Bancaja: Developing Customer Intelligence

Case Analysis Report

 TABLE OF CONTENTS

3C’s (Company, Competition, Customers) 2

SWOT Analysis 3
Statement of the Problem 4
Project CRM 4
Why Use Credit Cards? 5
STP Analysis 5
Potential Methods for Specific Analysis Objective 7
Pros and Cons of Conjoint Analysis Vs Mini Campaigns: 7
Recommendations 7
Positioning 8
Important Chosen Attributes 8
Marketing in Target Market 1 8
Marketing in Target Market 2 9
Conclusion: Let’s talk about the Future 9
3C’s (Company, Competition, Customers)

Company Background:
Bancaja’s parent company, Caja de Ahorros de Valencia was established in 1878 and served as a
regional bank whose purpose was to provide support to its community via investment as well as
other philanthropic work. By 1996, they were the largest savings bank in Valencia and the third
largest city in Spain with an emphasis on non-profit work, social services and corporate
responsibility. They retained a strong presence in the nation with a portfolio which consisted of
insurance, investment services as well as real estate. Within the next few years, they became a
complex body of institutions that consisted of previous for profit banks and other savings banks.
These new divisions resulted in an unclear structure and lack of unity within different segments
of Bancaja which resulted in uncertainty between different branches. Although Bancaja was the
third largest savings bank in the country, it still had a long way to go to compete with the nation's
leading financial institutions.

Competition:
Currently, Bancaja’s cost position was closer to that of a small, conventional bank that it had
obtained rather than with the leading modern bank that it wanted to be. There is increasing
competition in the current markets that Bancaja operates in, which results in a rapid decline of
the bank’s operating margin. This led to the need to build a loyal client base in order to remain
competitive. By 1996, although Bancaja had put in efforts to innovate and compete, their credit
card market share had still not improved. When it came to credit cards, it was still quite behind
its competitors, with less than half of the success rate than other banks in Spain. This implied
that its competitors cards were used twice as often than Bancaja’s credit cards. This raised the
question of whether utilizing customer analytics would improve the situation.

Customers:
Through market analysis, Bancaja has developed
part of the demographic profile of a typical user of
credit cards in Spain. In 1996, they found that the
typical customer is likely to be male than female,
as demonstrated in Exhibit 6. Additionally, we
notice that the age of the typical customer is around
25-54, and is likely to be a part of the upper or
middle class. However, this is currently public data
and if Bancaja wants to perform better than its
competitors, it must develop new sources of
information that will be available to just them.
This will be discussed further in the STP
Analysis section.
 SWOT Analysis

Strengths:
● In Valencia, Bancaja is the largest savings bank,
and the third largest in Spain.
● Bancaja enjoys a strong presence in Spain through
○ Strong customer orientation
○ Diverse portfolio with insurance, real
estate and investment services.
● Succeeded in expansion the years by acquiring
more savings banks which increased its reach
throughout the nation
○ Acquisition of banks from different areas
created new marks for Bancaja
Weaknesses:
● Lack of cohesive structure
○ uncontrolled expansion led to
confusion regarding the match
between the new divisions and
Bancaja’s existing design.
○
● Their market share has not improved
despite commercial efforts and continuous
innovation
○ Competitors have a success rate
twice of Bancaja.
● Currently not able to compete with stronger
leading financial institutions.

● Well developed reputation of being an innovator

in credit card commercialization.

Opportunities:
● In Spain, the market for credit cards grew rapidly
creating more opportunities and potential
customers for Bancaja.
● In terms of POS terminals, Spain had the densest
network worldwide, and was second in ATM
concentration after Japan.
● People in Spain tend to hold credit/debit cards
more than in other European nations.
● Customer Relations Management (CRM) and the
emerging field in customer analytics can
positively benefit Bancaja’s operations.
Threats:
● Although, Spanish customers tend to hold
credit/debit cards more, they conduct only a
few transactions even when compared to
European standards
● Rapidly increasing competition resulting in
declining operating margin
● Doesn’t have the presence of a large
modern bank, rather its cost position is
more similar to a smaller traditional bank.

