Hyundaicard’s Marketing Strategy

HYUNDAICARD’S MARKETING STRATEGY

Case on: http://www.asiapacific.ca/sites/default/files/hyundaicard.pdf

COMPANY
HyundaiCard was established in 2001. In Aug 2005 HyundaiCard established a strategic
alliance with GE Consumer Finance. So, HyundaiCard’s largest shareholders became Hyundai Motor
(31,6%) and GE Consumer Finance (43%).
HyundaiCard focused on its customer needs, developed new credit card products, and
provided different online marketing campaigns. Its customer segmentation strategy focused on its
customer needs: Lifestyle Influences  Activities. That why HyundaiCard formulated “Alphabet
Marketing” named M, S, W, U, K and A, based on consumer lifestyle. The customized marketing
approaches included “Alphabet Credit Cards” having unique and creative designs. HyundaiCard also
diversified its product line and expanded into the premium market via the introduction of “the
Black” and “the Purple” cards.
HyundaiCard scoured the world for top artists and designers to help create strong brand
identity, incorporating unique, contemporary elements that resonate with today’s consumers.
HyundaiCard’s also diverse marketing strategy was integration of online and offline channels. Thus,
to carry out an effective marketing strategy and increase profits, HyundaiCard focused on customer
value and online interaction through e-CRM. The company also strengthened its internal
administration regarding customer service and guaranteed safe online business.
Long-term strategy in order to transform itself from an automobile manufacturer into the
world’s leading provider of additional services related to automobile business. The company’s goal
was to strengthen its financial services, retail businesses and Internet fields, etc.

PROBLEM
In the competitive South Korean credit card market, a review of the past decade of
HyundaiCard's marketing strategies and evaluation of anticipated possible difficulties of being a
market follower revealed several challenges for senior management. Despite a tremendously
successful creative business model based on customer needs, innovative products and integration of
online and offline customers, the company's performance had not progressed in the past seven
years. HyundaiCard had difficulty relating its creative business model to the strong personas of the
leading players in the credit card industry. How could HyundaiCard, a market follower, successfully

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Hyundaicard’s Marketing Strategy

position itself as a market leader? Could HyundaiCard's marketing strategy keep enhancing its
competitive edge in the market? What future strategy would be best for HyundaiCard?

CURRENT SITUATION

CURRENT PERFORMANCE
Sales: HyundaiCard’s sales growth in 2004 to 2008 was growing. The 2008 sales was 42,7 trillion won.
Margins: Operating revenue was increasing from 2003 to 2007 while the 2007 operating revenue
was 1121,3 millions of Korean won or 1109,5 thousands of U.S. dollars.
Profits: Net income was increasing from 2003 until 2006, but in 2006 to 2007 the net income was
decreasing from 281 millions of Korean won to 234,4 millions of Korean won or 299,5 thousands of
U.S. dollars to 249,8 thousands of U.S. dollars.

MARKET DEMAND
Market size which describes the number of customers in the market and the amount they purchase
is 89.565.000 in 2007 (Exhibit 10).
Growth rate: It was not until year 2000 that the market saw an annual growth rate of 80% and more
than 100 Million cards issued. Between the 1990s and 2002, the number of credit cards issued in
South Korea increased tenfold (10x), from 10 million to 100 million. The Korean credit card market
was characterized by rapid growth and was the first preference of payments (Exhibit 8). But since
2003 to 2007 the growth rate number of Credit Cards per person was stagnant between 3,5 to 4,1
(Exhibit 10). In 2004 to 2008, the growth rate from number of card issue was approximately 0.08%.
Potential: Potential market for credit cards can be seen from economically productive population
which in 2007 was approximately 24.216.000 (Exhibit 10).

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COMPETITION & INDUSTRY

Competitors: The Korean credit card market was characterized by intensified competition. The
major monoline credit card issuers were Samsung Card, LG (Shinhan) Card and HyundaiCard. The
major competitor of HyundaiCard were LG (Shinhan) Card and Samsung Card.

Industry
• Credit card penetration in South Korea was quite high. So, Rivalry Among Existing Firms was
high.
• Credit card companies had taken a customer-focused view and retreated from the mass
marketing approach.
• In order to increase profits, credit card companies focused on the fact that customers had to
be willing to use their cards often. The key to profits was frequent card usage.
• The average South Korean cardholder held 3,78 credit cards in 2008 which means the
Determinants of Buyer Power was High.
• Even though the use credit cards was the most common mode utilized by South Koreans to
pay for products and services, but the substitute products was many and have total
preferences about 61,30 (Exhibit 8).

Share Position
HyundaiCard was the country’s fourth largest credit card company. Since LG Card and Shinhan Card
were integrated, LG Card was South Korea’s largest credit card company and at the end of 2008,
market share reached 24%. Shinhan Card was the largest card issuer in Asia and No.10 in the world.
In 2008, Kookmin Card was the market leader in the industry. Samsung Card was Korea’s third
largest card issuer.

MARKET SHARE
Market Share: Hyundai Market Share was 9,96% in 2006 (Exhibit 14)
Share Potential: The average South Korean cardholder held 3,78 credit cards in 2008. So,
HyundaiCard share Potential was 100% divided by 3,78 was 26,45%.

