Citibank India - the Segmentation Choice for Profitable Growth

To be more competitive in the intense credit card market and to focus on profitable growth, Citibank India needs to change its target market selection strategy. Based on the result of industry analysis and its historical performance, Citibank India should promote credit cards to emerging affluent segment (SEC B) in second rung cities in which Citibank India already operated.

Industry analysis

The credit card industry in India is fast growing and fiercely competitive. The market is divided by domestic banks and foreign banks. Domestic banks own unique advantages in understanding the market and being unregulated by the strict licensing norms. The free annual fee and repayment on time resulted in the revenue to concentrate on interchange. Geographically, the market could be divided into city and village. Although fewer people living in cities, the cities’ population growth is nearly 2.5 times to villages’. And also most consumers with higher SEC level live in cities.

Performance of Citibank

Citibank’s strategy that focused on top-tier consumers in top-tier cities brought not only high revenue but also high cost to the company. The targeted consumers, the super-affluent and affluent segments, required better service, which leaded to higher costs. This segment was already quite saturated. Therefore, it is hard for Citibank to obtain a huge revenue growth or profit growth here in the future. On the contrary, the battle for SEC B has just started. The population of SEC B is four times larger than SEC A, and, with different lifestyle, income and demand, the cost of servicing SEC B customers could be lower than SEC A. Moreover, Citibank operated in 30 cities in India but only focused on the top eight metros – giving away its market share in the rest 22 cities but still undertook the operating expenses there.