City Bank Credit Card

Table of Contents TitlePage Number Research Proposal3 Introduction7 •Problem Studied7 •Background Information8 •Research Goals9 Preliminary Details9 •Literature Survey9 •Theoretical Framework17 •Hypotheses Formulated17 Research Design •Type and Nature of the Study17 •Sampling Design18 •Data Collection Methods18 •Data Analytic Techniques Used19 Results of Data Analysis •Hypotheses Substantiated/Unsubstantiated19 Conclusions25 Recommendations25 Limitations of Study27 Acknowledgements27 References27 CONFIDENTIAL Research Proposal On

Reasons for Voluntary Attrition in Credit Cards at Citibank Pakistan for the period Jan. ’10 to Jun. ’10. Prepared for Mr. Sibghatullah Hussaini Submitted by Ahmed Hassan July 28, 2010 Sponsor’s Name/Client Professor Sibghatullah Hussaini, Faculty Member, IBA. Advanced and Applied Business Research, Summer 2010 Contact Person Same as above Background 1)Industry/Category In today’s competitive credit card market card cancellations or “voluntary attrition” is a genuine threat to the customer base of any progressive company. Good companies keep a vigilant eye on attrition dynamics.

They want to know who is leaving when, how and why. 2)Company/Brand Citibank is part of Citigroup, the largest financial service provider and currently one of the most profitable companies in the world. Citibank provides a broad range of financial services to consumer and corporate customers in 101 countries and territories. The Citibank franchise was set up in Pakistan in 1961 with Corporate Banking operations. Marketing Objective: Purpose of the study is to find out if the cancellations are linked to customer expectations that have not been met. These expectations can be value related or service related.

Value related expectations are concerned with the benefits and features of the product which customers expect the product must deliver. Service related expectations deal with level of service that customers expect the bank to deliver. If the cancellations are due to any of the above expectations, which are not being met then the business must correct the anomaly. Otherwise there would be a serious threat to the customer base as more customers will cancel the card and the dissatisfaction will spill over to other bank customers. Research Objective: The research objective as per research brief developed by the sponsors are as under: 1.

What is the root cause for credit card voluntary cancellations? 2. What is the profile of the customers who are canceling the cards? 3. What are the major reasons given by customers for the cancellations? 4. What are the spending and delinquency trends of customers who are canceling the cards? 5. What are the vintage trends of the cancelled cards? Information to be collected Interview method has been used to gather primary data. Standardized interview format was developed where the interviewer called up the respondent and conducted the interview over the phone by using the interview schedule to ask questions and record the answers.

The information collected would be 1. When was the card activated/ 2. How long was the user using the card/ 3. When did he/she decide to attire? 4. What factors influence this decision? Population under studyRespondents are Citibank card members, male or female, who have voluntarily cancelled their credit cards during the period from January’10 to June’10 Research MethodologyPrimary data was gathered through the standardized telephone interview of the respondents, which was conducted by the author. Secondary data source was Citibank’s mainframe server, which houses all the details of card accounts.

The details include, customer profile, account history, and membership opening and cancellations date. The Server or the Mainframe contains Customer Record (all variables pertaining to customer history) right from the day the account was created. However, the data mining process had to be performed manually by looking up all the variables on different screens Card by Card. The results were logged on Excel Worksheets so that they could be statistically evaluated. The secondary data was used to sure up primary data findings and to identify trends in variables if any.

AnalysisMean and percentage has been used to analyze primary and secondary data. Researcher’s ProfileMr. Ahmed Hassan BE Electronics, NED University of Engineering and Technology PGD, IBA, Karachi, Paksitan MBA, IBA, Karachi Pakistan Acceptance Submitted Babar H Qazilbash Approved/Agreed Professor Sibghatullah Hussaini IBA. Introduction: Problem Studied: Citibank is part of Citigroup, the largest financial service provider and currently one of the most profitable companies in the world. Citibank provides a broad range of financial services to consumer and corporate customers in 101 countries and territories.

The Citibank franchise was set up in Pakistan in 1961 with Corporate Banking operations. The Consumer banking business was launched in 1990 with the deposit products and it soon established a full-fledged presence in the five biggest urban centers in the country. Today Citibank Pakistan serves the financial needs of the entire range of customers from the world’s largest multinational companies to individuals from the emerging segment. Across consumer banking products, Citibank enjoys the trust and loyalty of more than 500,000 customers belonging to the middle and high-income segments of the Pakistani market.

Not only does Citibank offer the widest range of products in the wholesale as well as retail-banking category, it has traditionally been the first to innovate and offer new products and services. Credit Cards are a case in point. The Citibank Credit Card, launched in 1994, was the first Credit Card in Pakistan. Today Citibank is the dominant market player on the issuing as well as acquiring (acceptance) side of the cards business with 185,000 cards in force (55% market share) and more than 15,000 active merchants (85% market share).

