Development of a competitive strategy for card retention through an empirical study on the attrition of Diners Club card

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Development of a competitive strategy for card retention through an empirical study on the attrition of Diners Club card

 

Author: Li, Po-ngor Katherine
Title: Development of a competitive strategy for card retention through an empirical study on the attrition of Diners Club card
Degree: M.B.A.
Year: 1994
Subject: Credit cards -- China -- Hong Kong
Credit cards -- China -- Hong Kong -- Marketing
Hong Kong Polytechnic -- Dissertations
Department: Dept. of Management
Pages: xi, 118, [14] leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1152579
URI: http://theses.lib.polyu.edu.hk/handle/200/4796
Abstract: Diners Club was the first charge card that ever introduced in the world. It is a payment tool offered with deferred payment service. In Hong Kong, the evolution of Diners can be classified into two stages. The first stage was under the marketing and operation of Standard Chartered Bank. The second stage was under Citibank N. A.. It started right after the acquisition of Diners Club Card business from Standard Chartered Bank by Citicorp in 1986. During the time with Standard Chartered Bank, there were little marketing activities initiated for promoting Diners business and awareness of the brand to the public was low. It was until late 1988 that Citibank N. A. decided to invest heavily on the re-launch of Diners. The marketing strategy at that time was concentrating on acquiring more new cardmembers aggressively in order to secure a profitable market share. From 1989 to 1993 (January to June), card base grew rapidly from around 81,000 to 166,000. The current figure almost doubles within past 5 years. But at the same time, Diners is facing a common headache of high card attrition due to the cut-throat competition from major card issuers. There is a going concern on the uprising trend of attrition rate. Cardmembers terminate their membership with Diners voluntarily. The voluntary attrition rate increased from 12% in 1988 to 13.5% in 1992. It represented a loss of 21,870 cardmembers last year. On the other hand, the ratio of attrited per newly acquired account also increased. That means whenever we add one new account to the card base, there is only half an account net added. The growing attrition trend slows down the net growth of the card base and thus hinders the expansion of market share. It directly hurts the profitability of Diners Card business. However, the reasons for these lapsed cardmembers to leave Diners were unknown and not identified. It makes the effort to devise alternatives to tackle the problem becomes difficult. In view of this situation, the topic of this project is initiated. My motivation is to formulate a competitive strategy for retaining the cardmembers of Diners through an empirical study on the attrition of those lapsed cardmembers. The Value System Theory of M. E. Porter and the Brand Loyalty of David A Aaker are chosen as the framework for me to do the analysis and to develop card retention strategy. A formal quantitative research was conducted through personal interviews with 150 randomly selected lapsed cardmembers in June. The research results tell us that the key reason for cancelling Diners is non-acceptance in Hong Kong. Other specific reasons are high annual fee, cannot repay by instalment and high finance charge. And the awareness of several unique card features of Diners among the attriters was very low. To prevent attrition and possibly induce attriters to reinstate Diners, the fundamental issue to address is acceptance, both in reality and perception. It is also vital to increase the awareness of its best card features including 8-week free repayment period and free travel insurance. The areas to be improved within the Value Chain of Diners include firm infrastructure, technology development, operation, marketing and sales as well as after-sale service. As for the strategy to retain existing cardmembers, Diners should immediately create loyalty among cardmembers, enhance and maintain its existing acceptance distribution network, reward cardmembers on frequent usage by the mileage concept, increase awareness on its best card features and revitalize the brand, Diners, in the perception of target and existing customers.

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