Banks in Taiwan offer a plethora of services to safeguard the market share of their credit cards. The competitive edge is now gained by the bank that gives the best toy.
Credit cards have become one of the hottest products in Taiwan's banking industry. To have a stake in this considerable market, many card-issuing banks--local and foreign, new and old--are summoning all the talent and strength they have to conceive the most powerful promotional plans they can. The resulting gimmicks include just about anything one could think of, from annual fee exemptions, bonus award programs, and motorist aid packages, to worry-free guarantees for lost cards. Banks in Taiwan, however, cannot win their marketing battles with these offerings alone. The biggest trophies seem to belong to the banks that give out the cutest stuffed animals.
Based on statistics from the ROC's National Credit Card Center, more than seventeen million cards were issued in Taiwan last October and over ten million of them have been activated. Between January and October of last year, credit card charges totaled NT$396 billion (US$11.9 billion). With that figure in mind, profits gained by card-issuing banks are expected to reach as high as NT$240 billion (US$7.2 billion), as a five-percent service charge is required from credit-card contracted shops. This number does not include annual fees, interest from revolving credit, or service charges for cash advances. With figures so tempting, it's a small wonder that the local banking industry is taking a tremendous interest in credit cards. The fact that there is still room for future growth makes offering plastic even more alluring to financial institutions. Credit card spending as a percentage of total private consumption is fourteen percent in Singapore, seventeen percent in Hong Kong, and twenty percent in the United States, but only 8.1 percent in Taiwan.
The Chinatrust Commercial Bank, Citibank, Taishin International Bank, Chinfon Commercial Bank, and Fubon Bank are the top card-issuing banks in Taiwan. Collectively, the five have issued 4.3 million cards since international credit card companies were first allowed into the market in 1989, and these banks' cards account for one-fourth of the island's market share. Chinatrust alone issued more than 1.6 million cards last year. Needless to say, banks wishing to enter the market and obtain a substantial share of customers must come up with aggressive promotional strategies. Giving away toys inspired by cartoon characters has become a wildly successful tactic.
By giving away Mickey and Minnie Mouse dolls as a bonus to new cardholders, Chinatrust can be credited with having started the trend last year. Citibank soon followed with its Mushiu dragon, and Fubon later introduced its Winnie the Pooh doll. The competition reached a boiling point earlier this year when the Makoto Bank acquired exclusive rights to release financial products in Taiwan with Sanrio's Hello Kitty image. To counter the threat from Makoto's Hello Kitty, Fubon quickly brought Dutch rabbit Miffy into the market. The Hongkong and Shanghai Banking Corporation also sent a rabbit, Melody, to the war front.
Peter Y.H. Jiang, senior vice president and general manager of Chinatrust Credit Card Center's Planning and Marketing Department, says when his bank was making plans for the future, it was decided that the goal was to become the only local bank that would surpass foreign banks in size and quality of service. It was also decided that new marketing approaches must be found to achieve this goal. The bank's current "We Are Family" campaign was created in hopes of shaping an identity that was on the side of consumers. As Disney's image is related to family and fun, Chinatrust was inspired to put the two concepts together. Besides giving out Mickey and Minnie dolls as bonus gifts, the bank's cardholders also received discounts on tickets to last spring and summer's visiting Disney show tour. Chinatrust found the results successful. Around the same time, Taishin International stopped charging annual fees on its cards, but the outcome was not as good as Chinatrust's.
Seeing this, Fubon began to give Winnie the Pooh dolls to new cardholders, pushing the trend to an even higher point. Less than two months after it launched its campaign, Fubon issued 150,000 cards and 160,000 Winnie bears, making it the fifth biggest card-issuer in Taiwan by the end of last year. Vice President Wang Wen-yeu of Fubon's Credit Card Department says the bank decided the best time for it to enter the credit card market was during these two or three years. The bank's tactic is to get its credit cards into consumers' pockets first, then think of ways to encourage cardholders to consume.
In the past, card issuers tended to stress incentives like no-risk guarantees for lost cards and shopping protection, but cardholders were still charged annual fees ranging from NT$1,200 (US$36) to NT$2,400 (US$72). Fubon also came up with a "Do-It-Yourself" (DIY) credit card that has optional services. Since consumers are allowed to choose the services based on their individual needs, these extra expenses usually work out to be lower than the annual fee. For instance, it costs NT$797 (US$24) a year for motorist aid, lost card protection, and worldwide purchase insurance. The same package of options would normally cost around NT$2,400 a year with a competing bank's card.
Changing the behavior patterns of consumers, however, is not an easy job, and the idea of a DIY credit card was not immediately embraced by the public. Wang Wen-yeu of Fubon says promotional campaigns work best--in other words, get consumers to become cardholders first, and then tutor them to be credit card consumers. Fubon's target group is people between the ages of twenty-five and thirty-five, because they are the most receptive to consumer trends and are therefore more likely to use credit cards. The bank did a survey of this age group's tastes, and the results showed that stuffed animals were the most popular promotional gifts. Fubon's Wang observes that women between twenty and twenty-nine enjoy keeping the stuffed animals for themselves, while women between thirty and thirty-five have a tendency to give the gifts to children.
It was the success of Fubon's Winnie the Pooh campaign that prompted it to start making plans for another promotional campaign. The bank had first contacted Sanrio about possibly using the images of the Japanese company's Hello Kitty and Merry Melody. An agreement could not be reached because the two sides failed to come to terms on royalty payments. Instead of making a single, large royalty payment, Fubon prefers to pay royalties based on the number of stuffed animals given to cardholders. Wang believes a campaign such as this is a joint venture between the bank and the manufacturer, and Fubon would be responsible for marketing the toys after they were manufactured.
