Marketing Plan for MBNA Platinum Credit Card - Assignment Example

Marketing Plan (For MBNA Platinum Credit Card) Planning forms an integral part of management. A Marketing plan is a way of achieving something within the available resources and time limits. Such a plan basically involves, setting objectives and selecting strategies accordingly. MBNA was founded in 1982 by a group of MNC Financial executives headed by Charles M. Cawley, to be a partner in the growing business of credit cards. With growing competition the company felt a need for consolidation and subsequently struck a deal in June 2005, worth $35 billion to merge itself with Bank of America, thus forming a combined financial giant with 20% of the U.S. credit card market. MBNA kept issuing the credit cards with its own brand identity till late in 2006, but gradually, all these cards will be replaced with credit cards from Bank of America in 2007. Therefore while preparing a marketing plan for MBNA Platinum cards we need to consider this aspect as well. MBNA Corporation also offers deposits; insurance products; and consumer loans. The US, UK, Canada, Ireland, Spain, Mexico and China are the main operating areas for the company, employing about 26,300 people. MBNA credit cards are offered on the MasterCard, Visa and American Express networks. It offers a variety of customized credit cards endorsed for affinity programs and for programs under its own brand name. The cards include standard, gold, Platinum Plus and Quantum. While devising a marketing plan for MBNA Platinum Plus cards for the year 2007, we need to think about two broad strategies; i. How MBNA will take on the competition and ii. How the day to day operations will be executed to supplement the marketing plan. A marketing plan for MBNA forms an integral part of its broader business plan implying in words and numbers how, where and to whom MBNA proposes to sell its Platinum Plus cards, outlining the company's approach in attracting potential customers to its cards and convincing them to buy. In general the components of a marketing plan may include: 1. Terms of Reference: MBNA requires a feel of the market, particularly after its merger with Bank of America, renewed emphasis of ITES services from Europe, USA etc. towards countries like China and India, other cost cutting exercises to take on the competition more effectively.. 2. Executive Summary: Year 2007 may well prove to be a very happening year for MBNA on account of; Its merger with Bank of America, and the process of completion of the merger formalities. The Platinum Plus Card will invite stiff competition from the likes of HSBC in UK UK market being very divergent will also present unique experience to the company. While the strengths of both MBNA and Bank of America give the new organisation more strengths, their weaknesses too will make matters difficult for it. MBNA needs to approach the prospective customer in order to enroll the new customer and continuously nurture the customer base in order to retain their loyalty. 3. Marketing Mission and Vision: Stating the founding philosophy called the mission statement and company objectives provides the target/s to be achieved by the company and forms the guiding principles while doing the business. For example MBNA UK has a strategic plan that can be summarised in nine words, "Success is getting the right Customers ... and keeping them." A mission statement needs to take care of Key market, Key Contribution and Distinction of the company in selling this particular proposition. 4. External Marketing Audit/ Competitor Analysis: Such an analysis in the marketing plan helps in explaining in detail the external challenges and opportunities a business may face in the coming year. Such an analysis will help in identifying the competitive strength of MBNA while taking cues from competitors' strengths. Some of the top competitors of MBNA are Capital One Financial Corporation, Citigroup Inc., HSBC Holdings plc, JP Morgan Chase & Co, KeyCorp, Morgan Stanley, Wells Fargo & Company, Comerica Bank, Discover Financial Services, Inc. etc. HSBC for example has for example the biggest share of its operations in UK with over 55,000 employees serving the bank customers. To analyse the market in a better way PESTLE analysis can be carried out. PESTLE stands for political, economical, socio-cultural, technological, legal and ecological factors. Political: MBNA is basically into the finance business, which has the potential of breeding controversies. In one such controversy, in June 2006, in a wise move, MBNA agreed that it will comply with the stipulation from the UK's Office of Fair Trading (OFT) that credit card penalty fees should be limited to GBP12. Its competitors like HSBC and Lloyds TSB had agreed earlier while MBNA was holding the forte. As of now MBNA doesn't appear to be in direct conflict with the establishment. The political environment as well appears to be quite conducive to the credit card business as it provides the all important purchasing power to the customers, a very important part in the growing up of economy. Economic: Economic factors are driven by Development of relevant economic indicators like inflation and GDP of the society at large. The economy in general is on an upswing in the UK. The Economy rose by 0.7% in Q3 2006. This growth is driven by a rise of 0.8 per cent in the service sector, with growth strongest within the business services and finance industries. Compensation of employees, measured at current prices, rose by 1.1 per cent, compared with 