Tough task for Diners to join the credit club

Ask three people around the world what the Diners Club card is and you’ll get three different answers.

In Hong Kong or Japan, it’s seen as a must-have business card dripping with prestige. In the US it’s known as the original charge card. But in the UK and Europe most people say Diners who? Or at best think of luncheon vouchers.

But this confusion could be a thing of the past with the news that Diners is beefing up its marketing department by adding five new senior positions (MW January 29). It is also looking at above-the-line advertising, including TV, and investigating a credit card launch.

Historically Diners Club, the original charge card, carved a lucrative niche in the travel and entertainment sector. Unlike a credit card, a charge card, does not have a revolving credit facility and is popular with people who want the discipline of paying bills in full at the end of each month. But in Europe it has been hamstrung by two major problems.

Firstly, its presence in “service establishments” or retail and other outlets which accept the card is not nearly as strong as the likes of Visa and, increasingly, American Express.

Secondly, the card has suffered from a lack of brand awareness on the back of limited above-the-line marketing activity. Richard Roche, the new vice president of marketing at Diners Club, admits there has been under-investment in the brand. “We are looking at all media opportunities, including broadcast media,” he says. “There has been under-investment in the brand and it is not well known enough. This is something we want to rectify.”

The company has earmarked 3.5m for above- and below-the-line work in the UK this year, designed to promote the charge card business. Advertising will be handled by Young & Rubicam.

But the size of the task can be measured by comparison with its fierce rival, Amex, which has built a strong presence in the market with its “That’ll do nicely” and testimonial campaigns supported by a worldwide annual ad budget of $300m (183m). Spend in the UK alone was over 20m last year across its charge and credit card business, according to ACNielsen-MEAL.

In the US, and some Latin American markets, Diners Club is testing a credit facility. “We are experimenting with a revolving (credit) type product at the moment and in certain markets such as Argentina and Brazil we can offer that facility,” says Walter Sanders vice president corporate affairs Diners Club International (US). “We are very interested in revolving credit as a revenue stream, so we are exploring this as a niche product, looking at the dynamics of it against our existing portfolio.”

Sanders says the UK could be an option for a credit facility in the future. “I would not rule it out. We are certainly testing the waters.”

A move into the world of credit is attractive. According to RSL’s Strategic Initiatives Monitor (Simon), about 21 million people in Britain have a credit card – 48 per cent of adults. This compares with 600,000 Amex charge card holders and just 200,000 Diners Club charge card holders in the UK.

But the credit card market is difficult to crack. The mass market Goldfish card, launched in September 1996 with a launch budget of 30m, has achieved high awareness but only a two per cent market penetration (RSL Simon).

Gary Davies, professor of retail at Manchester Business School, believes Diners Club’s marketing approach depends on what it aims to do. “In theory there’s no room for another player in the credit card market, but in practice there is an awful lot of fat among big spenders. Diners Club has already made significant inroads in the high spend market because it has existing data from its corporate card base.”

A perennial problem for Diners Club has been its level of acceptance. Coverage is good in its traditional travel and entertainment strongholds but if it is to go down a broader route then it faces a much tougher task.

One option could be to join with a bank to bring access to a band of cardholders and in turn put pressure on establishments to accept the card. But since the Diners Club franchise is owned by Citibank International, its options may be restricted.

Citibank only has one credit card in the UK and its UK marketing director Peter Wilkes says there would be no conflict with a Diners Club credit card.

“My gut feel is that Diners needs to get the acceptability level right. We don’t really see it as a threat,” says director of marketing for Goldfish UK Claire Stroud. “On its own it really is limited.”

Amex has supported the launch of its credit card with a major push to get its card accepted in more outlets. In the past 18 months, the company has signed up five of the major supermarket chains and has just launched a new advertising campaign featuring Seinfeld.

That is the challenge Diners Club faces. It will need a strong loyalty scheme and a push on retail outlets. But a 3.5m marketing campaign and five new senior marketers may not be enough.

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