This share of market is despite the premium pricing strategy primarily based on the strength of the brand name and its reputation as being the market innovator. The list of firsts in the credit card market include: •Launched Co branded credit cards •Launched an installment plan on cards •Launched an installment plan at 0% mark-up •First to launch a rewards program •Enabled utility bill payments on cards •Introduced credit insurance coverage •Photo Card feature •Introduced shopping through mail order

Today Citibank provides a wide choice of products within its Credit Card menu: Standard Citibank SilverClassic product with wide array of value added features Standard Citibank GoldCard for the affluent segment with differentiated product features Caltex (Oil) CobrandDiscounts on petrol, lubricants and station supermarket products Citibank’s core strategy is based on delivering greater value to its customers. Any company, when it ventures into a different line of business looks up to its sales force to deliver and bring in new customers.

At the same time it is important to ensure that the customers who come in are well taken care of and the company is able retain them, and is continuously able to meet and exceed their expectations. A CEO’s worst nightmare is to face a “leaky bucket”. When customers’ expectations are not met whether it is due to service or value they may move on to another company and cancel their relationship. So while the company spends millions of dollars to bring in new accounts, dissatisfaction with the product may cause a lot of those accounts to go away thus directly affecting the revenue prospects.

Due to this reason all the big corporate giants invest a lot of money on customer retention by focusing on loyalty programs by enhancing value and bringing in improvements in customer services. In today’s competitive credit card market card cancellations or “voluntary attrition” is a genuine threat to the customer base of any progressive company. To counter the threat most companies have set-up a “ Retention” department whose job is to handle customer attrition and give feedback to the business on reasons for customer attrition. Every month attrition numbers are presented to the management committee along with the reason report.

The management committee members look at the attrition trends and discuss the dissatisfaction, which is causing the attrition. They look at ways to improve the product proposition and work out strategies to bring the customers back. It is then up to the retention department to go after the attrition customers and try to bring them back. Background Information: Citibank’s card customer base has increased over time due to a dynamic sales force backed by a strong marketing mix, but attrition (in terms of number of cancellations) has also gone up suggesting that there is something wrong in the perceived product value and or services.

Year200820092010(JAN-JUN. ) Customer Base137034132017165882 Attrition89381084817400 The attrition has almost doubled in the last three years, which shows that there is something wrong and it needs to be investigated. Research Goals: Purpose of the study is to find out if the cancellations are linked to customer expectations that have not been met. These expectations can be value related or service related. Value related expectations are concerned with the benefits and features of the product which customers expect the product must deliver.

Service related expectations deal with level of service that customers expect the bank to deliver. If the cancellations are due to any of the above expectations, which are not being met then the business must correct the anomaly. Otherwise there would be a serious threat to the customer base as more customers will cancel the card and the dissatisfaction will spill over to other bank customers. The study will contribute in identifying the root causes for cancellation. If the cancellations are due to dissatisfaction with the product or service then the study will help the business identify the areas where it needs to improve.

If the recommendations of this study are implemented it will lead to an increase in revenue for the bank and improved value proposition for the customer. Statement of the problem: 6. What is the root cause for credit card voluntary cancellations? 7. What is the profile of the customers who are canceling the cards? 8. What are the major reasons given by customers for the cancellations? 9. What are the spending and delinquency trends of customers who are canceling the cards? 10. What are the vintage trends of the cancelled cards? Preliminary Details: Literature Survey: Definition of the term ‘Attrition’:

Voluntary cancellation of credit card membership by customers Literature was reviewed to get a better perspective about attrition. The reading helped understand what others have to say about attrition, its significance and how it should be studied. It helped open up avenues for research and straightened the line of study. Local Literature: In the past Citibank hired the services of a marketing research company to submit a report on attrition in the Citibank’s card business. The objective of the report was to identify the weak areas in the product and to suggest improvements. According to the author, Citibank has a very strong market presence.

It is specifically the market leader in Credit Cards. Even very strong brands in the market tend to loose their customers to a certain extent. Being a highly aggressive, customer oriented company, Citibank not only wishes to acquire new customers and broaden its base, it also wishes to retain its current customer base. The bank therefore wishes to find out the reasons behind attrition of card customers. An in-depth analysis of attiring card customers grievances will not only help Citibank in controlling attrition in future, it will also help in building a future strategy for a happier and satisfied customers.

It will further offer Citibank an opportunity to gain an insight into its customer reactions to the competitors offering. Research Objectives: The broad objective identified by the author was to uncover the core reasons for attrition of Citibank card customers. The research was also scoped to find out: •The attitude and perception of the attiring card customers towards Citibank card •To assess the gap between attiring customer’s expectations and fulfillment with Citibank card •To find out the ex-customers satisfaction in terms of service related issues. To assess the perceived strength and weaknesses of Citibank card from the attiring customer’s perspective. •Perception and assessment of these consumers towards competitive offerings. Research Methodology: Three group discussions were conducted in all. All respondents were selected from a list of attiring credit card holders provided by Citibank. The discussions were conducted at MRL’s test room. Each group comprised 8-10 respondents and was fully taped. Transcripts were made later for analysis.