0.3 per cent in the previous quarter. This makes more room for spending and hence greater potential for credit card sales. Socio-Cultural: Inter-cultural influences on different societies as a result of globalisation have made it quite easy for MNC brands to be more acceptable in the international market. Now companies can make a product with requirements of minor adjustment for being accepted in the local market. This on the one hand makes the domestic market more competitive for the domestic players while on the other, it creates congenial environment in the domestic market. Technological: The pace of changes in technologies led by the IT sector has helped in taking the taking the businesses closer to the customer. Now many types of purchases are being done on the internet, leading to increased use of credit cards for internet purchases. This has also lead to more frauds involving credit cards. Therefore, while facilitating the use of credit cards, the technological edge also presents a challenge in safe and secure use of the plastic money. Technology has also made it possible for MBNA Europe Bank to offer access of Personal Identification Number (PIN) over the telephone in UK. Legal: Legalities are always involved in banking transactions. Therefore this aspect is of crucial importance for any company in the finance sector. 'Abiding by the law of the land' is all it takes for MBNA to remain acceptable for the legal framework. Ecological: Taking care of ecological surroundings forms an integral part of any company. The corporate social responsibility has become more than a marketing communication technique now. MBNA and Bank of America has become a big corporation now and it is their duty to respect the environment and make its progress sustainable. 5. Marketing Audit or Market Research: Once the company identifies the product, the market is studied for enabling it to plan out strategies accordingly. Market studies help in collecting, organizing, and writing down data about the market that is currently going in for such cards. Market research also helps in pointing out the potential customers. Market research will provide MBNA with; a. Market dynamics: MBNA will study the marketing dynamics, by taking note of recent patterns in credit card programmes for example, to what extent the loyalty programmes have been able to influence the customer, influence of affinity programmes, influence of co-branded cards etc. For example, in 2004, MBNA received new endorsements from more than 280 organizations, including Charles Schwab, GMAC Mortgage Corporation, A.G. Edwards & Sons, and the Massachusetts Institute of Technology. The company's credit cards are already offered on the MasterCard, Visa and American Express networks. MBNA has an agreement with American Express enabling it to issue MBNA Rewards American Express-branded credit cards in the United States. The company can explore similar possibilities for the UK market as well in the year 2007. b. Customers: - Though MBNA is in the business for quite a while now, but the way market dynamics and composition keep changing with renewed inclination of the growing number of youth towards credit card patronage, studying the demographic profile of potential market will help it in market segmentation, targeting the segmented markets and influencing the buying decisions of customers. UK has a very big diversity as far as composition of society is concerned. According the 2001 census, the 25-40 age group has the largest percentage1 as far as composition of society is concerned. Today, in the era of globalisation and liberalization, more and more young people are getting to the top of the hierarchy ladder in many companies. This particular age group should be the main target segment for selling the Platinum Plus card. c. Current sales in the industry: MBNA needs to assess the current sales figures in the credit card industry, particularly the higher end credit cards like the Platinum Plus. d. Benchmarks in the industry: A higher end credit card needs to have certain set of additional features and privileges associated with it. It is always advisable if a company can set a benchmark for providing the credit card as well as for providing the facilities on the card. Benchmarks help in providing better services and in placing the product at the desired pedestal in the marketplace. MBNA will have to study the strategies and plans of its some of the top competitors like Citigroup, HSBC, Bank One Corporation, Capital One Financial Corporation etc. 6. SWOT Analysis: Having an introspective analysis of strengths, weaknesses, opportunities and threats helps in making a comprehensive marketing plan and strategies. a. Strengths: MBNA is one of the largest independent credit card issuer and based on a 2004 study ranks third overall with 13% market share based on US credit card receivables. MBNA markets its credit cards through affinity partners and other organizations endorsing MBNA cards with over 5100 organisations. There are co-branded relationships as well with some companies. This way MBNA is able to derive strong brand relationship with its affinity partners, which in turn helps in deeper penetration into the market and capturing bigger customer base. Such endorsements also help in strengthening the credit card loans business. For example in the US, about 80% of the company's credit card loans have been sourced through endorsements. MBNA can set such a target for its UK market as well. In the credit card business losses on account of credit card defaults and