The promotional article is regarding the introduction of a new Octopus card brand in the name of Shenzhen- Octopus in the new region of Shenzhen, China. The report narrates the history of smart card introduced first time in the world in Hong Kong for catering to mass transit commuters who were spared of waiting in the queues and carrying cash for their daily routine. The report further discusses the pros and cons of prepaid cards and how they can be of use to financially underserved and uncovered population in a region. It also shows how it could prevent consumers from falling into the debt-trap of traditional credit cards. A SWOT review reveals an excellent record of the Octopus card’s success in Hong Kong, and the present plan is just to adjust the brand name to Shenzhen Octopus and repeat the promotional tactics originally introduced for the Octopus Hong Kong card, while the same strategies are also justified by further advertising principles. In the development of the tactics for the proposed launch, experiences learnt in the past have also been duly taken into account. The attributes and prospects exceed the current proposal’s limitations and risks.
Simple and easy to use (Hong- Kong-Travel .org)
One of the MTR's Customer Service Centres where you can purchase the Octopus Card (Hong- Kong-Travel .org)
This reader can check the balance of the Octopus Card. (Hong-Kong-Travel .org)
Table of contents
S l no
Introduction and context analysis
A discussion of the new brand
Key strategic decisions
Appendices Tables 1 and 2
1. Introduction and Context Analysis
Shaenzhen is bordering Hong Kong in China and Hong Kong has more than any other aspect of China's logistical benefit in doing business in Shenzhen. It is projected that China's sequel to the financial system will have a credit market that will overtake the U.S. sector in its scale by 2020 owing to urbanisation and wealth formation. The amount of 200 million cards issued by Chinese banks is currently projected to exceed 800 million by 2020. But the truth remains that Chinese also choose cash or debit cards instead of spending on credit cards (Madden, 2010).
2. A Discussion of the New Brand
The Octopus card is not new to Shenzhen in view of the above details, although it is not as common as its parent location in Hong Kong or for that matter, Oyster cards in London or elsewhere. Unlike Hong Kongers, who share British culture, Chinese customers are traditional in their perspective. Since in Hong Kong the Octopus card is famous, the business only has to repeat its current advertisement strategy. SWOT study of the demand of the Octopus card itself would also be useful for duplicating in Shenzhen where it has already been used but it has now been suggested to modify the name as Shenzhen Octopus for which an awareness campaign is required.
3. SWOT Analysis
3. 1 Strengths
Market Leader in Smartcards
As shown above, 9 million cards are in operation, with 7 million purchases a day in Hong Kong, amounting to US 2.2 billion (HK $ 17.2 million) a year (Beiske, Lee, Yu and Yim, 2007, 19) With this background and with the existing market for the cards in Shenzhen, it will be just a cake walk for Shenzhen Octopus to make a foray to literally create a smart card market in Shenzhen.
Emphasis on coin free objective
The users can now do away with coins payment system and start enjoying hassle free travel by just waving cards against the scanners which step automatically deducts the appropriate amount form the card balance. About 160 organisations are targeted encompassing public transport, parking, retail etc. (Beiske, Lee, Yu and Yim, 2007, p 19).
It took five years for Octopus company to develop smart card payment technology. After the introduction, it has undergone several up-gradations. Notable among them is the central clearing system with many service providers offering Octopus. This results in better operational efficiencies besides offering data on consumer behaviour (Beiske, Lee, Yu and Yim, 2007, p19).
Strategic partnership with service providers enables offering of loyalty programmes which in turn lead to increase in their sales besides increasing product awareness. For instance, Octopus offered free single journey ticket for every ten rides within a campaign week during September 2002 to March 2003 (Beiske, Lee, Yu and Yim, 2007, p 19).
Customer Relationship Management
The data base available through transaction enables customer segmentation highly useful for assessment of market potential and drawing out plans for advertisement campaigns and loyalty programmes. The unique numbering of the card capture updated customer information forming the said data base (Beiske, Lee, Yu and Yim, 2007, p 19).