According to the author the two major reasons for attrition are either, inability of the customers to utilize the card, or dissatisfaction with certain service issues. Most ex- Citibank cardholders share the view that the bank concentrated more in expanding its customer base rather than the merchandising base. Customers with fewer traveling needs and hotel payments could not see much usability of the card. Being a high road brand Citibank card was expected to innovate and improve continuously in order to justify its premium price, majority of the switchers did not construe this to be the case and switched to less premium priced cards.

The switchers and dropouts also faced a number of service issues, primarily in terms of delay in invoicing. There is a basic communication gap between Citibank and its card customers, which needed to be resolved. The level of customer sophistication regarding credit cards and its processes is only skin deep. A number of customers did not understand that the service charges are in reality interest charges levied on revolving the card. Some of the customers perceived that revolving the card was an inherent feature of the card and was a prerequisite of using the card.

The same is not viewed to be the case with ANZ or MCB. Late billing and the catch 22 situation of penalty on cash payment are viewed to be just another mode of fleecing the customers. A number of times the overexcited, over enthusiastic sales force made commitments and promises that were not fulfilled at card initiation. The attitude of the sales personnel has been rather slack, raising similar expectations of slackness in payment and billing. The key to retain customers lies in education, education and education of customers. Both users and traders as well as the internal customers that is the sales force.

There is an urgent need to widen the merchandising base, unless the card is acceptable in diverse areas of the city the usability of the card cannot be improved. Data Interpretation: According to the author in order to understand the reasons for Citibank card customer’s attrition, it is essential to examine the perception and understanding of these customers about credit cards and their expectations with it. The report was therefore organized in three sections (i) Customers initial perception of credit cards (ii) Delivery of Citibank Card and (iii) Improvements desired.

Initial Perception: The strength of the need for the product and the satisfaction of that need determine the continuity of usage of that product or service or for that matter brand loyalty to it. Amongst the attrition customers, the need for credit cards was not shared with the same intensity. That is one of the strong reasons that not all customers have attired to switch to another card. There is one group of attrition customers that simply canceled their membership and do not wish to be involved with it any more. There is another roup of customers with a strongly felt need for credit cards and their reasons for attrition is primarily to switch to another card mainly, for greater perceived benefit and facilities. Areas of dissatisfaction: The former group of customers had simply taken up the card because they were promised certain benefits, by the salesmen, that did not materialize. Since an initial motivation as well as wherewithal was lacking, the slightest disappointment made them revert to their original state. Here most customers are lower middle income, who did not find enough value for money in the card.

Since the avenues available to them were restricted, and their lifestyle did not permit the kind of expenses offered by the credit card. The later group had a well-defined need for credit card, was not quite satisfied with Citibank card and switched at the first opportunity of finding an alternative in the market. Usually these customers need to travel a lot and have considerable cash transactions. According to the author card retention is also determined by the initial reasons for choosing a credit card. A successful product usually changes with the changing needs and market structure.

Citibank credit card is a market leader; at the time of its launch there were no other credit card available on a mass scale. The card had simpler demands compared to other cards in the market, in terms of membership conditions. It also had a high reputation and credibility because of the Citibank brand name. It was simply chosen because it was the number one card and the only card offered in the market. Once other card brand materialized consumers found a yardstick of comparison and a need to shop around for greater benefits.

The issue got further compounded because the teething problems of credit card as a product are associated with Citibank card only. Perceived Benefits: According to the author the benefit perception of credit card does not necessarily vary between groups. Most attrition customers had opted for the card with high hopes. Almost a good majority was driven by the core benefit of expecting to live beyond their limits with little worries about the mode of payment. Amongst the switchers, the core driving force was the safety aspect of credit card and its value in traveling; these are also the customers that were aware of the pitfalls of overspending. If one spends within the limits one has advantage, once you cross the limits it is difficult to pay it back (Switcher to ANZ)”. A number of these credit card holders expected the benefits of unlimited spending, with little inkling of intricacies of interest payment on revolving the card. These customers also expected greater usage and prestige and status value with credit cards. Almost a majority of them knew little about the discipline of payment mode in credit card and none of the dropouts had worked as to how revolving the card will affect their financial scenario.

Thus there were two key benefits that the attrition customers were expecting from the credit card. The benefits of a blanket cover for emergencies and needs above their financial resources and the security value of the card. Those who simply canceled their membership without switching to other cards gave little value to credit card as mainly an alternative to cash or could not find this value. Then there were a number of benefits expected from the card because those were promised and did not materialize like health insurance benefits, and highly enhanced limits.