CUSTOMER NEEDS
Customer Needs: Lifestyle Influences  Activities

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Purchase Behavior: Korean paid for many purchases with credit cards, even small purchases of a few
dollars at convenience stores. Private consumption with credit cards amounted to approximately
$210 billion in 2006 (40% or higher of private final consumption). Card purchases of goods and
services were on an upward trend, accounting for as much as 45.7 per cent of private consumption
expenditure in 2002 (Graph 1).

Graph1. Credit card purchases1 as a percentage of private consumption

1
All credit card purchases of goods and services; flows.
Sources: Bank of Korea; Financial Supervisory Service of Korea
(www.bis.org/publ/bppdf/bispap46k.pdf)

Customer Profile: Customers like to easily use its credit cards almost anywhere they went.
Customers of Credit Card were Male and Female who use credit card for all purpose such as driving,
dining out, flying, or even shopping. The customers were varying from university student, premium-
level, and VIP customers.

COMPETITIVE POSITION & VALUE

Product & Service: HyundaiCard launched Alphabet Card: M, S, W, U, K and A. HyundaiCard also
diversified its product line and expanded into the premium market via the introduction of “The
Black” and “The Purple” cards. HyundaiCard intended provide effective tailor-made services through
its website for HyundaiCard consumers. The finance shop (Exhibit 13) was the place that enabled
HyundaiCard customers to enjoy all-in-one service, getting financial consultation services, and
enjoying an ambience created by world-famous designers.
Cost of Purchase: interest payments on purchases made at alliances stores.

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Customer Value: HyundaiCard make creative business model which provide pre-discounted and
provide more diverse data for financial services and added value.

SWOT ANALYSIS
Strength
• HyundaiCard was the country’s fourth largest credit card company.
• Sept 2004, HyundaiCard won first place in Service Quality Index for the Credit Card
• HyundaiCard M had the largest subscriber base of any credit card in Korea.
• HyundaiCard was named Korea’s Most Admired Company for the second consecutive year
out of all Korean credit card companies (2007 and 2008).
• HyundaiCard ranked number one in the National Customer Satisfaction Index (NCSI) for the
third consecutive year (2005, 2006, and 2007).
• HyundaiCard was also selected number one in the Credit Card category of Net Promoter
Score (NPS)
• HyundaiCard website traffic almost caught up with the top three credit card companies in
2005 and 2006

Weakness
• HyundaiCard suffered from minimal customer count (i.e. number of cards distributed)
• The web traffic of the HyundaiCard website was low in comparison with several competitors
in spite of an aggressive marketing campaign in 2003 and 2004.
• HyundaiCard was slowly becoming a brand name in the international markets.
• Compared to other major credit card companies, Hyundai entered the Korean credit card
market late (latecomer)
• Low brand awareness
• Weak marketing communication
• Weak card services
• HyundaiCard had fewer customer and sustained moderate losses

Opportunities
• The Korean government encouraged consumers to use credit cards to stimulate private
spending and secure more taxes.

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• The Korean government made the acceptance of the credit card mandatory and penalized
stores not accepting the credit card.

Threats
• Under the strict control of the Korean government, adding new members swiftly and
redistributing cards to expired members proved very difficult.
• The Korean credit card market experienced a rapid expansion in the number of cards,
reduced standards for issuing cards, etc.
• There is growth in the number of late payments and users with bad credit history.
• The industry underwent an adjustment period, with many credit card companies forced to
change the way they did business.

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STRATEGIC MARKET PLAN (PORTFOLIO)

Differentiation advantage factor relative Attractiveness Attarctiveness

importance: 50% importance rating score
product quality 30% 60 18
service quality 40% 20 8
brand image 30% 40 12
100% 38
Cost advantage factor importance: relative Attractiveness Attarctiveness
20% importance rating score
COGS 30% 60 18
Marketing expense 50% 30 15
overhead expense 20% 40 8
100% 41
Marketing advantage factor relative Attractiveness Attarctiveness
importance: 30% importance rating score
market share 40% 60 24
brand awareness 40% 40 16
distribution 20% 50 10
100% 50

Competitive Position Index 19,00

8,20
15,0
42,20

relative Attractiveness Attarctiveness

Market Forces: 40% importance rating score
Market Size 30% 40 12
Growth Rate 30% 60 18
Buyer Power 40% 50 20
100% 50
relative Attractiveness Attarctiveness
Comp.Envi: 30 %
importance rating score
Price Rivalry 30% 50 15
Ease of comp entry 30% 40 12
No of comp 40% 60 24
100% 51
relative Attractiveness Attarctiveness
Marketing acces: 30 %
importance rating score
Cust familarity 30% 40 12,00
Channel Acces 35% 50 17,50

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Sales/Services Requirement 35% 40 14,00

100% 76,00

Marketing Attractive Index 20,00

15,30
22,80
58,10

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Hyundaicard’s Marketing Strategy

The existing position of HyundaiCard was in Medium Competitive Position and Somewhat Market
Attractiveness, so the strategy that should be implemented is Defensive strategy with strategic
focus in managing profits and investing to protect position (Optimize Position).

