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HSBC Reward Program

This document summarizes the evolution of HSBC's credit card rewards program in Hong Kong over the period of 1995 to 2005. It discusses how the program shifted from a point-based loyalty program to a cash rebate program that was rated the best in the market. The summary discusses how early problems with insufficient redemption options and high costs were addressed through new features like reward multipliers and cash back rewards that improved customer perception of the program.

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Elizabeth Alexandria Lauren
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221 views

HSBC Reward Program

This document summarizes the evolution of HSBC's credit card rewards program in Hong Kong over the period of 1995 to 2005. It discusses how the program shifted from a point-based loyalty program to a cash rebate program that was rated the best in the market. The summary discusses how early problems with insufficient redemption options and high costs were addressed through new features like reward multipliers and cash back rewards that improved customer perception of the program.

Uploaded by

Elizabeth Alexandria Lauren
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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HSBC CREDIT CARD

REWARDS PROGRAM

Elizabeth Alexandria Lauren


MM UA
Introduction
 The worst to best CC in Hong Kong over 10 years

 Currently market leader in the Hong Kong market (number and value
of transactions)
 Vitality of CC market to HSBC due to profitability of the category &
its role in acquiring new customers, building customer relationships.
 Customer acquisition  low entry barriers associated with the product,
tailor made to specific target segments (e.g. young adults)
 Customer profiling to cross-sell other products (e.g. investments,
insurance)
 Basis for the customer relationship management (CRM) system for
customer segmentation and targeting.
The Credit Card Market in Hong
Kong
 Rapid growth of CC in HK due to wider acceptance in
retail outlets & low value transaction, also growth of e-
commerce
 Highly concentrated competition, any bank/FI could
become Visa/MasterCard franchiser
 Narrow market segments: females, youth, affluent
consumers, frequent travelers, affinity with
employment/educational/social group
Competition
 Fierce competition, each had a significant retail bank
presence in HK which focused on exiting customer base
as primary target market
 Survey to see direct competitors’ brand image, features,
& benefits
 HSBC highly rated on: brand familiarity, value perceptions,
& perception of reward program, also CC attributes to
affect impression of HSBC (good service & attractive
rewards)
HSBC
 The Hong Kong and Shanghai Banking Corporation
Limited, (1865)  to finance the growing trade between
Europe, India and China, emphasized to build up
representation in China & Asia-Pacific region.
 “Glocal bank”  Positioned as a global bank that
leveraged its local expertise to better serve its customers.
 “The world’s local bank” (2001-present)  emphasizing
the bank’s global size and reach, adapting to host country
markets and cultures.
HSBC Credit Card Business
 Targeted its diverse customer base with various credit card
types
 Emphasized the best features & reward program

 Credit card as customer acquisition tool

 Two segments: transactor (points oriented) & revolver


(limit user/balance carrier), based on demographic info:
income & life stage
 Partnership with HK merchants
Managing the Rewards Program
 Marketing department  reward partners, number &
types of rewards, redemption level
 Supports: Regional Card System (RCS), Group
Purchasing Unit (GPI), Customer Service Department
(CSD)
 RCS  reward program system (feature & partner)
 GPU  procurement & redemption items, deal & contract
fulfillment from outsourced party
 CSD  day to day operation of the reward program
Program Evolution :
1995 to 1996
 Point-based loyalty program (1994) to compete Chase &
AMEX
 Redeemable points (1-3yrs)

 Targeted high-end customer segments  branded


merchandise & luxury goods, e.g. air miles
The Downturn : 1997 to 1998
 Supply shortage of most redeemed rewards, no guaranteed supply contracts
with vendor  Long waiting periods for redemption due to insufficient
CSD staff for high redemption values
 Outdated & unattractively priced redemption items, competitors offer
cash vouchers
 Huge cost involved, difficulty measuring program success

 The program remained uncompetitive due to limited selection of


rewards, competitors started launching cash rebate & instant redemption
system
The Recovery : 1999 to 2001
 Reward program for customer acquisition & retention

 Reward as a key driver of customer usage & loyalty, but


still regarded “unattractive reward program”
 Improvement on catalogue but no difference from
competitors
 The cost of the bonus point created burden, so catalogue
only sent to selected customers
Best-in-Town : 2002 to 2005
 New features of reward program:
 Reward multiplier  discount based on relationship length
with HSBC
 Cash multiplier  cash rebate for specific spending level
 Special of the month  discount based on points
 PointShare  pooling points from friends & families
 Quarterly redemption boosters  new items

 Resulted in improved customer perception of the program,


rated best in the market without increasing cost
 “Best-in-town” proposition
The Future
 Competitive strategy in terms of loyalty program & overall
market
1. Focused on gaining a larger share of receivables rather than on
acquiring new customers, amount-based rather than number-
of-transaction-based
2. Shift from catalogue-based program to cash-based program
(instant cash-back point redemption)
3. Reliance on reward program as differentiator
Problem Analysis :
Point Reward as a Typical CC Loyalty
Program goes wrong
 Barry Berman (2006)
 Point based reward, type 3  rewards / redeemable gifts after
certain cumulative purchases (points)
 Program tier
 Partnership w/ compensating marketers  didn’t go well 
customers’ dissatisfaction due to unhandled redemption
volume  huge cost involved

 Pitfall: No specific target customer


Problem Analysis:
Leaky Bucket & Polygamous Loyalty
 Dowling & Uncles (1997)
 Leaky Bucket  CC as a tool for acquiring new customer &
maintaining HSBC customer relationship
 Polygamous Loyalty  customers might have several CCs
with various offers  “unattractive loyalty program”

 Linking Customer Rewards to Loyalty Programs


 Low involvement rewards, not specified into customers profile
 Outdated & limited selection of reward
 Delayed reward  “instant gratification” is preferred
Problem Solving:
Taking Corrective Action
Problem Solving:
Shifting from Typical to Alternative Loyalty
Program Scheme
Problem Solving:
Relationship Program
 Shep Hyken (2018)
 Make customers feel connected
 Content & connection, not discount
 Personalizing product experience

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