Delivery of the Citibank Card: Areas of Dissatisfaction: The dissatisfaction’s, or problem areas are in some cases genuine service problems in terms of wrong billings or delayed bills, and sometimes due to little perceived value for money from the card. Or in other words lack of education and information about the processes involved with credit card. The simplest irritant mentioned by some of the attrition customers was the strict discipline Citibank card has of insisting on timely payment. Or charges levied on late payment.

In fact charges have become such hot buttons for attrition customers that interest charges on revolving the card are perceived to be extra charges as penalty. The level of such customer sophistication is apparent from the fact, that there is little realization that the card need not be revolved if one does not need to pay the interest. “The fees for both are the same, but ANZ offers extra facilities, its credit is for one and a half month”. It is obvious that these consumers were either not informed or deliberately left in the dark by the sales personnel. “I do not know about Citibank but ANZ does not charge if you pay within the due date”.

Then again most attrition customers faced a genuine problem of delayed billing and penalties on late payment through no fault of their own “If the courier service does not deliver in time then we should not be punished for it” A number of such customers not used to too many bill payments get nervous that the bill has to be paid the next day. “I cannot get my household chores, I got confused whether I should get my gas bill, phone bill or now this new problem of credit card”. Then there is the catch 22, if they pay the bill through cheque then the bank will not receive it in time and a fine will be charged.

If the payment is rushed by making cash payment then there is another penalty involved. It made the customer come to the conclusion that the idea of the entire exercise is to fleece the customer. “Citibank is a Jewish owned bank, it just fleeces money from you on the slightest pretext”. Most service issues are not related to discourteous behavior, as much as the lack of cooperation offered. The bank rarely owns delayed bills, and the customer goes around in a circle, the personnel are courteous but not in the least helpful.

Since little is known about the processes involved in credit card transactions, the customer gets terribly confused once he is charged late payment and interest charge on the same bill. The cost and charges have obsessed the customers to such an extent, that the dropouts now believe that the customers need to revolve the card and the bank should not charge any interest on it. Again the limits should be enhanced and there should be no penalty on late payment. It does not imply that the customers have gone berserk; this only goes to indicate that he is totally confused.

Then again the acceptability level of different cards are the same “Where one card is acceptable all are”. Yet Citibank card being a high road brand and the leader of the market, it is expected to fare better, as a matter of fact this happened to be the case initially. The bank is also blamed for the uncooperative behavior of the traders. “One has to pay 3% more, one needs to go through a waiting period while he goes and checks, you just wish to get rid of all this by making payment through cash”. The responses of the consumers make it very clear that both switchers and the simple dropouts are disappointed.

They share a strong belief that Citibank is too complacent and has little desire to retain its existing customer pool. Since little was done to enhance acceptability, broaden the usage in terms of deeper penetration in the trade market or otherwise add value to the card. The customer perception of credit card of the pre-Citibank card era and the time when the card was established in the market has also changed little implying that the card did little to broaden its acceptability level. Earlier on the customers construed the greatest benefit of credit card to be for traveling and payments of bills outside the country.

Currently those who have switched still retain the same concept. The customer pays a fee for credit card he then wishes to justify the fees and utilize the card. Utility is not an easy task. The shopkeepers’ resist, there is embarrassment when the card needs to be verified, and longer time is needed with cards then cash. In the end, the customer found little value for money from the whole process. Comparative Strengths and Weaknesses: According to the author Citibank card was rated to have no comparison, despite the fact that when Allied bank card and MCB cards were launched their impact was insignificant.

The Citibank card customer considered these cards to be beneath such comparison. Then with the launch of ANZ visa, customers’ found the first benchmark. Now the attrition customers compare Citibank card with both MCB and ANZ. A major strength of Citibank card is its easy attainability. Another strength of the card is its position as the market leader, and the most widely used card in Pakistan. The strengths are largely emotive rather than tangible and definitely do not translate into tangible benefits. For instance a highly popular card should also be more acceptable and the most favored card of the merchants.

This does not seem to be the case. A major weakness of the Citibank card is the perception that it is expensive; this is a legacy from its consumer banking too. ANZ and MCB do not have the same joining and membership fees as Citibank. Then again the later too do not levy so much charges. ANZ has earned a reputation of sending the bills at least 15 days in advance; it has many more branches where payments can be made. As a result it does not get into the hassle of late payment. Then again ANZ does not encourage its customers so much to revolve, and somehow communicates to them the benefits of timely payment.

Then again the facilities of ANZ are customer need oriented. Since the basic use of the cards is still restricted to be in traveling and hotel billings, those Citibank customers who have switched find it more beneficial. On the other hand the rewards scheme of Citibank is rated to be a farce, since one has to spend millions to earn enough points to get a good reward. As a matter of fact the customers idea of rewards and facilities are neither those offered by ANZ nor Citibank. Customers would like to be rewarded for spending in terms of value addition, for instance reduction in interest charges and membership fees.

