Citibank India Hbs Case

With focus on only super-affluent and affluent segment, Citibank‘s has maintained its position of operational excellence in the industry. But now, Citibank should consider focusing on expansion to an additional segment of ‘Emerging Affluent’ in existing locations. With more than 80% of literacy rate in the major cities, Citibank, being a global brand, enjoys an advantage of unaided brand awareness among this consumer base and can tap the market with marginal increase in marketing costs and existing distribution network. This segment constitutes that around 15% of households in top 8 cities holds the potential to generate an additional revenue stream to existing Rs 22.51 (Billion) spending by consumers.

Even though customers in ‘Mass Market’ segment is 77.4% in the top 8 cities, the lower average monthly spending of Rs.3000 and 65% as revolving balance would lead to higher credit costs and increased losses if Citibank chooses to provide service to them. The risk of credit loss is relatively low for consumers in ‘Emerging Affluent’ due to higher annual income and less revolving loan balance of 45%.

The current strategy to target only 8.35% of the market with higher marketing cost of Rs.34 Million poses problem to growth and profitability in the long run. The average spending per consumer can be improved by increasing the number of credit card users through expansion into ‘Emerging Affluent’ segment. The current target segment is saturated and fewer number of credits cards are being issued each year. Also, the changing customer behavior to pay their outstanding loan on time is effecting the interest revenue model. To serve the affluent consumers with premium services, the sunk service cost to bank is higher that can be shared among other potential segments generating higher return on investment.

To position Citibank as preferred brand at the point of purchase, ideal customers’