Chinese government has already acquired the smart card technology from Octopus and hence the entry into China is far easier than its competitors from overseas.
Being based on smart card technology linked to card or watch, customers have to carry their cards or watches for conducting transactions that too only at smartcard readers are available. In Shenzhen which is new market, smartcard readers have to be installed exhaustively entailing capital costs (Beiske, Lee, Yu and Yim, 2007, p 20).
Low Switching Cost
One can easily switch to competitor for as law as HK $ 50 (Beiske, Lee, Yu and Yim, 2007, p 20).
Limited Venue to Add Cash
“Adding value is limited to the MTR terminals or a few banks for the personalised Octopus cards” (Beiske, Lee, Yu and Yim, 2007, p 20).
Limited Usage of Octopus
As the maximum amount loadable in the Octopus card is HK$ 1,000, transactions are bound to be small in value. The card is only meant for small transactions (Beiske, Lee, Yu and Yim, 2007, p 20).
No password protection
As there is no password or pin for the card, it is liable for misuse in case of theft (Beiske, Lee, Yu and Yim, 2007, p 20).
The targeted location being a foreign country, unless a local partner is found in China, it may not be feasible to develop a full-fledged operations in Shenzhen thus impacting on economic viability or it may have to be expensive for the traveller or user. Entrance fee or Royalty may have to be paid to Chinese Government for obtaining licence to operate in Shenzhen.
Entering Shenzhen itself is leveraging of Octopus brand and partly the customer base in Hong Kong who may happen to travel to Shenzhen. With the Octopus brand, it business partners can cross-sell their own products and services through direct marketing or telemarketing campaigns.
Further, China's emerging middle-class and consumer economy, its WTO entry, banking reforms, financial reforms are clear opportunities. Its largest mobile and telephone market comprising of 900 million and internet users base of 210 million are potential target audience for the Shenzhen Octopus card usage. China already has 1.4 billion bank cards, 50 million credit cards holders of which may find the Shenzhen octopus card an opportunity for either migration or partial use for their day to day use for which smartcards are more suitable. It is said to have enormous potential for remote transactions for e-ticket estimated at $ 20 billion in 2008 and mobile top up at $ 20 billion with 20 % annual growth. The huge demand for new pay channels offers an opportunity for the proposed Shenzhen Octopus card. Further more, payment is the single largest demand in China yet to be satisfied due to lack of secure payment systems, low penetration by credit cards and bank and debit card driven payment systems with virtually no protection for consumers (Tang).
Hong Kong is already well acquainted with the card and hence well trusted by the Hong Kongers. Chinese culture being highly conservative, it is very easy to convince prospective consumers to trust e-money transactions in their day to day routine even though they are equally averse to credit card use.
Competition is likely to intensify from Credit card market in which China is predicted to be a world leader by 2020.
4 Key Strategic Decisions
The market for prepaid cards in Shenzhen has been selected due to its proximity to Hong Kong as a logical and careful step for expansion keeping in view the risks and logistics associated with it. The segmentation of the market is demographic. First, it is the commuters in public transport to start with. The other segments are retailers, mobile phone users. The sub-segmentation would be students, office goers, senior citizens and women. As it is a prepaid card and the initial deposit is fixed, the segmentation would make it easier to have different levels of recharge according to the needs and paying capacities of the consumers under different segments. For example students who have no income of their own may be offered the lowest possible tariff slabs. This is part of the micromarketing strategy replacing mass marketing, thus targeting X generation market and elderly market etc. Segmenting the market leads growth higher than average by tailoring the product and ad campaigns (Batra, Myers and Aaker, 2006, p187)
Geographic- It has been decided to target Shenzhen market for popularising the Shenzhen Octopus brand. Shenzhen market is already familiar with smart cards for use in phones. For instance, Shenzhen China Smart Card Technology Co Ltd is already manufacturing the smartcards since 2001(cheapsonsale). Shenzhen has a population of 2.06 millions as per an estimate of 2003. The emerging economy of China’s statistics shows an increased spending on transportation from 289.9 billions RMB in 1997 to 614.0 billions in 2003. (Kalish, 2005).