Statement of the Problem

Bancaja is facing three major issues: unity between parts of the financial group, cost efficiency
as well as the segmentation of commercial actions. They are required to identify goals of new
divisions and coordinate how they relate to the goals of the larger organization and group vision.
Secondly, they have to devise ways to build a strong loyal customer base in order to compete and
fix the problem of declining operating margin. Lastly, they are considering Customer
Relationship Management (CRM) as a solution to develop their objectives in each segment with
regard to micromarketing and commercial actions. Overall, Bancaja has to develop its vision
throughout all the divisions and implement a strategy that is cost effective and gives it a
competitive advantage over its competitors.

Project CRM

Customer Relationship Management (CRM) is a way of controlling a company’s relationship

with its current and potential future customers. This method consists of utilizing data analysis
about a customer's history with a company and sorts client information in an efficient,
economical, and ethical way in order to increase customer retention and drive sales growth.
Bancaja will use CRM as a way to segment, target and position (STP) its product in the Spanish
credit market. In order to run this program, Bancaja was required to select an area with high
visibility that had a low risk of tarnishing their firm's image and would still provide a benefit.
After thorough discussions and analysis, it was decided that credit cards were the best option to
run this program.

Why Use Credit Cards?

● The sales of credit cards is rapidly increasing in the
country as more people are starting to utilize it. In
the bar graph to the side, it is evident that credit cards
per thousand inhabitants in Spain is 271, while the
Average EU is 212.
● Bancaja can use the credit cards as their product to
establish the CRM project as it provides them an
opportunity to establish themselves in this growing
market by gathering more information on their
current and potential customers.
● Additionally, credit cards have high visibility as they
are very popular among residents in Spain, which
will make it easier for Bancaja to gather data about
their customers as there is a large market they can
analyze.
● Credit cards come with low risks as not many
residents are currently dependent on the Bancaja credit card as they experienced low
numbers of use just a few years ago.
● CRM can act as the perfect method for Bancaja to analyze the needs of credit card users
and make changes/advancements in order to establish themselves in this emerging
market.
The Credit Card project is definitely the appropriate product for launching customer intelligence
at Bancaja due to the reasons stated above: it is a high visibility product, it comes with low risks
and can be the solution for Bancaja to be able to establish themselves in the growing credit card
market.

STP Analysis
Segmentation:
● Demographic Market Segmentation​:
From Exhibit 6, we can analyze the
attributes of credit card users that dominate
the client base.
● Gender: Males are more likely to use credit
cards than females, accordion to the market
research studies conducted by Bancaja.
● Age: Customers that make up a large
portion of the client base tend to be between
the ages 25-34 and 35-44.
● Income: Customers in the high/upper
Middle class and middle class tend to make
up the largest percent of the total credit card users in Spain.
● Behavioural Market Segmentation:
○ Spaniards tend to be very debt averse: 75% of them chose to pay their outstanding
balance in full at the end of every month.
● Geographic Market Segmentation:
○ Observing the map to the right, it is
evident that Bancaja has made efforts to
spread its operations throughout Spain.
However, it is evident that the majority
of its branches still operate in the
community of Valencia. Bancaja should
use CRM as a method to target the
customers in the community of
Valencia as although different areas
represent different needs, the
information gathered from the
community of Valencia would be the
most useful as it represents the largest
customer base.
Target Market :
● First consideration: Male Vs Female
○ Since males make up a larger section of credit card users in Spain, Bancaja should
target males
● Between the ages of 25-54
○ Further division between 25-34 and 35-54 to create two distinct age based target
markets.
● Middle to Upper Class: Make up the highest number of credit card users and have a
tendency to pay bills on time.
● Bancaja must target each demographic as a different segment of the market. Although
there are several options available, it is smart to start small to test the various data that is
provided.
● This will be discussed further in the upcoming sections where the specific target market
segments will be pointed out.