other losses prove to be a dampener in the business. But MBNA has improved its position as the credit card losses have been declining over the years. The provision for possible credit losses in 2004 was $245.8 million lower than that in 2003. Net credit losses on loan receivables declined 58 basis points to 4.26% and net credit losses on managed loans declined 48 basis points to 4.74% for 2004, as compared to the same period in 2003. As compared to the industry standards MBNA continues to have an edge as it stand lower than the published industry levels in losses. This reflects strongly upon the company's improving credit quality, indicating the relatively minimal credit risk. MBNA has been able to successfully diversify its loan portfolio by expanding its non-credit card consumer loan business and commercial lending business and by expanding internationally. In the recent past MBNA has been on an acquisition spree. It acquired Premium Credit, the leading insurance premium financing business in the UK, and Sky Financial Solutions, a professional practice financing business as a part of its pivotal growth strategy. Similarly MBNA singed an agreement with Internet-based Yellow Pages services provider YP Corp, in August 2005, to offer financial products and services to YP.com preferred-listing customers. Under the terms of this agreement, MBNA Platinum Plus card will be offered to YP Corp's preferred listing businesses for Business credit card account, as well as global access to credit for both cash and merchandise. This may well form an important element in devising the marketing plan for 2007 in UK. After its acquisition by the Bank of America, the strengths of the Bank of America also provides MBNA the requisite strength e.g. over the years Bank of America has built a reputation of providing products and services with superior convenience which has enabled it to pay lower-than-market interest rates on its deposits (2.5% as compared with a peer group average of 2.8%). Bank of America has a strong client relationship and it enjoys strong loyalty from its customers (about 85% of its clients expressed the desire to continue their relationship with the bank at the as per a study conducted at the end of October 2005). b. Weaknesses: MBNA's acquisition by Bank of America has generated some strong reactions from its customers, particularly some dissatisfied customers. There are many blog sites2 on the internet calling for stopping the merger of these two companies. Customer reactions to MBNA's products and services have also been somewhat mixed, particularly from those attracted by its promotions and low balance deals. Some customers have claimed that MBNA interest rates have often jumped from reasonable fixed rates to very high variable rates. Though MBNA is considered as one of the leading credit card issuers, yet its customer care services have left room for much more and it appears that concern for customer service appears to be declining steeply. In today's market driven economy, a company has to listen to the market needs and customer feedback and requirements. Holding a big name doesn't automatically ensure market and customers, for example Apple Inc. started off as a unique company providing computing solutions but today it lacks the kind of penetration desired from a company of its stature. MBNA's return of average shareholder's equity has decreased considerably over the past couple of years. It was 25.8% in fiscal 2000, but came down to 21.7% in fiscal 2004. Even though the stockholders' equity increased over the same period, at a CAGR of 19%, the average return on it, when compared to net profit, declined. This affects capital base of the company as investors' confidence is shaken. Company can take some liberty after its merger with Bank of America resulting in widening the capital base, but if considered in isolation, this kind of trend may well prove to be harmful for the company's growth prospects. The effects of the merger will also be reflected here with the fiscal year 2005 the investment banking revenues of Bank of America declining by 0.4% as compared with 2004. Moreover Bank of America group depends largely on the US market for a majority of its revenues. Therefore MBNA will have to chart out the course in UK with its own set of expertise. c. Opportunities: With globalisation coming into full force, year 2007 presents a bouquet of opportunities for MBNA. Its merger with Bank of America will help in assuring the promotion and market associated with another established brand as well. Both MBNA and Bank of America have recently expanded their business operations in Chinese market. This will bring them big volumes of business which the conglomerate can leverage in the UK market, by adopting a competitive approach in UK market. This will ensure its taking on the competitors like HSBC. Eighteenth century liberal philosopher Tom Paine made some interesting observations about contribution of business and commerce towards peace in the society and wrote that goods "cannot be procured by war so cheaply or so commodiously as by commerce". This statement underlines the crucial importance in making judicious use of business principles. Therefore to establish itself as a responsible and caring organisation the MBNA and BofA can make fullest use of the opportunities. d. Threats: MBNA is dependent on the acceptability of its credit cards on MasterCard's, Amex and Visa's networks. Therefore the litigations faced by these organisations also have a bearing on MBNA as well. Increased competition between MasterCard and Visa also has a bearing on the business prospects of MBNA. Increasing rates of interest will also have a bearing on the company. The past few years have seen central banks of many countries impose higher interest rates to check inflation and the overheating of regional economies. 