Demographic: Rather than based on gender alone, it would be effective if consumers are targeted on activity basis also. “A very basic but useful a priori demographic segmenting variable is age” (Batra, Myers and Aaker, 2006, p192). Hence tariffs are designed in such a way to attract office goers, students, senior citizens and women to suit their monthly budgets. Since the card will spare the consumers of standing in queues and carrying coins or currencies, there is no dearth of opportunity for Shenzhen Octopus.
Psychological: Though credit card market is expected to increase surpassing the size of the U.S market by 2020, Chinese conservative society prefer pre-payment by smart cards to credit cards as it gives them a sense of pride.
Brand Loyalty: Octopus is already popular in Hongkong. Shenzhen travellers in Hong Kong who may not be unaware of its presence, will form part of the ready market for Shenzhen Octopus on being launched. “It is useful to consider brand loyalty as a basis for a priori segmentation” (Batra, Myers and Aaker, 2006, p 197).
Positioning as strategy to differentiate from competitors ( Batra, Myers and Aaker, 2006, p 213) Shenzhen Octopus will highlight saving of time standing in queues and carrying coins and also avoiding the debt trap of Credit cards.
4.4 Buyer-Behavioural Objectives
Consumers are favourable disposed towards time-saving and money-saving products and this buyer-behavioral objective is a clear incentive for the launch if Shenzhen Octopus card.
5. Advertising Objectives
An advertisement will be effective only if it is “noticed, read, comprehended, believed, and acted upon” (Search in Batra et al 2006, p 122). Batra et al (2006, p144), advocated “Defining Advertising Goals for Measured Advertising Results” (DAGMAR) approach as part of advertising planning and this approach includes a method for “selecting and quantifying goals and for using those goals to measure performance (Batra et al,2006, p 144). As already mentioned the steps start from “unaware, aware, comprehension and image, attitude and action” (Batra et al, 2006 p 145). It can be a model of effects of communication process hierarchy. Accordingly, the advertising objectives for the next 12 months from 1st January 2011 to 31st December 2011 will be as follows.
Creation of brand awareness of Shenzhen Octopus card among the transport users of different segments from 0 to 50 %.
Develop brand loyalty towards Shenzhen Octopus card among the transport users by 50 %.
Achieve a market share of 50 % by the end of the period.
6. Advertising strategy
The campaign on a continuing basis for twelve months will be characterized by a pull strategy for motivating the transport users as targeted customers to buy Shenzhen Octopus cards.
6.1 Communicated message
In order to increase customer interest, bring about use and encourage development of Octopus partner projects in Shenzhen, there must be an integrated marketing strategy. Efforts to increase customer perception about the benefits of getting reloadable credit cards instead of cash payments should be rendered as the first step of the Shenzhen marketing strategy. This is particularly bound to cover the financially underserved population in Shenzhen. The campaign will bring to light how the Shenzhen Octopus card can make better money management and empower the potential users to have alternatives to cash and carry life style. The fundamental messages that should be conveyed in the campaign are control of their spending on their own terms, convenience in making online purchases at retailers and also payment of bills, security i.e safer than cash and other forms of card payments, timely and easy access of money. The campaign may be a mufti-channel one comprising of social media, mobile, digital, radio advertising, in-store demonstrations, displays and promotions. As part of the digital media which is central to the campaign, display ads online should enable access to purchase of Shenzhen Octopus cards. Social media enables connect themselves as a community on Face book page meant for Shenzhen Octopus smartcards. The in-store demonstrations and local events would enable personal interaction with the potential customers whereby the experts can demonstrate functioning of the smartcard and motivate them to apply for card on the spot (visa, 2010)
6.2 Examples of Advertisement
There will be 12 print ads for the entire year of the campaign. The print ads will be based on DAGMAR approach objectives stated above reflecting hierarchy of effects model.
