Wednesday, 23 May 2012

The two way story of credit cards: Why banks sell? Why customer buys?


First Visit

In the world where we are clearly saying no to plastics, one plastic is gaining popularity with every passing day. That plastic is simply called the “Plastic Money” or in much simpler terminology it is known as “Credit Card”. Yes! This non-living thing has the existence in most of the wallets of the working class people. One thing which always kept me thinking was that “why people use credit cards?  Anyway you have to pay it so better go with the cash. So, Why? Why credit cards? There has to be an answer and with this thought I walked out of my shell to gather some information which would drive me close to at least some conclusion.

Last week I was at Shopper’s Stop, Chennai to purchase a pair of shoes for myself. As I walked towards the payment counter, without consulting my mind, my hand slipped into my back pocket to take out my wallet and without any second thought I was ready with my debit card. I was waiting for my turn and meanwhile I was also observing the payment mode of the customers in front of me and also for those who were standing on other counters. The majority of payment mode was credit cards. Same question again came in my mind “Why credit card?” I thought of starting a survey right there and ask at least 2 – 3 people to understand their idea or point of view on using credit cards for their purchases.

With due permission from the authority, I stood next to the payment counter and took the first step by approaching a young man. His age would be around 27. The moment he pulled out his credit card and completed his payment I took him on one side and gave him an idea of my survey and then I asked that gentleman “Sir! Why credit card? You could have paid through cash or using debit card.” He thought for a moment and then explained “I carry a Citi Bank credit card which is co-branded with Shopper’s Stop. I get certain points on every purchase made on this card and I can redeem these points at this store whenever I Want. This card can also be used as Shopper’s stop membership card.” He had a very good point and this could be the most obvious option for people going for credit cards. Co-branding is a much hyped and well put strategy which leaves impression on the customer’s mind.

In shopper’s stop there are always few Citi Bank representatives standing at the payment counter who also do the same duty what I was doing today – observing the payment mode of the customer and pouncing on those who do not pay by credit card. I approached them to ask what they do to sell their credit card. How do they justify to the customer that this card would be of their use? The representative said “We explain the reward point program to the customer which is the USP for our card and then we provide them with option of free lifetime card if they enrol for it then and there. This makes the customer think and they make their decision quick.” So, I got to know that banks do a lot of research on needs of the people before they introduce a co-brand card. They co-brand only with famous brands and then they target the customers by explaining and hitting on their weak points.

I also asked couple of more people but they were not willing to spare some time for this and one of them came up with a very genuine reason of using credit card that is it’s easy to carry and safe to use.
I left the store with some understanding and first-hand information from the customer. I have also decided to continue my survey with different class of people and at different places. This is just the beginning and a lot more is yet to come on this topic and on this blog.

Rishabbh Rishi
FT13465

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