7. Marketing Objectives: One of the prime objectives for MBNA is to popularize its Platinum Plus card in UK. To this end MBNA already announced that customers enrolling for its cards before Christmas will enjoy 0% p.a. on balance transfers for 12 months as well as benefit from the offer of 0% p.a. on card purchases for 3 months and then 15.9% APR typical (variable) thereafter. Strategic thrust will of course remain on promoting the card but besides promoting the card, the company is also supposed to make its merger Bank of America fully functional, with steps like making requisite changes in the brand name, loan accounts etc. so that customers come out of the duality confusion. Thereafter making the group brand more acceptable amongst the erstwhile customers of both MBNA and Bank of America will be a challenging task as well. Amongst its strategic objectives MBNA will have to do away with the tag of 'less customer friendly company'. It can only be achieved when MBNA adopts the Total Quality Management (TQM) principle. TQM encompasses a set of critical factors (Powell, 1995; Li et al., 2003; Arawati, 2005). In general, some of these critical factors can be identified as; Top management commitment: The top management of MBNA must be convinced enough towards adopting quality control programmes. Strategic planning: Strategic planning is a process which, through an examination of external and internal factors for an organisation, results in a set of mission, purpose, objectives, policies, plans and programmes for implementation. Customer focus: A progressive organisation is supposed to have a strategy for quality which is based on customer perceptions of quality. Customer service after enrolling him as a Platinum card holder is considered as important as the quality and feature so the card itself. Benchmarking: It is the process of following the best in the industry. Human resource management: Human resources form the crucial part of any organisation. They are the key players in producing and delivering quality. Distributor/ Supplier relationship: Distributors or Direct Sales Agents too have a role in quality assurances as their role encompasses the identification, acquisition, access, positioning, and management of the resources required for the product and the company. Continuous improvement: Improvement is a never ending cyclic process. Product Quality requires to be continually improved to remain in the competition. Quality information system: How the quality principles are being implemented in the company and if required the management can decide to take a corrective course of action midway, is determined by the Quality Information System (QIS). 8. Core Strategy: Understanding the market needs and segmenting it according to the ability of MBNA to meet successive targets lies at the core of its marketing strategy. MBNA will no doubt gain more strength once its merger with Bank of America comes into full force. It will have an edge over some of its competitors, but in today's cut-throat competitive environment, size does matter - provided there are supporting strategic moves. In a business like Credit Cards there are no declared underdogs. Any company having the ability to convince customers will be able to gain their patronage. MBNA therefore needs to segment the customer base to better understand their requirements. a. Segmenting the market: MBNA will have to undertake a comprehensive exercise towards segmenting the market. It's being in the business will no doubt provide useful inputs, but after its merger with Bank of America - an erstwhile competitor, the company will have to segment the market according the changed scenario. The market can be segmented based on characteristics such as age, income level, sex, race, where they live etc. For example a person living in downtown London will have a different lifestyle and spending habits as compared to a person living in the countryside. The target audience may tend to be workaholics of the IT era who often prefer to go out and hang around with their friends. This segment could prove to be the most useful customer for MBNA. Similarly the market can be segmented on the basis of wants and needs. For example a call centre worker doing 24X7 shift duties may like to do the shopping online using his/ her credit card. These guys will need to assured of safety and security on such transaction. 9. Marketing Mix and Promotion: The four Ps of marketing have, over time, discovered some more companions in making a balanced marketing mix. It now comprises of Product, Promotion, Price, Place, Physical evidence, Process and People. For promoting a concept like credit card, mailers coupled with attractive discounts proves to be most attractive. Enrolling a new customer into the credit card company's fold now requires lots of persuasion as there are a number of alternatives available in the market. Customer wants a comparative analysis and other tangible benefits to switchover loyalties or to commit himself/ herself to the company's product. All this is not possible through TV or a radio commercial, neither the customer has sufficient time to go through lengthy newspaper supplements. Therefore the best way to invite the customer's attraction towards