The 1st print ad
As shown in the title page, design will be based the existing Octopus Hong Kong card. The print ad with the slogans “coin-free and queue-less commuting” and “already trusted by Hong Kongers”. The design will be soft and comfortable to reflect the mood of being coin-free and queue-less payments for commuting for going work, college or pleasure travel. This lets the audience to know the advantages of smart card Shenzhen octopus.
The 2nd print ad slogan “debt free and no hidden charges”
The second print is to differentiate a smart card from a credit card. Credit card is potential competitor for other apart from commuting. The credit cards are potential debts traps if not properly used and always have hidden charges like interest, late fee and over-limit-fee. The slogan “be debt free without hidden charges of a credit card by using Smart card Shenzhen Octopus”. This is to caution customers from buying cards without knowing the difference and also the efforts of credit cards to dissuade existing customers from purchasing smartcards by counter advertisements or other campaigns to retain their customers.
The 3rd print
The 3rd print will trigger purchases through the attached coupons which entitle the prospect to avail of the initial discount.
6.3 Justification of Advertisement In Tune With Advertising Objectives
While the 1st advertisement is to create an awareness of not only the new product but also the leading brand elsewhere. The second one is to educate the potential customers not to fall prey to credit cards. The 3rd and final advertisement is to encourage customers to purchase cards as the end of the advertising objectives to gain market for the new product and market share among potential new entrants or other means of purchases of transport tickets already existing in the market. A slogan “now or never’’ will be added to avail of the opportunity to have 50 % discount on initial deposit.
6.4 Decisions for Media Selection See Appendix Table 1
6.5 Justification of Media In Alignment With Advertising Objectives
The media selected are for targeting the commuters. They are likely to frequent at the locations selected and come into contact with media otherwise.
6.6 Media Schedule
In the first three months, Shenzhen should be made aware of by the target consumers. There are three ads have been planned in the news paper and outdoor locations. They will also appear on the Chinese new year day. On the other hand, ads will be constantly appearing in the internet in view of the low cost.
6.7 Sales Promotion
The promotion campaigns have to be concomitant with the ads campaigns. Otherwise, the advertisement will be an empty exercise. As such as already mentioned, discount coupons will be offered to stimulate sales and enhance brand image.
6.8 Advertising Budget (see Table 2) in Appendix
Details of rates will be furnished on request.
Advertising evaluation is an important milestone in the advertisement process (Parente 2000, p283). Market research is an important tool to predict if the advertising objectives are practicable. As the Shenzhen population is about 8.62 million. As it is too large, target audience numbering three hundred have to be selected. The target group will be first shown the ad prints and furnished with questions. The profiles of the selected audience will be as follows.
Gender - Both male and female
Age groups - 15-18, 19-35, 36-55, 55-70 years
Qualifications - High school, undergraduate, postgraduate and PHDs.
Expenses on cards - on monthly basis $ 300, 301-500, 501-800, 801-950.
Reading habit - one news paper
Transportation taken - MTR/Bus/Taxi/Others
8 Campaign Evaluation
The calculation of t is relevant to advertising after the campaign has come to an end. It will serve as guide for future advertising and avoid mistakes committed in the past. A successful advertisement is characterised by high level of recall rates and recognition. Towards this end, the day-after recall will be adopted. The interviewees will be asked if they could recall the product features of Shenzhen Octopus card.
The advertising report for Shenzhen Octopus card is backed by as many as 105 evidence-based advertising principles. In fact original advertisement proposal when the card was first launched in Hong Kong had only 30 principles. The significant increase at present should ensure attracting potential customers in the new region of launch i.e Shenzhen and although Hong Kong is a different region artificially, culturally Hong Kong and Shenzhen must have the common characteristics and hence duplicating the advertisement strategies for the Hong Kong region should ensure the same results for Shenzhen also. The total expenditure on advertising is estimated to be Hk $ 990,000 for the advertising campaign for a period of twelve months and it should result in 427 % return on investment on Shenzhen Octopus. The task however is challenging because the entry is planned in a regulated country like China and although western nations have made successful entries, the neighbouring Hong Kong entity cannot afford to take things for granted as if they are entering into their own home territory encouraged by common culture and language. The Shenzhen Octopus, in order to have a sustained presence in Shenzhen, should not hesitate to sell at zero profit so that it can hike its prices doubly once its rivals are eliminated in the price war as it did in Hong Kong. It certainly has an a competitive advantage because of its innovative product first of its kind in the world and the technical expertise gained and the loyal workforce should be the company’s sources of strength for its sustained presence in Shenzhen and later all parts of China with different brand names for each region. The advertisement campaigns should be on sustained basis throughout the budgeted period and all campaigns should occur concurrently.