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Strategic Market Plans and Defensive Strategies

The suitable strategy for HyundaiCard was defensive strategic market plan to optimize
position. A maximize profits strategy was sacrificing volume, share, and sales revenues, as well as
reductions in marketing expenses to a level focused primarily on customer retention. A reduced-
focus market strategy to more narrowly allocate its resources in an effort to better defend a desired
share position and improve the profits derived from this market. A reduced-focus market strategy
goes one step further drastically reduce market volume by focusing on certain customers in order to
optimize profits.
With the average South Korean cardholder held 3,78 credit cards in 2008 means that
increasing the number of card subscribers doesn’t mean much. Credit card industry more
competitive in this sense so HyundaiCard to focus to make customers loyal and give appreciation for
customers who are loyal.

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Hyundaicard’s Marketing Strategy

Hyundai
Card

From product life cycle, 2009 is the time to optimize position (Defensive Strategy) and
Offensive strategies to expand market to become a global player to achieve greater profits (Improve
Position strategy). The goal is to find a more profitable combination of margin and market share,
one that yields greater marketing profits. When managed correctly, optimizing position at the later
stages of the product life cycle should allow the product to produce it maximum profits.

MARKETING MIX STRATEGY

PRODUCT
Hyundai is suggested to strengthen customer relations through innovation. This includes
diversifying business and products through more accurate analysis, on top of continuing creative
marketing efforts. In simply analysis through segmenting had already done by Hyundai through its
alphabet card, the premium card is the most prospectus one to be improved its customer
relationship. Moreover, in this business the key to profits was frequent card usage. By improving
customer experience, the premium card holder will use their card more frequent.
For example, for improve customer satisfaction (CS), HyundaiCard need to provide audio
response system for customer. But also provide directly talk to operators to solve problems related
with customer satisfaction in advance. HyundaiCard also can make differences in serve the
customers which the VIP cardholder directly talks to operators instead of an audio response system.

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This customer service improvement in IT infrastructure and operator and product development can
strengthen its brand.
PRICE
HyundaiCard needs to give different fee for each kind of card depends on its card holder
type and its card benefit or services. Such as, for VIP card holder the annual card fee can double than
university students (HyundaiCard U holder). But this different price must be supported by worth
benefit and services from HyundaiCard.

PROMOTION
HyundaiCard need to be credit card brand that customers would recommend to their friends
most. Besides doing penetration via television and radio media, Hyundai Card need to develop
marketing strategy by word-of-mouth and improve its online marketing strategy. But word-of-mouth
strategy must supported by service excellence and maximal customer experience so HyundaiCard
can enhance the brand power of premium cards.

PLACE
Hyundai is suggested to partner with retailers in all provinces and have partner with many
merchandise. By partnering with many merchandise or other parties, HyundaiCard can provide more
service and widen its channel. It makes HyundaiCard have competitive advantages.
For registration, customer must be provided by easier step and shorter place, such as
registering online through HyundaiCard website and when finish, the card will be sent by post.
HyundaiCard also can provide registration form and train its entire partner to can serve their
customer to be new member of HyundaiCard. The benefit for their partners are having added value
by giving discount and other promotions which provided by HyundaiCard and increase their
customer loyalty by giving ease of payment.

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PERFORMANCE PLAN
(in million won)
2011 2010 2009 2008 2007 2006 2005 2004 2003 Source 2003-2007
Sales 73.603 61.410 51.238 42.750 34.850 28.650 22.710 17.620 Exhibit 15
COGS 72.477 60.285 50.114 41.628 33.729 27.541 21.977 17.032 -
Operating Revenue/
Gross Profit 1.126,0 1.124,8 1.123,7 1.122,5 1.121,3 1.109,5 733,3 587,7 495,0 Exhibit 16
Other expenses, tax and
interest (7.658,9) (2.425,7) (311,3) 542,5 886,9 828,5 647,0 806,1 1.122,3 -
Net Income 8.784,9 3.550,5 1.435,0 580,0 234,4 281,0 86,3 (218,4) (627,3) Exhibit 16
Total Asset 4.645,2 3.383,4 2.896,8 2.458,4 2.470,7 Exhibit 16
Total Liabilities 3.522,2 2.552,7 2.661,9 2.320,7 2.360,2 Exhibit 16
Total Equity 1.123,0 830,7 234,9 137,7 110,5 Exhibit 16

Average Growth Formula

Sales Growth 18,5% 17,8% 20,7% 22,4% 19,9% = This Year - Last Year / This Year
Operating Revenue Growth 1,1% 33,9% 19,9% 15,8% 17,6% or
Net Income Growth -19,9% 69,3% 353,1% 187,2% 147,4% = (difference/original) x 100

PROFIT PLAN
HYUNDAICARD 2008 2009 2010 2011
Sales Revenue 42.750 51.238 61.410 73.603
Gross Margin Percentage 2,63% 2,19% 1,83% 1,53%
Gross Profit 1.122 1.124 1.125 1.126

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