Platinum Plus is to get in touch with him personally through a well informed customer care executive. The customer needs to be approached at his/ her place of convenience. It is indeed very important to be seen regularly in the media, so that the awareness level remains high. At times courting trouble also brings in media publicity, but that too needs to be handled tactically. A positive image in the media is a distinctive plus for any business, more so for any business in the finance sector. MBNA therefore needs to plan out promotional campaign with these objectives in mind. 10. Budgeting: Budget allocation forms an integral part of any marketing strategy. It involves estimating the needs, the costs involved, provisioning for shortfalls/ emergencies, and miscellaneous expenditures. It is worthwhile to note here that the budget involved in marketing budget, if entering a new market, for the first few years is a form of capital investment and expecting an ROI in the very first year itself will be nave thinking. But MBNA has its presence in the European market for quite some time now, therefore it is a known brand. On an average it has registered an increase of about 5% revenue growth. For the year 2007, MBNA wants to expand its customer base and target premium customers with its Platinum card. The returns should in general be expected to remain around the existing figure. The main heads consuming the budget allocation will be; a. Media Campaigns: The direct effect of media campaigns may not be translated into windfall of customers, but it is very much required to reach the maximum audience in minimum possible time, and to establish the brand identity. b. Sponsorships: Sponsoring some sports events, social events, cultural evenings helps in bringing the brand nearer to that particular segment of the society. Such events provide an opportunity to come face to face with potential customers. Such events often prove to be creating high ROI marketing programs resulting in maximizing customer value, increase in sales with lower expenses. MBNA has already started such ventures with its football themed credit cards by targeting the English football fans. c. Mailers/ Feedback Forms: Mailers help in gathering feedback from market and customers. d. Routine Expenditures like Salaries incentives etc: Such expenditure is of course a routine yet important element in the budgeting process. 11. Organisation and Implementation: Since MBNA is a well established organisation, therefore it doesn't require establishing the different supporting departments from scratch. Only thing is MBNA will have to fine-tune the mutual relations of different departments. Implementing the marketing plan is not the responsibility of the marketing team only. It's a mission where all components will have to work with matching zeal. In order to get good workforce, HR will have to recruit competent people. These people need be encouraged to come out with best results by granting them adequate incentives etc. Management has to foresee and analyse the market in a realistic manner. The IT team has to do the most crucial task of energizing the plastic money by activating/ deactivating the cards, providing a safe a secure gateway for transaction etc. 12. Control: The task of keeping a check on the progress of implementation and is to evaluation of the results on a periodic basis helps in controlling usage of resources and gathering the outputs. If required, corrective course of action can be initiated midway, before things go out of hand. To this end, the management of MBNA can decide on having a routine meeting with team-leaders at least once every month, while the team-leaders can be entrusted with meetings of their team members at least once every-week. The monthly meetings must be used as a forum of encouraging good work done by some teams/team-members, spelling out their modus operandi, so that others can also learn something from their experiences. References: 1. MBNA, available online at http://www.mbna.com/ 2. MBNA Platinum plus Card, https://wwwa.applyonlinenow.com/UKCCapp/Ctl/entrysc=5ptdecgs04_ost&mc=MBN-SC-51076-51100 3. STOP MBNA FROM MERGING WITH BANK OF AMERICA! http://www.cra-nc.org/bofa_mbna_merger.htm 4. Anticipated acquisition of MBNA by Bank of America, http://www.oft.gov.uk/Business/Mergers+EA02/Decisions/Clearances+and+referrals/Bank+of+America+2.htm 5. Cavyl Stewart, Four Essential Marketing Plan Components, available online at http://www.powerhomebiz.com/vol151/marketingplan.htm 6. Small Business Notes - Marketing Plan Components, available online at http://www.smallbusinessnotes.com/planning/marketingplan/marketplancomp.html 7. Michael Fleischner, 10 Key Components of a Marketing Plan, available online at http://www.businessknowhow.com/marketing/marketing-plan.htm 8. Census 2001, United Kingdom, available online at http://www.statistics.gov.uk/census/default.asp 9. Powell, T. C. "Total quality management as competitive advantage: A review and empirical study." Strategic Management Journal 16 (1995). 10. Arawati, A. "The structural linkages between TQM, product quality performance, and business performance: Preliminary empirical study in electronics companies." Singapore Management Review 27 (2005). 11. MBNA News, available online at, http://www.topix.net/com/krb 12. Li, J. H., Andersen, A. R. & Harrison, R. T. "Total quality management principles and practices in China." International Journal of Quality & Reliability Management 20 (2003). 13. HSBC Holdings Plc, available online at http://www.hsbc.com Read More