Reasons for selection
1. “coin-free and queue-less commuting” and “already trusted by Hong Kongers”.
2. “debt free and no hidden charges”
3. “now or never”
“Shenzhen Economic Daily Frequency
Twice a month
Daily newspapers are purchased by almost all the persons engaged in some economic or some useful activities. They always look for news items of their interests. The ads positioned somewhere adjacent to such news items are bound to be noticed by the prospective customers.
Outdoor advertising is equally effective as it serves as a reminder to the ads already seen in the newspaper and also for those who are too busy to read newspaper or do not have reading habit. The vehicles chosen have the following justifications.
The card is for use in transportation and therefore there can be no better place than transportation as tool for advertising the card. MTR station network is fast expanding in Shenzhen. Shenzhen Metro Phase 1 Network is already in operation with two lines. One, Line 1 between Lo Wu and the “window of the world” in the east-west direction. and the other line 4 connecting Huanggang Boundary Control Point with Shaoniangong in the north-south orientation. There are 20 stations in operation since 2004. (MTR). And all the stations will have display ads at vantage points.
Bill Boards: For remembrance value, Bill boards for Shenzhen Octopus will be installed in important locations including Shenzhen Airport, Splendid China, Folk-custom culture village. The selected areas are frequented and crowded by people always, the billboards for Shenzhen Octopus will add strong remembrance value.
Effectiveness of advertisement in the internet need not be overemphasised. People spend more time internet than in any other media. Both at home and at work, people have access to internet as if it is a constant companion. Shenzhen Octopus will be more frequently beamed before the prospects in the internet than in another media in the most economical way.
Table 2 Advertising budget
Expenses in $
Batra Rajeev, Myers John G and Aaker David A, 2009, Advertising Management, Pearson education, Dorling Kindersley (India) Pvt Ltd. New Delhi
Beiske Ben, Lee Leslie, Yu David and Yim Iris. (2007). EOctopus in Hong Kong- A feasibility study, Grin Verlag.
CheaponSale, PVC prepaid card recharge card, Retrieved September 26, 2010 <http://www.cheaponsale.com/d-p1113533761254743025-pvc_prepaid_card_recharge_card/.
Hong Kong Travel. Org
Kallish Ira, 2005, China’s consumer market; Opportunities and risks, Deloitte, Retrieved September 26, 2010 < www.e50.com.my/pdf/General_China%20Consumer%20Market.pdf>
MTR, Projects, Shenzhen Metro Longhua Line (Line 4) Retrieved September 25, 2010< http://www.mtr.com.hk/eng/projects/china_shenzhen.html>
Madden Normandy (2010) China will be world’s top credit market by 2020, Advertising Age, September 15, Retrieved September 25, 2010 <www. http://adage.com/
Parente, D. (2000) Advertising Campaign Strategy – a guide to marketing communication plans (2nd ed), pg. 283, 292, The Dryden Press Harcourt College Publishers America
Tang Bin (no date) Innovations in China’s e-Payment market, Yeepay.com Retrieved September 25, 2010, < www.http://iis-db.stanford.edu/docs/189/e-payment/bin.tang/pdf>
Visa (2010) Visa launches campaign promoting prepaid card benefits for financially underserved consumers, Retrieved September 23, 2010 <http://corporate.visa.com/media-center/press-releases/press1036.jsp>