Then again ANZ is construed to communicate better with its customers in terms of handling complaints, and responding. Improvements Desired: According to the author when one puts everything in balance, it is not really a matter of service and facility as much as disappointment with Citibank because it is a high road brand. Customers are ready to pay slightly more to a high road brand in return for its ability to innovate and satisfy customers’ needs. The bank needed badly to enhance acceptability, educate the traders, and gain traders’ loyalty.

It was also expected to broaden the area of acceptability, to keep its customers loyal and happy. “They should increase the number of outlets where the card is acceptable, currently it is acceptable at limited places. The bank not only needs to educate the customers; it also needs to educate the traders and the merchants. Most attrition customers feel that the bank offers little incentive to the traders, resulting in the trader’s resistance to accept the credit cards. “The shop keepers are charged 2% that is why he minds accepting the card”. “If the shop keeper is given relaxation he will accept it happily”.

Once the customer base is expanded the bank needed to push the traders hard to have a positive attitude towards credit card acceptance. A major area where improvement is badly needed is the billing delivery. The dispatch system leaves a lot to be desired. “A major issue is late invoice since the customer has to bear the burden for it”. In their eagerness to let the bank make greater profit the customer is motivated to revolve the card, without really letting him evolve in the credit card culture. Before he has been trained to spend he is trained to overspend; as a consequence the amassing of debt scares him away from credit card altogether.

The customers with little traveling or hotel payments needs are required to be encouraged to use credit card instead of cash. This is only possible when major avenues of day-to-day spending are enhanced. In almost half of the overpopulated city areas credit cards are simply not acceptable making it difficult for these customers to justify the joining and membership fees. It is essential that the customer understand the interest charge element in revolving the card. Most customers’ construe that the bill has a service charge and do not see a similar charge for other cards.

A major problem is that there is no discrimination as to who needs the cards and for what purpose. The entire process is totally mechanized. Even when it is mechanical, the impression must be created that individual needs are catered for. It is not only the customers and the traders that need education; the same rule applies to the sales force. There are a number of times when they omit to give essential information, or misguide the customers in terms of limits or other non-existent benefits. There are a number of loose ends that tend to gradually sink in the consumers’ repertoire and discourage him. FOREIGN LITERATURE

A cross-functional team of senior Citibank staff was formed in Dubai, U. A. E to look at the attrition trends and reasons in Citibank businesses across the region and suggest remedy to handle the situation. The team came up with their findings and recommendations, which are being summarized here. According to the project team, retaining customers has never been more important, with all the markets getting highly competitive; the need for a robust Retention Management Program is now paramount. According to the project document experience tells that it costs 5-6 times more to get new customers than it does to retain an existing one.

In the region, there are nearly 2. 5 million customers in the cards business alone, and at an average of 7-8% attrition every year, they are looking at 175,000 customers attiring from the card fold each year. An effective Retention Management Program, which fosters customer loyalty and delivers value to customers in a way meaningful to them, should be the focus. Understanding Attrition: According to the team the essence of managing customer attrition is in understanding the customer relationship process and identifying the nature of attrition and developing a plan, which focuses on preventing attrition.

According to the research Attrition could occur due to any of the following reasons: •Buyer’s Remorse •Service Related Interim Closure •Closure during Renewal of Card •Customer Relocating I Transferred to Another Location Current situation: A study across the region indicated that the reasons for attrition could be broadly classified into 2 categories namely: Value Related: Customer does not see value in Citibank relationship such as Fee high, Interest Rate high. Service Related: Customer has experienced problems, which has interrupted usage. Reasons for Attrition – Service related: DSA Misinformation •Low Credit Limit •Acceptance I Surcharge •Authorization Decline Reasons for Attrition – Value Related •Balance Transfer •High Fee I Interest Rate •No Need for Card Results of Retention Activities According to the project document there is clearly an opportunity and a need to develop a Standardized Retention Management System with a greater focus on a Proactive Retention Management, which can be implemented across the different businesses, particularly in Startup Businesses who can come up the learning curve faster. End of Literature Survey Theoretical Framework:

Ideally, all companies would want to see zero attrition in their businesses. However, certain amount of attrition happens anyway as customers’ priorities and preferences change over time. So it is important to establish why attrition is happening. If attrition is happening due to value proposition or service it must be investigated so that the required changes are made. Hypotheses Formulated: There are no visible trends in credit card voluntary attrition that would suggest that there is dissatisfaction with the product or service. Research Design: Type and nature of the study:

