HSBC should implement the market penetration and product development strategy by capturing current account market share from other financial institutions that have been weaken from the economic crisis. Besides that, the launch of the new prepaid card would be a step towards product development that would be useful to counter non-traditional financial institutions that are poise to enter the current account market.

The market development strategy can also be carried out at a later date by bringing the new and tested prepaid card product into other geographical markets like China and India. This would be in line with HSBC’s slogan of being the ‘World’s Local Bank’ and would also take advantage of HSBC’s global network in more than 79 countries.[1] In relation to the Porter Generic model, HSBC should aim at using a broad based differentiation strategy to capture market share from ailing financial institutions.

4. Target Market

4.1. Market Segmentation and Targeting

A market segment should consists of a group of customers who share a similar set of needs and wants (Kotler. Etal, 2009). A market segment must be accessible, measurable, large enough and profitable in order to be worth targeted by an institution. The new prepaid card should be offered as a ‘naked solution’ that all segment members value (Anderson & Narus, 1995). Ways of segmenting the market should include geographical and demographic segmentation.

The new HSBC prepaid card should be launched in the United Kingdom first before being extended into other geographical regions. A time lag of half a year would be enough to test the effectiveness of the product as a method to obtain a higher market share for current accounts. Demographic segmentation on the other hand should be focussed on age and income. Special attention should be focussed on young individuals opening their first current accounts and high net worth customers.

4.2. Market Positioning

Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the minds of the target market (Ries & Trout, 2000). Data taken from SWOT and PESTEL analysis of HSBC enables marketers to define the points-of-difference and points-of-parity associations. Points-of-difference are attributes or benefits consumers strongly associate with a brand, positively evaluate and believe they could not find to the same extent with a competitive brand. In the case of HSBC, the bank is known to be a truly global bank with an international branch network.

Points-of-parity are associations that are not necessarily unique to the brand but may in fact be shared with other brands (Brunner & Wänke, 2006). There are two types of points-of-parity, namely, category and competitive points-of-parity. Category points-of-parity includes HSBC being a reputable financial institution and also a bank entrusted with fiduciary responsibility. In terms of competitive points-of-parity, HSBC must be seen to ‘break even’ with other financial institutions in terms of service quality.

(See appendix 2)

5. Marketing Mix

Marketing for financial services pose distinctive challenges to marketers because services are intangible, inseparable and cannot be inventoried. An expanded marketing mix is required to fully answer the differences between product marketing and marketing for financial services. The expanded marketing mix aims to capture the distinctive nature of financial services (Booms & Bitner, 1981).

(See appendix 2)

5.1. Product

The product is the heart of the firm’s marketing strategy. Poorly designed service products that do not create value for customers are destined to fail regardless of how well the other 6 Ps are executed. The goal of the product element is to create a service concept that would offer more value to a market segment than competitors. Working to transform this concept into reality involves designing a cluster of different but mutually reinforcing elements.

The product must be a means to solve a problem or satisfy a want in the market. To date, overspending is a major issue in the Western world. This is the reason why the new HSBC prepaid card is included in the new current account package as a means to ensure that customers do not overspend by ensuring prudential budgeting of financial resources.

Unique Features:

Prepaid Card

HSBC will launch two prepaid cards, namely, the HSBC’s Financial Manager and the HSBC’s Budget Manager prepaid card. Both prepaid cards come preloaded with £10 after the customer pays the initial card issue fee. The Financial Manager is a way to manage a monthly budget by transferring your spending money from your bank account onto the card. It has an annual load limit of £15,000. The Budget Manager on the other hand has a smaller annual load limit of £2,000.

The new HSBC prepaid cards would be fee-free while offering the same flexibility as a credit or debit card. The prepaid card however, would need to be loaded up with cash first before allowing its users to purchase products and services. The prepaid cards can also be used to withdraw money from cash machines.

Real Time Balance Alerts

Real time balance alerts will be sent to the customer’s mobile device every time a HSBC prepaid card user purchases something. This balance update will notify the prepaid card user on the amount of money spent and the amount of money left for free. HSBC may need to team up with companies like Vodafone to provide this service.

Online Banking

Another unique element of the HSBC prepaid cards are their flexibility in managing the customer’s financial resources. Bank customers can access the HSBC website and set standing orders on how much money to load onto the budget manager every month as long as the funds are available in their current account.

Optional Savings Account

Bank customers that pay more than £500 into their current account every month would qualify for the HSBC’s Current Account Advance. Regular payments can be made through the internet or by direct standing order from the customer’s current account to save a specific amount every month. This feature is ideal for customers with a fixed monthly income.

5.2. Price

The pricing component plays twin roles for HSBC in the sense that it must be able to first attract customers to purchase the service and also generate revenue for HSBC. According to Adrian Palmer (2008), there are five main factors that influence pricing decisions, namely, profit maximisation, market-share maximisation, survival, social considerations and personal objectives.

While pricing strategy is highly dynamic for other products and services, pricing for current account services have become rather static in recent years. Most banks do not require any fees to set up a current account. Banks instead rely on the money that floats in the interval when they are deposited to when they are spent in order to profit from current accounts.

It is unlikely that any increases in interest rates would be able to attract customers to open up new current accounts with HSBC. The base lending rate that is now at 0.5% provides little room to manoeuvre for banks and other financial institutions. Adding to that is the credit crunch and declining asset prices that makes borrowing at a higher rate unattractive at the moment. The initial prepaid card issue fee should be around £10. This is in line with what competitors are charging at the moment.

