The company provides several incentives to boost sales. It offers HBL and DSAs Rs 15- 30 for every new application that they source (this is paid apart from the amount paid on issue of credit cards). Also additional amounts are paid to channel partners if their sales exceed targets (like Rs. 250 is paid to DSAs for every card issued above the allotted target. ) Also, high performing DSAs are given prizes, mementos and certificates. Further, HDFC regularly supplies DSAs and other channel partners with merchandise to be distributed amongst their sales people.
HDFC also arranges several training programs for the staff of the channel partners For Bank Executives The bank executives’ salary consists of a fixed and a variable component. The variable component depends upon the sales and can be as large as 10 ten times the fixed component. Typically the fixed component varies from Rs 3000 to Rs 6000 per month. In addition high performing employees also get recognition in the form of a certificates and mementos. They are also eligible for an annual bonus depending upon their level of performance.
The employees are evaluated on the basis of their performance against monthly productivity targets. Non performing employees are monitored for 3 months after which appropriate action is taken. Sales Promotions The recent spurt in credit card service providers have led to intense competition in this field. Additionally, the fact that credit card is not a highly differentiated product has further intensified the degree of competition. Given this scenario promotion becomes extremely crucial in the success of any credit card company.
A prospect is converted into a customer by a credit card company that first reaches the customer with its offer. The industry has been aggressively wooing the consumers by offering “free” credit card right at the door step of consumers and several discount schemes attached to the credit card. Also, HDFC offers several ranges of credit cards (Silver Card, Gold Card, Health Card, e-seva Card) to its customers. In the case of HDFC the promotional planning is centrally done at the credit card division located in Chennai (in consultation with their headquarters in Mumbai).
The bank provides fee waivers and has tie ups with several retail outlets for providing attractive discount schemes for its consumers. Fee waivers are primarily provided to institutional customers and account holders and borrowers of HDFC. The bank is also using direct mailers to prospective customers in order to reap benefits of being the first mover. However, HDFC has not been aggressively targeting students of prominent institutes as potential future customers unlike major credit card players in the country.
HDFC is taking cognisance of the strategies adopted by various players and is planning to come up with counter strategies to enhance its market share in the industry. Decision-making Architecture Almost all the policy related decisions are made by the Credit Card Division of HDFC located at Chennai. The Bank however, uses push strategy to induce channel member to work for it (this also involves decision as to how may DSAs, self staff, HBL efforts etc. , should be focused in a particular area).
The Area sales managers have some leverage while granting discounts to customers but that too is more or less policised. The DSAs and other channel partners do not have any voice in the policy matters. There responsibility is to get applications filled from as many as prospective customers and forward it to the Credit Cards Division. The decision regarding the allotment of the card, the credit limits etc are taken by the Division. Problems faced by Channels The major problem faced in the distribution system, is that of channel conflict.
As we have seen earlier, HDFC’s distribution channel comprises of DSAs, its own branches and the HBL. Thus a channel conflict becomes inevitable. Lack of clearly defined areas of operations often leads to a lot of overlapping between the different channels. Customers often complain about the fact that they are often approached by different channels at the same time. This not only leads to waste of resources and time but also affects the reputation of HDFC adversely. Also, HDFC uses HBL as the primary distribution channel unlike the use of DSAs by the other players in the industry.
This channel provides HDFC with a lot of control over the distribution channel. However, HBL has not been able to meet the aggressive selling that has been resorted to by other competitors through their DSAs. This is evident from the complete absence of targeting of students by HDFC unlike Citibank, ICICI and Standard Chartered. As the market share in this industry directly affects the bottom-line of the companies it is one of the handicaps of the HDFC channel. \ Recommendation The nature of the problem permits us to look at two time frames – a short term solution and a longer term plan.
In the short term the company could look at a scheme whereby it divides the customer base between the different channels based on their respective potentials. In the long term the company could look at developing a management information system wherein a complete database is maintained of all the existing and potential customers together with the number of visits made to the respective customer by each channel. Such a database would be available to all the channels so that any kind of overlaps can be avoided.
The issue of lack of intensity in selling by the channel can be addressed by increasing the current share of the DSAs in the overall distribution of HDFC. The current share of DSAs is a miniscule 8-10%. This share can be increased so that the DSAs also become a significant distribution channel. The DSAs have the workforce and are more effective in tapping the potential customers in a more aggressive manner. Additionally, the HBL salesmen can also be provided additional incentive in addition to the current cash component to target the newer segments of customers.