According to Good “research is a careful, critical, disciplined inquiry, varying in technique and method according to the nature and conditions of the problem identified, directed toward the clarification or resolution (or both) of a problem”. Parel defines research as “a systematic study or investigation of something for the purpose of answering questions posed by the researcher. ” Treece commended that “research in its broadest sense is an attempt to gain solutions to problems. More precisely, it is the collection of data in a rigorously controlled situation for the purpose of prediction or explanations. ” Research can be of three types i. . historical (what was), descriptive (what is), or experimental (what will be). The study here deals with the current scenario i. e. “what are the root causes of voluntary attrition in the card business? ” Hence the type of research used in the study is largely descriptive research. Sampling Design: Sample size was 30 respondents with a standard margin of error of 18%. Systematic sampling technique was used to come up with the sample. Out of the total cancellations of 8700 cards during the period of study a sample of 30 cancelled cards was collected by first sorting the data by cancellation month and then picking up every 290th cancellation.

Respondents of the Study: Respondents are Citibank card members, male or female, who have voluntarily cancelled their credit cards during the period from January’10 to June’10 Structured & Unstructured Interviews: Interview method has been used to gather primary data. Standardized interview format was developed where the interviewer called up the respondent and conducted the interview over the phone by using the interview schedule to ask questions and record the answers. Data Collection Methods: Primary data was gathered through the standardized telephone interview of the respondents, which was conducted by the author.

Secondary data source was Citibank’s mainframe server, which houses all the details of card accounts. The details include, customer profile, account history, and membership opening and cancellations date. The Server or the Mainframe contains Customer Record (all variables pertaining to customer history) right from the day the account was created. However, the data mining process had to be performed manually by looking up all the variables on different screens Card by Card. The results were logged on Excel Worksheets so that they could be statistically evaluated.

The secondary data was used to sure up primary data findings and to identify trends in variables if any. Data Analytics Techniques Used: Mean and percentage has been used to analyze primary and secondary data. Results of Data Analysis: Hypotheses Substantiated/Unsubstantiated: TABLE: 1 PROFILE OF CANCELLED CARD ACCOUNTS No. of Respondents% out of total respondents Age : 405161 Salaried5971 Self-employed2429 Income : < Rs10,00011 Income : Rs10,000-. 20,0003441 Income: Rs. 21,000-40,0003947 Income: > Rs. 40,000912

The first column lists the profile of the respondents based on age, nature of profession and income brackets. The second column lists the number of respondents that fall under each profile bracket. The last column gives the percentage of respondents out of total respondent making up each profile bracket. Analysis shows the following: •61% of the respondents are over the age of 40 years •71% of the respondents are salaried •88% of the respondents are in the income bracket between Rs. 10,000-40,000 Analysis shows that older age group is more prone to attrition.

Majority of the respondents is salaried which may reflect the impact on salaried class due to economic slow down. Most of the respondents belong to the lower income group, which may indicate their vulnerability to service charges levied by the bank and mark-up charged by the merchants. Reasons for Cancellations: TABLE: 2 Value Related Attrition Total Respondents: 83Total Response% of Respondents S. NO. Questions YesNoYes 1Did you cancel the card because you believe that the annual membership fee is high? 305336% 2Did you cancel the Card because you believe that interest charges are high? 37016% The top of the table shows the total respondents questioned which is equal to 83. The next row lists the questions that were asked, to confirm if any one of them were the reasons that prompted the respondent to cancel the card. The following two columns show the response of the respondent against each question in either “Yes” or “No”. The last column shows the percentage of respondents out of total respondents who indicated dissatisfaction. Analysis shows the following: •36% of the respondents identified high annual fees as a reason for cancellation. 16% of the respondents identified high interest charges as a reason for cancellation It is evident that attrition customers do not see the value in the card in return for the annual membership fee. These are customers who value paying cash instead of using credit when making their purchases, as they do not perceive the benefit of using plastic money in place of cash. There is also a perception amongst card users that the interest charges are high. These are frequent spenders who pay minimum outstanding each month and revolve the rest of the outstanding balance to the next statement of account.

The dissatisfaction occurs when they see mark-up charges that appear on the bill as a result of not clearing the total outstanding against the account. TABLE: 3 Service Related Attrition Total Respondents : 83Total Response% of Respondents S. NO. Questions YESNOYES 1Did the Sales Executive impose the Card on you? 265731% 2Did the Sales Executive over-commit on Credit Limit? 176620% 3Were you dissatisfied with the Credit Limit allotted to you? 176620% 4The Sales Executive did not inform you about the Annual Fee? 127114% 5Merchants Charge extra on the Card? 117213% 6Was there Dissatisfaction with our CitiPhone Services? 777% 7Sales Executive did not inform you about our Service Charges? 5786% 8There were not enough Merchants? 5786% 9Did you face Problems in receiving the Card? 3804% 10Were you having problems in receiving Statements? 3804% The top of the table shows the total respondents questioned which is equal to 83. The next row lists down the questions that were asked to confirm if any one of them were the reasons that prompted the respondents to cancel the card. The next two columns show the response against each question in either “Yes” or “No”. The last column shows the percentage of respondents out of total respondents who had dissatisfaction.

