similar to co-branded cards issued by Amazon, Walmart, and Uber, which have a low membership fee and offer more benefits to their users than just redeemable loyalty points at specific vendors’ stores (see fig. 1).
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- Brand Statement: Green Card is a co-branded credit card that incentivizes customers to buy environmental-friendly brands and products from different vendors.
- Project Audience: Green Card is a unique co-branded card in association with Citibank and MasterCard. The branded card is backed by the leading brands in the financial industry. The credit card company aims to promote awareness about the adverse effects of human activity on the environment and encourages customers to spend more on green choices. It offers monetary incentives to customers to buy products and services which are categorized as environmentally friendly.
- Target Audience: Males and females between 20-45 years who understand the growing concerns about environmental protection and want to contribute their part in protecting the environment. Individuals using this card will play their role by promoting sales of green products.
- Advertising Objective: New co-branded card to influence consumer behavior to make green choices.
- Consumer Message: A credit card that lets you be environmentally responsible with great benefits.
- Key Consumer Benefit: Redeemable reward points and cash-back.
- Benefit Support:
- 24-hour customer service.
- No restrictions on points redemption at participating vendors.
- No expiry of redeemable points.
- Instant cash-back on signup or referrals.
- Competition: Retail co-branded cards.
- Advertising Tone: Innovative, Incentivized, Responsible, Trustworthy.
- Advertising Medium: Indoor and outdoor marketing, mail marketing, email and SMS marketing, and social media advertisements.
- Mandatory Elements: Green Card logo, Citibank logo, MasterCard logo, taglines, value and incentives, the application process, company website.
Two distribution channels will be used as Green Cards will be issued jointly by Citibank and Green Card. These cards can be acquired by submitting an online application which will be received by the company or by making a physical application at Citibank with complete details and proof. The online application form also needs to be printed, signed, and sent to the company’s office for final assessment and approval. The application process will depend on one of the three credit agencies, including Equifax, Experian, and TransUnion, to provide details of the applicant’s credit score. The processing time will be longer for web applications than physical applications.
The co-branded card will be issued and sent directly to the customer’s address along with an introductory pack and information about participating vendors. The secret code and pin will also be sent separately through email or mail to the provided address. The company will use United States Postal Service or UPS for urgent shipments of Green Card. All credit card related inquiries will be received and addressed via email or call center support.
The company will use multiple channels for promoting Green Card. The company will provide a signup bonus of 100,00 points at the introduction stage, which will be later reduced to 20,000 points at the maturity stage of the product life cycle. It will also give $100 cash-back to customers upon successful referrals. The promotional strategy also involves engaging finance bloggers such as The Points Guy, NerdWallet, GenYFinance, etc. for writing informative and interesting blogs about Green Card. The company will also promote its co-branded card by using Citibank’s Twitter feed at different stages of the product life.
Furthermore, mail flyers will be posted to the targeted customers with a high credit score to inform them about the credit card and its features. The list of such customers will be obtained from Citibank’s database. The company will also display floor-standing banners at participating vendors’ locations. It will carry out paid campaigns on Google U.S. and Facebook to increase its followership and customer base.
Initial Business Funding Requirements
The initial business funding requirements are provided in Table 2.
Table 2. Funding Requirements.
|Website and IT development||10,000|
|Total funding requirement||250,000|
The owners will require $250,000 to cover the costs of setting up the business and managing their overheads (see table 2). The owners will contribute 20% of the total funding, and the remaining balance will be raised from an external source. The primary constraint is the inability to raise the required initial funding for starting and managing business overheads. The owners of the company will use two approaches, including (1) crowdfunding loan with a lending club and (2) business credit from a credit union. It will ensure that the owners can manage the business efficiently.
The company’s revenue model indicates that it will have multiple revenue streams. It will charge a yearly membership fee of $30 after the first year of subscription. It will also receive a share of credit card charges per transaction from MasterCard. Furthermore, it will generate revenue from charging different fees (see table 3), when applicable, including late payment fee, balance transfer fee, cash advance fee, and foreign transaction fee.
