Entering a new market with a new product

Decision-makers within organisations need to look into the future. As they do so, their thinking should focus on their customers. These should include existing customers and potential customers who have so far not taken up products from that organisation.

In an age when credit is more widely available than ever, this case study focuses on a new product launched by Experian, a global information solutions company which runs one of the UK’s leading credit reference agencies. Experian traditionally deals with business-to-business customers. This case study illustrates how Experian has developed a new product called CreditExpert for consumers.

The company background

Experian operates in more than 60 countries. It has over 20 years of experience in providing financial, statistical and marketing information to businesses and consumers. Building partnerships with companies is Experian’s core business. For example, when banks, credit card companies and other financial services organisations lend money, they need information they can rely on. Lending money involves an element of risk. Experian’s information helps them with the decisions they have to take.

As a credit reference agency (CRA), Experian enables different lenders, such as banks, to share information about their customers’ credit accounts. The lender can then use this information to help it to decide whether somebody can afford to repay any borrowings. It looks at how much credit the customer already has. It also looks at how they are managing this. Lenders pay a fee to the CRA each time they search its records.

Consumers give permission for their credit report information to be looked at when they apply for credit and for their account information to be stored with a CRA. People have a legal right to see the information about them held by a CRA. Experian charges consumers £2, the statutory fee set by the Consumer Credit Act, to provide a copy of the information held on a credit report (sometimes called a credit file). People receiving formal debt counselling receive their credit report free.

Diversification

As organisations develop their businesses, they face a range of choices and opportunities.

One way of representing these choices is through a matrix developed by Igor Ansoff in 1965.

Alternative marketing strategies

By relating product opportunities to markets, this mix identifies four broad alternative marketing strategies open to Experian:

a) Market penetration. This involves selling more existing products to existing markets. This increases the organisation’s market share. Experian is the largest credit reference agency in the UK market and in this field the company has two main competitors.

b) Product development. This means developing new products for existing markets. Experian is a customer-focused organisation. Its customers are businesses. Knowledge of individuals and markets enables Experian to build and develop a wide range of products relevant to its customers.

c) Market development. This strategy takes existing products and finds new markets for them. Experian uses market research to target and develops its markets. Operating in more than 60 countries, Experian used this strategy to become a global leader in the information products market.

Diversification stands apart from the other strategies. It involves the greatest risk of all strategies.

d) Diversification. This involves moving away from core activities and developing new products for new markets. Diversification stands apart from the other strategies. It involves the greatest risk of all strategies. It requires new skills, new techniques and different ways of operating.

In a world where credit is part of modern living, Experian diversified with a new product CreditExpert, launched in 2003. This decision recognised that many consumers wanted to be more in control of their credit status, to be able to monitor their credit report at any time and protect themselves against identity fraud.

The market

Credit for young people often starts when they take out a student loan. Credit, such as personal loans, credit cards or hire purchase agreements, can help smooth out the peaks and troughs of your income. It can help you buy expensive items, such as a car or kitchen equipment, which you would otherwise have to save for. As people settle down they may want to purchase a property. A mortgage is a type of credit that enables them to do this. It is important that consumers manage their finances properly. They do not want a late payment, identity fraud or clerical error to damage their financial status. This might lead to them being refused credit in the future.

What is CreditExpert?

CreditExpert has enabled Experian to target a new market with a new product. Consumers have always been able to apply for their statutory £2 credit report by post by writing to the CRA. More recently they have been able to apply online or by phone and receive this statutory report in the post. But by using CreditExpert consumers can access their credit report online, once they have passed strict authentication and security checks.

Why is a credit report important?

Consumers are wise to monitor their credit history regularly, particularly before they apply for credit. They can ensure that the information held about them is accurate and up-to-date and can check that they have not been targeted by an identity fraudster. For the first time, CreditExpert enables consumers to monitor their creditworthiness online by giving them access to their real-time credit reports. They can look at this as often as they like. Looking at their credit report enables a consumer to know what a financial institution will see when it does a credit check in response to an application for credit. CreditExpert also helps its members to understand how a prospective lender is likely to view the information on their credit reports.

Identity fraud is a serious problem in the UK. This may involve somebody applying for credit in another person’s name. The consumer magazine Which? has revealed that more than one in four people had been affected by identity fraud or knew somebody who had been.

How does it work?

CreditExpert sends its members a text or e-mail, or both, every time there is a significant change to the information on that individual’s credit report. This enables a consumer to verify that a record of a credit check relates to an application they have made for credit. They can also check that any credit accounts opened belong to them and have not been opened by a fraudster using their name and address. CreditExpert members can use a freephone number to get help and advice about the information on their credit reports. They get immediate help from Experian’s free Victims of Fraud service if they find they have been the subject of identity fraud.

Market segmentation

Customers have different needs and wants likes and dislikes. For example, not every person likes the same motor car or has the same taste in clothes. There are many different types of consumers with different types of needs. Experian aims to treat all consumers as individuals. Market segmentation helps to turn marketing into a science. It does this by separating a market into parts called segments. Each segment contains groups of customers who are likely to respond in a particular way to marketing activities. Market segmentation involves three elements. These are:

a) segmentation, in which the market is divided into segments

b) targeting, where an organisation identifies specific segments and provides products and services relevant to those segments

c) positioning, where the strategy uses customers’ views to define the location of a product relative to other products in the market.

Identifying targets

The marketing team at Experian wanted to identify the nature, characteristics and type of consumer who would be interested in CreditExpert. Markets are segmented in a variety of ways. Experian used its knowledge of consumers who had applied for their statutory credit reports in the past to help segmentation. It built up a profile of the consumer it wanted to target. This took into account people’s ages, where they lived, their gender and socioeconomic grouping.

It was important to develop an image that would be appropriate for the product that was being offered.

Experian wanted to attract people with certain characteristics, such as people who were:

• Internet users
• credit users
• keen to manage their financial affairs well.

These were people who might read the financial pages in daily or Sunday newspapers or visit personal finance websites. This profiling helped marketers at Experian to identify which groups they would then target with information about the new CreditExpert service. Experian might be a new name to many individuals in consumer markets.

CreditExpert was a new UK brand. It was important to develop an image that would be appropriate for the product that was being offered. Having a profile of the most likely customer also helped Experian to develop a promotional campaign that would position the product in the minds of its potential customers.

Marketing mix

Experian undertook its market research and identified the segments containing those potential customers that it wanted to target. Next, it developed its marketing strategy. Marketing strategies are developed using the marketing mix. Organisations need to create a successful mix of:

• the right product (or service)
• sold at the right price
• at the right place
• using the most suitable form of promotion.

Product

The CreditExpert service enables members to check online that their credit report is accurate and up to date. It enables them to see their credit history online as often as they want. The CreditExpert alert service helps them to identify whether somebody has been asking for credit using their name and address, which enables them to spot identity fraud. If there is a problem, consumers get free phone advice from credit reference specialists. Members can also order a credit score based on their Experian credit report, which gives them an idea of how a lender would view the information if they were to apply for credit.

Price

As with most financial services, there is a