Analysis shows the following: 71% of the respondents identified sales complaints as a reason for cancellation. Further break-up of Sales Complaints is as follows: •31% of the respondents identified forced sales as a reason for cancellation. •20% of the respondents complained that they were promised a higher credit limit by the Sales executive •14% of the respondents complained that Sales executive did not inform them that they would be charged an annual membership fees. •6% of the respondents complained that Sales executive did not inform them that they would be charged service fees if they revolve their credit.

Merchant Surcharging: • 14% complained that Citibank’s merchants charge 3% extra on the bill whenever they use the card. Dissatisfaction with the Credit limit: • 20% of the respondents were not satisfied with the credit limit allotted to them. Sales executives are imposing cards on prospects that don’t want them. They are also over-committing on the credit limit and they use it to entice customers into applying for the card. When customers are promised huge credit limits, which don’t materialize because of their low income, they feel cheated and cancel the card.

Sales executives also do not inform customers that they will be charged with the annual membership fees which is payable at the time of membership. Merchant surcharging is also a major issue identified by the respondents. Customers preferred cash to card as it saved them from paying 3% extra on the bill plus but they could also bargain on the price. Merchants surcharge customers to cover for the 3% commission that they pay to the bank as a royalty for being their merchants. As per the signed merchant ship agreement it is illegal to pass this cost to the customer and it must be borne by the merchant.

Dissatisfaction with the credit limit may be due to a conservative credit policy. According to the current credit policy maximum limit extended is roughly twice the substantiated monthly income. Another reason is that a lot of customers are not ready to provide proof of income due to tax related issues though their actual income may be quite high. In the absence of income documents credit policy will not allot higher credit limits. TABLE: 4 Attrition due to personal reasons Total Respondents: 83Total Response% of Respondents S. NO. Questions YYESNNO YES 1Were you having financial problems in making ayments? 112771 14% 2Did you cancel the card because interest charges are un-Islamic? 55778 66% The top of the table shows the total respondents questioned which is equal to 83. The next row lists down the questions that were asked, to confirm if any one of them were the reason that prompted the respondent to cancel the card. The next two columns show the response of the respondent against each question in either “Yes” or “No”. The last column shows the percentage of respondents out of total respondents who had dissatisfaction. Analysis shows the following: 14% of the respondents identified financial burden as a reason for cancellation •6% of the respondents identified Islamic sentiments as a reason for cancellation These are customers who spend more then they can afford and hence end up revolving their credit and making minimum payments each month. The outstanding balance keeps piling up as spending continues and service charges build up. After a few months customers realize that their minimum payments are not enough to get rid of the outstanding balance, which has been increasing over time. They decide to cancel the card so to put a stop to new spending.

They then concentrate on making payments to get rid of the debt. Islamic sentiments also accounted for 6% of the respondents who considered interest charges as un-Islamic. They were of the view that since they would sooner or later end up revolving their credit and hence pay interest it is in their best interest to cancel the card. Spending and Delinquency Trends: TABLE: 5 Non-spenders vs. spenders No. of respondents% Out of total respondents Non-spenders 7388 Spenders1012 The first column lists the profile of the respondents based on spenders and non-spenders.

Spenders are those who have made at least one transaction in the last six months prior to cancellation, where as non-spenders are those who have not done any transaction in the last six months prior to cancellation. The second column lists down the number of respondents that fall under each category. The last column gives the percentage of respondents out of total respondent making up each category. Analysis shows the following: •88% of the respondents had no transactions in the last six months prior to cancellation. •Only 12% of the respondent made at least one or more transaction in the last six months prior to cancellation

Respondents did not see the value in using the Citibank credit card for their purchases and opted for paying by cash. The inactivity on the card reminded them that they were paying a premium for the services, which were not being utilized by them. Therefore they decided to cancel the card. TABLE: 4 Delinquent customers No. of respondents% out of total respondents Delinquent 4554 Non-delinquent3846 The first column lists the profile of the respondents based on delinquent and non-delinquent customers. Delinquent customers were those who had missed the payment date prior to the cancellation month.

Non-delinquent customers were those who did not miss or skip payment prior to the month of cancellation. The second column lists the number of respondents that fall under each category. The last column gives the percentage of respondents out of total respondent making up each category. Analysis shows the following: •54% of the respondents had missed a payment prior to the month of cancellation. •46% made their outstanding payment within the due date prior to the month of cancellation More than half of the Respondents was in delinquency prior to the cancellation month.

