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Kerin Foster

External Pressures and Budget Outcomes

Kerin Foster
External Pressures and Budget Outcomes

The budget determinations of assorted types of companies can be affected by situations both internal and external. This article will focus on the outer pressures faced by four very large contending banks, and how they counter-reacted to best suit their budgets and companies overall.

Below is a graph that illustrates the advertising budgets of four major credit card companies over the course of 3 years. The budgets of Bank of America, Capital One, and HSBC are roughly identical apart from Chase’s budget being somewhat greater.

We can see that in December of 2010, the graph spikes for the first time due to budget committees assembling and making year-end budget decisions. However the fourth company, HSBC, contrastingly decreased their budget... but why?

If we look back on the graph into July of 2011, the Federal Reserve imposed modifications on credit card companies only permitting them to increase interest rates on new credit cards and future purchases, but not current balances. Since retail took a dive, Chase, Capital One, and Bank of America decreased budgets to discuss their reactions and to re-organize their budgets. However, why didn’t HSBC do the same thing?

Overall, the federal regulations resulted in advertising budget alterations so that the companies could attract new cardholders who were not subject to the new regulations, and hence the interest rates could be tweaked.

Why is HSBC Different?

As revealed above, variations in regulations that govern a specific industry can also cause companies to increase or decrease their budgets dependent upon how the changes will affect business.

Bank of America, Capital One, and Chase focus more on the attainment of retail consumers, but HSBC is distinct in that they are geared toward a higher-level market, and therefore weren’t affected by the Federal Reserve adjustment that was geared toward individuals. HSBC spends money but not typically on Google Search due to the fact that it is used by an assortment of people, and HSBC desires an extremely specific clientele.

HSBC, instead, emphasizes special invitations and other methods to pursue their desired patrons. HSBC was not affected by the federal regulations attributable to their higher-end consumers, and increased their budgets a small amount for retail in September of 2011 to attempt the attainment of consumers in the United States, specifically since the market increased.

How did Chase respond to the Federal Regulations?

As displayed below, when a user searched “chase rewards,” a corresponding advertisement for the Chase Rewards card appeared, specifically geared toward consumers and not businesses.

Take notice of the positive aspects advertised for the Chase rewards card, and that these do not include any information about interest rates. Chase showcases the benefits of the card such as $100 cash back and earn $625 in Travel Rewards.

 Chase Regards Budget vs. Business – Which Card is Now Being Promoted?

Take a look at the graph below:

The blue line represents the percentage of Chase’s advertising budget allocated to the Chase Rewards Card. The red line represents the percentage of Chase’s advertising budget allocated to the Chase Business Card.

It is made extremely clear that Chase is progressively lessening the advertisement of their Rewards card and increasing that of their Business Card. Over the course of 3 months subsequent to the start of the regulations, Chase went from distributing 20% of their budget on promotion of their Rewards card to a mere 5%. In comparison, the Business card increased from an approximate 2% allocation to an excess of 15% six months later.

Therefore, 2011 Federal regulations played a substantial part in future promotion decisions for the companies involved.

In Conclusion…

Banks such as Bank of AmericaChaseHSBC, and Capital One don’t intend to make all of their confidential budget information evident. However, we are able to perceive when they are deciding their budgets and how they respond to other external factors.

So, with the use of SEMrush, facts can be exhumed that succeed in authenticating budget decisions, and hence a hypothesis can be created as to why those judgments were made.

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