At the end of 1997, Makoto began to notice the huge popularity of cute cartoon characters in Hong Kong and Japan and began to think about the idea of combining these characters with its monetary products. Last July the bank launched cards with the "Penguin" cartoon character as a touchstone. Penguin is not as well known as other cartoon characters, and the bank was not aggressive in its marketing of the card and its bonus gift (a tiny aeolian bell). However, Makoto still managed to issue more than 10,000 cards in the first month, and a total of 30,000 by the end of last year. The quick success of the low-cost Penguin card encouraged Makoto to prepare to unleash its Hello Kitty card. The bank decided to expand its use of the cartoon cat in its products by showing her image not only on credit cards, but on passbooks and bonus gifts.
Regarding royalties, stories in the banking industry differ over the amount Makoto paid for Hello Kitty. Some insiders say the bank paid NT$8 million (US$240,000), while others say more than NT$100 million (US$3 million). Makoto, prefer ring to remain low-key, says it paid less than NT$10 million (US$300,000)--a figure definitely not as high as rumored. The bank has received approximately 100,000 applications for its Hello Kitty cards since January and has issued close to 70,000. About ninety-nine percent of the issued cards have been activated and the bank expects to stamp a total of 200,000 by the end of this year. Hans Tzou, vice president of Makoto's Business Department, says the high percentage of active cards shows that Hello Kitty cardholders are a loyal group. Makoto hopes consumers will think of the bank when they see Hello Kitty's likeness: just as a professional baseball team has a mascot, Hello Kitty is the symbol of Makoto. The card's target customers are women who tend to go after fashion trends and have high disposable incomes. Marketing surveys done by the bank indicate that over seventy percent of its customers with a Hello Kitty passbook are between the ages of twenty and forty, and that eighty percent of them are women.
While Makoto's star character has incredibly huge support from local cliques of Ha-jih (fans of Japanese products and entertainers), Miffy the Dutch rabbit is not as lucky in terms of local popularity. Fubon's Wang, however, believes that its newest card personality will soon become distinguished. While some people are crazy about Hello Kitty, Wang feels others might prefer something less conspicuous. Before Fubon unveiled Miffy cards, it conducted surveys to make sure local consumers would find it cute. Apart from the Ha-jih group, not everyone is crazy about Japanese cartoon characters--and Fubon chose Miffy to grab that part of the market. In addition, this year happens to be the Year of the Rabbit according to the Chinese lunar calendar, and many consumers are attracted to the animal as a Chinese horoscope figure. Fubon began accept ing applications for its Miffy card on March 15 and, according to Wang, the bank received more than 18,000 applications the first eight days after its launch. Unlike giving Miffy away as a bonus gift as it did with Winnie the Pooh, the bank will distribute the rabbits on the condition that cardholders charge at least NT$399 (US$12) on their cards, or NT$499 (US$15) on gold cards.
Makoto charges Hello Kitty cardholders an annul fee of NT$800 (US$24). The reason for the extra charge, Makoto's Hans Tzou explains, is that last year other banks offered free gifts and received lots of card applications, only to have cardholders cut up their cards after getting their stuffed toys. Makoto was initially unsure about charging an annual fee for its Hello Kitty card but decided to go ahead after seeing what had happened to other banks. According to Tzou, Makoto would rather encourage consumers to use their card by asking for a smaller annual fee and offering better service than just giving away a free gift. Tzou could be alluding to Fubon's marketing tactics, and Wang does admit that three to five percent of its Winnie the Pooh credit cards were cut to pieces by customers after they received their doll. However, it is clearly stated in Fubon's application form that no annual fee will be charged if purchases total over NT$1,200 each month for the first three months. Some cardholders have been forced to pay annual fees because they had destroyed their cards and therefore were not able to meet the minimum purchase amount.
Wang claims it is easy for consumers to spend the required amount of money to wave Fubon's annual fee. The average Fubon credit card sales slip is NT$3,000 (US$90) and the monthly amount on a Fubon card averages NT$4,000 (US$120), requiring the equivalent of a family meal at a fine restaurant to meet the bank's no-fee requirement. Fubon set up the precon dition in the hope that its customers would truly make use of their credit cards--"rather than using it to finagle a Winnie the Pooh doll," Wang jokes.
Peter Jiang of Chinatrust says it is useless for banks to compare the number of issued cards. "What's significant are the figures accumulated afterwards," he says. Stuffed animals are products designed to invigorate the market, Jiang explains, adding that these gimmicks look promising but after a while consumers start thinking about what they want from their credit card. Only sound protection and quality service can win the support of consumers in the long run, he says. Jiang realizes that, as other banks continue to pump out new promotional ideas to snatch a bigger share of the credit card market, Chinatrust is facing fierce competition. Even though Chinatrust is the forerunner in the market, it must still be inventive. The bank plans to offer cards with built-in calculators and memory chips, as well as combination cards that can be used for public transporta tion.
Jiang predicts that the stuffed animal craze will last only into the second half of this year and then lose steam. Wang wonders if Miffy will become the last stuffed animal for Fubon. Makoto's Tzou, on the other hand, holds an optimistic view about the Hello Kitty card, observing that the character has been popular for twenty-five years and that there are over 100 Hello Kitty stores in Taiwan. But no matter what, one thing seems positive: as credit card promotions increase, their content will become more dazzling and confusing.
Translated with permission from
"The Credit Card Toy Battle"
by Chang Ching-yia, The Journalist,
March 25-31, 1999, pp.89-92.