The delinquency could be due to the non-payment of annual membership fees and or outstanding transactions. Hence cancellations could be linked to the inability on the part of the respondents to make payments against their outstanding debts. TABLE: 5 Card Cancellation by number of years on books No. of respondents% out of total respondents Year 1 5667 Year 234 Year 368 Year 478 Year 578 Year 645 The first column list the profile of the respondents based on the number of years the customer was the card member from the date of the membership to the cancellation date.

The second column lists down the number of respondents that fall under each category. The last column gives the percentage of respondents out of total respondent making up each category. Analysis shows the following: •67% of the respondents cancelled the card in the first year of membership. So the customers who are going away are primarily new customers. The card may not be living up to it’s expectations in terms of providing value for money. There could also be a problem with the target market; the bank may be selling the card to the wrong segment. Summary of Findings, Conclusions and Recommendations Findings:

Attrition is coming from low-income salaried class, which is most susceptible to economic slowdown. Older age group (above 40) is more prone to attrition as high inflation is putting extra pressure on their income to meet the household expenses. Conclusion: The problem seems to be an economic one where the targeted income segment (10,000-40,000) is not able to afford paying even the annual membership fee let alone doing transactions on the card. Recommendations: Sales must switch to income segments that are making more than Rs. 50,000/month. Sales to lower income groups should be discontinued. Findings:

Attrition customers are not getting the value for money. Card has failed to replace cash as a medium for making payments since the merchants are not ready to bargain on price while processing card transactions. Hence customers feel that they are actually loosing money when using the card instead of cash. Citibank card is perceived as a premium mark-up rate card where the outstanding balance keeps growing even though customers make minimum payments. Conclusion: Card has been unable to supercede cash as a mode of payment because merchants do not offer the same bargain on price of goods and services as they do on cash.

Recommendations: Contracts with the high volume turnover merchants need to be re-visited with across the board discounts on sale price of all items charged through the card. The discounts are to be borne by the merchants, in return bank could promise more business to them by promoting such merchants through advertising, customer communication etc. Findings: Sales staff is imposing cards on prospects to meet the sales targets. They are doing this by wrongfully promising high credit limits to low income segments and by not revealing the annual membership fee and other service harges. Customers expect that the card does not carry any membership fee and it’s free from mark-up charges where they would only be paying for the outstanding transactions. When the expectations are not met they cancel the card. Moreover, customers are paying more than the price of the goods and services because of illegal surcharging by merchants. Conclusion: This is an integrity issue at the sales end, which needs to be sorted out. Monitoring and accountability controls must be in place to ensure that correct information is passed on to prospects before their conversion.

Moreover, merchant business needs to be reviewed with the focus on ways to stop illegal surcharging by merchants. Recommendations: Disciplinary action including if required termination must be initiated against sales executives who are found over committing to prospects. A strong message from sales and country managers must be passed on to the sales team that forced selling will not be tolerated and will lead to immediate dismissal. Mystery shopping should be carried out to identify merchants who are illegally surcharging customers in violation of the terms and conditions of the merchant contract.

The repeat offenders must be warned and if they persist then their merchantship should be terminated. Findings: Customers are facing financial crunch due to current economic slow down and excessive inflation. Those who have built-up high outstanding credits are facing problems in making payments. Conclusion: Such customers are having problems paying the minimum monthly payment each month and they feel afraid to continue with the card for fear of accumulating more debt by using the card. Recommendations: A lower mark-up plan with an increased repayment tenor could be offered to such customers.

Bank already has a special product called “smart installment plan” which can be offered to such customers. The product will bring down the monthly payments making them affordable. Bank would be able to retain such customers. Findings: Major portion of the attrition portfolio is made up of customers who are not using the card and hence find no utility for renewing the membership. The delinquency occurred in non-starters due to non-payment of annual fee, as they were not interested in the membership. Conclusion: Lack of card usage is causing customers to attire, as they do not have any incentive to spend on the card.

Recommendations: Marketing should launch frequent promotions with attractive discounts specifically targeting inactive customers. A focus group for inactive customers must be done to ascertain their needs so promotions could be tailor made for them. Findings: Major portion of the attrition portfolio is coming from new customers during the first year of membership. Conclusion: The target segment needs to be reviewed in terms of profitability, which definitely will be low, as they are not using the card. Recommendations: Sales must target high profitability segments and move away from selling to Rs. 0, 000-Rs. 40, 000 income segments. Limitations of Study: Study is limited to an analysis of voluntary cancellations that have occurred in the period between Jan. ’10 to Jun. ’10. The study excludes cancellations by customers who are moving abroad or to a remote area where Citibank does not have card services. The respondents of the study are Citibank card customers. Acknowledgements: 1. Almighty Allah 2. Professor Sibghatullah Hussaini 3. Citibank officials 4. Classmates who helped. References: Textbook: Marketing Research by Naresh Malhotra 5th Edition