Note​: Positioning will be discussed after the next few segments that discuss the potential options.

Potential Methods for Specific Analysis Objective

● Conjoint Analysis: ​This involves interviewing potential clients and asking them to rank
specific attributes that would influence their decision to purchase credit cards.
● Mini Campaigns:​ This is​ ​a way of testing the product on the real population by
marketing different sets of credit cards to different social groups and analyzing which
combinations seem to be the most popular and successful.

Pros and Cons of Conjoint Analysis Vs Mini Campaigns:

Conjoint Analysis Pros: Cons:

● Can be beneficial in market ● Reliability is uncertain
segmentation as it allows you as people may not
to understand which attributes necessarily manifest
customers value
their answers in actual
● Is cost-efficient as creating a
campaign and preparing purchasing decisions
equipment is inexpensive rather basing their
● Yields significant insights into answers on normative
the patterns of behaviour of ideas of what they
potential and current would want to do.
consumers which is important
to understand their
engagement with the company
 Mini Campaigns Pros: Cons:
● Involves collection of data on ● Operating this can
precisely the target group’s often price quite
actual decisions which are expensive
more relevant to the company ● Underlying potential
● Provides an excellent of tarnishing the
opportunity to analyze new reputation of the
ways to encourage customers company
without the expense of a major
campaign

Recommendations:

Although both Mini Campaigns and Conjoint Analysis present compelling cases to be employed
as a mode of research, a careful evaluation of both pros and cons for both strategies reveals that
mini campaigns are the advisable method of analysis. While Conjoint analysis presents a solution
that is in line with Bancaja’s goal of cost-efficiency given its inexpensive nature, its analysis is
limited to general customer behaviour and is unreliable in its recommendation as the actions of
actual Bancaja customers will not necessarily be in line with the general customer’s response.
The pilot project is a critical step for Bancaja and is worth investing in to achieving its
overarching goals in a manner that yields reliable and actionable results, even if is costly. The
analysis method of mini campaigns presents precisely this trade-off, thus making it the preferred
option between the two.

Positioning

Target Market

Employing the strategy of mini campaigns, it is critical to strategically discern two target
markets that are crucial to the operations of Bancaja. As demographic analyses indicate, men
tend to use credit cards significantly more often than women in Spain, making it important that
they are represented in both cohorts. Moreover, credit card users overwhelmingly pertain to the
age profiles ranging from 25 to 34 and 35 to 44. Finally, customers that rank within the
middle/upper-middle class comprise almost half of total credit card consumers, making it
essential that this characteristic is represented in the target markets. In particular, the two target
markets will reflect a distinction between credit card users that primarily use the instrument as a
means of financing purchases or simply to conduct transactions. As a result, the two target
markets that should be selected for the purposes of a mini campaign are:
1. Target Market 1: Males, 25-34, Middle/Upper class
2. Target Market 2: Males, 34-44, Middle/Upper class
Important Chosen Attributes

Given, the ultimate goal of maximizing sales in terms of retaining existing customers and
acquiring new ones, attributes should be chosen carefully to reflect the differences in the two
target markets being analyzed. The difference in age indicates that customers in the two target
markets have a proclivity towards different economic and financial spending behaviour which
should be a factor of consideration in the selection of attributes. This can be taken into account
by offering a separate combination of sign-up fees and annual fees for the two credit cards
offered. Moreover, the difference in age also implies a differential attitude towards channels of
promotion, and incentives offered in acquiring new customers.

