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Serving affluent class of over 200 000 customers with excellent services
Financial planning and investment services through its wealth management program Credit card introduction delayed due to
low per capita incomes poorly developed infrastructure of point of sales terminals publics lack of experience with such facilities low merchant acceptance
European union inclusion Recovery from recession- improved middle class but low urban population and incomes 2000 onwards
Disposal incomes of upper and upper-middle class rose and the payment system infrastructure progressed Consumer preferences Financial cards rose by 35% from 2005-2006 but actual usage rate was still low
Merchant discounts depend on the transaction volume and are split amongst networks/card associations, merchant acquirers and card issuers Interchange, annual and penalty fees and interest charges, which are earned from revolvers, who are customers that delay payments Transactors are customers who pay off bills in time Potential customers were the upper and middle class
Upper class (earning at least 500/month) could be charged higher and would be frequent users Middle class (earning over 200/month) also an attractive segment, would expect lower charges and may not actually utilize the credit cards Brand positioning may be distorted
Problems
Major issue at hand Alpen Bank is facing is the launching of a credit card Threat of losing their most profitable customers and disturbance in financials Low acceptability of Credit Cards at the end of merchants People not aware of Credit card benefits
Suggestions
Upcoming trend favored the usage of Credit Cards (Usage increased by 35%) Alpen Bank needed to set its target to the uppermiddle and affluent class Position the credit card as a supreme brand (Favorable to target the middle class indirectly) Underpenetrated market of Romania (Advertising to attract people)
Financial Analysis
Revenues
Segments Annual Income % of total population No. of customers Annual Revenue per customer
Middle class
3000-4500
18.2 %
3,385,200
60.63
Affluent
4,500-6000
15%
2,790,000
123.38
Most Affluent
6,000+
6.6%
2,399,000
209.75
Total Cardholder population = 18.6 m Average annual Revenue per card holder (middle class & affluent) = 122.78 Euros Average annual Revenue per card holder (affluent) = 163. 31 Euros
Cost
Unit Cost Prospects reached Response Rate Qualificati on Rate No. of cardholder s 38,250 12,750 13,388 7,650 1.25m .2m .175m .03m Total cost Cost per Card holder 32.68 15.69 13.07 3.92
Direct
Sales Branch Cross-sell
1.00
.05m
50.0%
90.%
19,125 91,163
.05m
2.61
Total cost per customer = 1,705,000/91,163 = 18.70 Euros Without Direct mail = 455,000/52,913 = 8.6 Euros
Affluent
Unit Cost Prospects reached Response Rate Qualificati on Rate No. of cardholder s 19,125 6,375 6,694 7,650 .625m .2m .175m .03m Total cost Cost per Card holder 32.68 15.69 13.07 3.92
1.00
.05m
50.0%
90.%
19,125 58,969
.05m
2.61
Break even customers 122.78(X+50,000) (7.750m) (50,000*17.5 + 36.25*X) = 28,758 Total customers for break even = 78,758 For 5 Million ROI 122.78(X+100,000) (8.50m) (100,000*15 + 33.75*X) = 30,574 Total customers for break even = 130,574
50,000
163.31 18.31 20 38.31
100,000
163.31 18.31 17.5 35.81
150,000
163.31 18.31 15 33.31
200,000
163.31 18.31 12.5 30.81
Total Revenue
Fixed cost V. cost Net Profit
8.165m
7m 1.915m -.75m
16.331m
7.750m 2.665m 5.916m
24.496m
8.5m 3.165m 12.831m
32,662m
9.250m 3.415m 19.997m
Break even customers 163.31(X+50,000) (7.750m) (50,000*17.5 + 35.81*X) = 3,604 Total customers for break even = 53,604 For 5 Million ROI 163.31(X+50,000) (7.750m) (50,000*17.5 + 35.81*X) = 42,823 Total customers for break even = 92,823