The catch with the prepaid card scheme is that it encourages bank customers to save. Any money that is saved is held within the customer’s current account and remains available for banks to provide further lending. This may prove to be highly beneficial to HSBC during times when raising new capital is extremely difficult.

(See table 3)

5.3. Place

The place element involves delivering the product element to customers through appropriate methods and delivery channels. Delivery may involve both physical and electronic channels. Failure to make a service product readily available to customers would guarantee its failure regardless of how good the service product is. The new current account package would be made readily available throughout HSBC’s 1,492 branch network and also through the internet.

(See figure 1 & 2)

5.4. Promotion

The promotion element relies on effective communications to bring awareness in the market of the service products offered by HSBC. The three objectives of the promotion element are to gain the attention of customers, provide additional information and persuade customers to purchase the product. Advertising is mass, paid communication that is used to transmit information, develop attitudes and induce some form of response on the part of the audience (Adrian Palmer, 2008).

The choice of media that would be utilised includes newspapers, magazines, outdoor advertising and the internet. A sales promotion will also be carried during the first three weeks after the launch date to help stimulate customer purchase and the effectiveness of intermediaries (Adrian Palmer, 2008). Other promotional materials include press releases, posters and brochures.

(See appendix 3)

5.5. People

Despite technological advances, many financial services still require direct interaction between customers and bank employees. The nature of these interactions strongly influences how customers perceive service quality (Hartline & Ferrell, 1996). This is particularly true for financial services as employees are often the first line of contact with the customer.

Due to the importance of this element in the marketing mix, special attention needs to be given to the training of employees concerning the new current account package. The prepaid card concept also requires some serious attention as its aim is to show HSBC’s change of stance concerning the psychology of spending.

Training should only be given to bank staffs that are directly involved in the new current account package. However, back office staff must also be formally notified concerning this new current account package to ensure that the entire organisation have a coherent understanding on the bank’s products and services. Besides that, training of IT personnel must also be stressed as new information systems may have to be put in place before the launch of the new product.

(See appendix 4)

5.6. Physical Evidence

It is generally recognized that physical evidence can be subsidized into two components (Shostack, 1982): peripheral evidence which can be possessed by the consumer but has little independent value and essential evidence, which cannot be possessed by the consumer but has independent value. The peripheral evidence is the prepaid card itself while the essential evidence includes bank branches, cash machines, posters and brochures.

(See appendix 3)

5.7. Process

The process element focuses on the mechanisms by which the service is delivered, including business policies for service provision, procedures, degree of mechanization etc. It is imperative that the policies and procedures are written and tested before the launch of the new current account package.

Bank personnel are to conduct a test to determine how efficient and effective front line staffs are at explaining the new current account package and setting up new current accounts. A step by step guide on how to set up a new current account and prepaid card system is to be issued to all front line staff to ensure that no confusion is to occur during the critical launch date.

Besides that, front line staff should also be constantly monitored to ensure that the delivery of services occur smoothly. Customer feedback and complaints should be welcomed as they would provide the input needed to continuously improve service delivery and customer satisfaction.

(See appendix 5)

6. Research

Market research will be carried out before, during and after the launch of the new HSBC current account package. There are three methods for a financial services organisation to carry out its research, namely, using in-house resources, using the services of a specialist agency or a combination of the two methods. During the period nearing the launch of the new current account package, both pre and post implementation research should be carried out by specialist agency commissioned by HSBC.

6.1. Pre-implementation stage

During this stage, research should be focused on whether the market’s current external environment matches the company’s initial results during the first external environment analysis. Political, legal and economic elements of the external environment are likely to be very volatile in the coming days that may cause HSBC to either delay or bring forward the launch of the new current account package.

Furthermore, research should also be done on the company’s corporate image and the receptiveness of market for a new product and concept during a time when the banking industry is facing heavy criticism from the public.

6.2. Implementation stage

A tracking study should be carried out by the research agency during the implementation stage. The tracking study will be done through monitoring consumer’s awareness and acceptance of the new current account package. This process should be an ongoing one during the product’s life cycle. Tracking studies should be conducted with small groups of a target market segment. It would also be advisable to rotate the members of a group with another group to ensure that a variety of responses is noted.

6.3. Post-implementation stage

Post-implementation research should be aimed at obtaining tangible results on whether HSBC has indeed managed to obtain the desirable level of market share and profitability. Another goal of the new current account package is to change the attitudes and perception of the public towards HSBC. Marketing research at this stage should also determine on whether HSBC is now perceived to be a more responsible financial institution that not only aim for profits but provide value to customers.

Besides obtaining tangible results on whether marketing objectives are met, it is also important to gain feedback on customer satisfaction levels and any complains on the product offered by HSBC. This is to ensure that further improvements can be made in the future and any mistakes made would not be repeated.

(See appendix 8)

7. Budget

The budget to implement this marketing plan is estimated to be around £15 million. A contingency of 5% is included in the numerical calculations to ensure that some measure of volatility is covered should the promotion of the new current account package proves to be more expensive than anticipated

(See appendix 6)

8. Timescales

The implementation of the entire marketing plan would take around 9 months to complete. The launch date of the new current account package is the summer of 2010 when economic conditions are predicted to be more accommodating as a result of fiscal stimulus by the UK government. A Gantt chart is included in the appendix to break down the timeframes of individual tasks.

(See appendix 7)

9. Contingency Plan

A contingency plan is included in the appendix to note down various responses to some of the challenges posed in these difficult times. Among the various scenarios that might occur in the future includes the failure of the prepaid card to be a practical method to manage personal finances, a severe contraction in economic activity and the failure to gain market share in the current account market.