Environmental Credit Plan

The following appeared as part of a plan proposed by an executive of the Easy Credit Company to the president:

"The Easy Credit Company would gain an advantage over competing credit card services if we were to donate a portion of the proceeds from the use of our cards to a well-known environmental organization in exchange for the use of its symbol or logo on our card. Since a recent poll shows that a large percentage of the public is concerned about environmental issues, this policy would attract new customers, increase use among existing customers, and enable us to charge interest rates that are higher than the lowest ones available."

Discuss how well reasoned . . . etc.

The proposed plan aims to help Easy Credit Company in gaining an advantage over competing credit card services by donating a portion of the proceeds from the use of the company's cards to a well-known environmental organization in exchange for the use of its symbol or logo on the company's cards. This argument is essentially based on a survey. The source of this survey, however, has not been made clear- putting into doubt the authenticity of the survey. The argument also assumes that the measure will not only attract new customers, it will also increase card usage and allow Easy Credit to charge higher interest rates. In the process, it completely fails to  cite the reason why people would increase usage of the cards or if higher interest rates may actually prove counter-productive by having unintended consequences. 

Taking the issues one at a time, the first in line is the survey that is the cornerstone of the whole argument. The credibility of the survey depends a lot upon the organization that conducted it and the methodology employed to achieve the same. If the survey was sponsored by the "well-known" environmental organization, the neutrality of the survey may be seriously questionable. On the other hand, a survey by a neutral, well-known third party may prove to be extremely credible.

Secondly, even though it may be fair to assume that such a policy may bring in some new customers, one is left to wonder how it would increase card usage? Can a company's policy change cause its customer to become a bit more reckless with their finances? Possibly: nothing is impossible. Nevertheless, it may help if the plan establishes the basis of this assumption more clearly: did people who said that they are concerned about environmental changes also asserted that they would not only support environment friendly products but will also increase usage and put up with incompetent interest rates? May be not.

This brings us to the assumption that this policy would allow the company to bring in new customers  and over-charge them as well.  A lot of current customers, who may not be that environmentally sensitive, may be lost to competition if such a change was made; such customers would not even have a far-fetched incentive to either increase usage or put with high rates. The resulting loss  of competitiveness and revenues has not been factored in the argument. Hence, The assumption is not only ungrounded, it also assumes that such an action would not have any unintended consequences.

Concluding, the presented plan is logically flawed on many counts. Before implementing it, the management should try to find more about the survey and examine if the suggested measures would indeed result in a competitive advantage. If implemented as it is, the plan risks loosing revenue and current customers in hope of winning more revenue and new customers.