Table 3. Revenue Sources.
|Membership fee||$30 per annum (Second year onwards)|
|Cash-back||2.5% in the first year (transactions up to $10,000) |
1.25% in the second and third year (transactions up to $10,000)
|Balance transfer fee||3%|
|Late payment fee||$25-$45|
|Cash advance fee||5%|
|Merchant transaction fee||0.5%|
|Foreign transaction fee||3%|
The sales forecast for the next three years is given in the following table, which shows that the company will have a revenue value in the first year, which will significantly improve in second and third years. It is estimated that the growth rates in these years will be 25% and 30% respectively (see table 4).
Table 4. Sales Budget.
|Number of Customers||78,750||105,000||150,000|
|Balance transfer fee||$44,888||$59,850||$85,500|
|Late payment fee||$590,625||$787,500||$1,125,000|
|Cash advance fee||$196,875||$262,500||$375,000|
|Merchant transaction fee||$393,750||$525,000||$750,000|
|Foreign transaction fee||$98,438||$131,250||$187,500|
Management Team and Staffing
The organizational structure of Green Card is vertical and is shown in Figure 2, which depicts management team members and other staff to be hired for the proposed business.
The Chief Executive Officer (CEO) will be responsible for the overall strategy, project management, and human resource management. He will also work with an independent consultant to ensure that the business remains financially and strategically feasible. Finally, he will communicate and oversee the work to be completed by the remote web-development team. The Chief Financial Officer (CFO) will be responsible for managing the financial aspects of the business by maintaining internal and external accounts and financial reports. The Chief Marketing Officer (CMO) will be responsible for marketing and promotional strategies and their implementation. Two customer service officers will be hired on a per-hour basis (see fig. 1). The team size is expected to grow in the second year as the company will expand its service network in other locations.
The contingency plan is provided in this section.
Table 5. Contingency Plan.
|Failure to get approval from Citibank and MasterCard.||High||The owners will seek a business arrangement with another bank and credit card issuing company.|
|Failure to attract customers||High||The company will increase its marketing and promotional budget. Also, it will make changes to its marketing strategies to attract customers.|
|Failure to generate revenue from sources other than the membership fee.||Medium||The company will reduce the interest rate charged on credit balances, transfers, and foreign transactions.|
|Declining reputation due to poor customer service.||Medium||The company will provide training to customer service officers. It will insource customer service department and manage its employees.|
|Failure to achieve profitability in the next three years.||Medium||The company will sell its brand and assets to a potential investor.|
|Lawsuits filed by customers||Low||The company will seek alternative dispute resolution.|
|Non-compliance with the regulations of Treasury Department’s Office of the Comptroller of the Currency||Low||The company will seek legal advice and ensure that its operations comply with the rules.|
The contingency plan indicates that there are several high-level risks faced by the new business (see table 5).
Green Card is a co-branded credit card service that will incentivize customers for every purchase they make of green products and services. The proposed branded card is based on a unique proposition that encourages customers to buy environmentally friendly products. The new credit card service will motivate customers to be responsible for the environment they inhabit. The company will offer redeemable points to its customers, which can be used at participating vendors’ stores. The promotional strategy proposed in this report will achieve the expected business and financial objectives.
The sales budget indicates that the company will have growing revenue in the next three years. The company will expand its operational network to other U.S. states after achieving a net income. The contingency plan indicates that the proposed business will face various risks, and the owners will address them, if they incur. The proposed business can be regarded as an innovative idea which is expected to yield positive returns for all participating entities.
Garthwaite, Josie. “The Effects of Climate Change on Water Shortages.” Standford University. Web.
Globe Newswire. “U.S. Co-Branded and Affinity Cards Market 2017-2020 – Deep Insight into a Market Contributing $860 Bn to U.S. Payments.” Globe Newswire. Web.
Holmes, Tamara E. “Credit Card Race, Age, Gender Statistics.” Credit Cards. Web.
Le Lab New York. “Co-branded Credit Cards: A New Trends for Brands.” SQLI Digital Experience. Web.