Marketing in Target Market 1: Males, 25-34, Middle/Upper class

Firstly, the credit card offered should feature a low sign-up fee as the revenue from sign-up fees
is a significant source of revenue and as Perez indicates, “customers won’t value something we
give them for free.” However, a low fee still keeps Bancaja in competition with some of the
banks that are starting to waive this fee. For the same reason, the company should also make a
low annual fee part of the credit card deal. In terms of communication channels, the PIN number
should be sent by mail and verified by call. This overcomes the security threat of sending
sensitive information over mail, but also accommodates those customers that would rather not
spend the time having to come to the bank to receive their PIN number. In addition, this
relatively younger target market could be conducive to online promotions and marketing
campaigns given their tech-savvy nature. Moreover, since this market prefers to avoid in-branch
visits, incentives such as movie vouchers and restaurant discounts are ideal for both acquiring
new customers and particularly for retaining current customers.

Marketing in Target Market 2: Males, 35-44, Middle/Upper class

Firstly, the credit card offered should feature a higher sign-up fees as the revenue from sign-up
fees is a significant source of revenue and an older generation of credit card customers are more
likely to be used to higher sign-up fees and less likely to compare Bancaja to newer banks that
are waiving these fees. For the same reason, the company could also charge a modest annual fee
part of the credit card deal which is nonetheless higher than the one charged in target market 1.
In terms of communication channels, the PIN number should still be sent by mail and verified by
call, as this metric remains unaffected by the relative age difference between the two markets. In
addition, this relatively older target market would likely be more conducive to conventional
promotions materials sent via mail. Moreover, since this market has a higher likelihood of having
a family, incentives such as family packages and flight miles are ideal for both acquiring new
customers and particularly for retaining current customers.
Conclusion: Let’s talk about the Future

After Bancaja has conducted Project CRM through a series of mini campaigns, they should
implement the outlined recommendations and in the future they should:
● Diversify and expand the target market to compete with other leading banks:
○ Although currently, their target market for the mini campaign focuses on males as
it is an easier starting point considering they are more likely to hold credit cards
as compared to females in Spain, Bancaja should drive its efforts in the future to
test more female groups. Once the mini campaign outlined in this report is
successful, Bancaja should expand its effort to include females, other age groups
as well as lower income households. This way, they will be able to gather
information on the use of credit cards not just in their dominant target market, but
also in small markets that could add to Bancaja’s growth.

● Continue to pick and adapt attributes according to the target market

○ For instance, when testing lower income households, the sign up fees and annual
fees should be changed to be lower as that would make it more attractive to that
specific target market. It is essential that they adapt their features and offerings
based on the customers that they are targeting.

● Execute the strategic vision they had developed initially:

○ Unity of Financial Groups: Bancaja should continue to focus on creating large
organizational goals that each smaller group can follow. They can do this through
educating the groups on CRM and continuously updating information on target
markets to ensure each management level is kept up to date regarding their
operations.
○ Increase Cost Efficiency: Bancaja should focus on finding methods to fix the
reduced operating margin ratio. This will essentially be done through CRM and
adapting to different margins. By continuously putting in efforts to pick attributes
that match the regions needs, Bancaja can increase their operating margin in the
future.
○ Better segmentation of Commercial Actions
■ Project CRM will achieve this goal if they keep testing different markets
and adapting their product to match these needs
■ By segmenting target markets based on common features they can develop
a loyal customer base.
● Overall, Bancaja should continue project CRM as it will allow them to truly stand out
amongst its competitors as they will receive information regarding that will not be
available to its competitors.
● In the future, Bancaja can also attempt to expand internationally.
○ For instance, Spain is only second to Japan in terms of ATM concentration,
Bancaja can attempt to understand how the Japanese community uses ATMs in
their daily transactions, and try to develop products that match the needs of their
customers.
○ They can begin to expand in other markets in the EU, such as France as they have
a market where credit cards, and other products used by Bancaja are used. This
presents an additional opportunity for Bancaja as there exists a whole new market.
Although it will be hard to compete with competitors, by conducting mini
campaigns in these new markets, they will be able to differentiate themselves by
developing products that match the needs of customers. This will give Bancaja
global exposure and allow them to become a leading bank not just in Spain, but
globally.