SERVICES AND CUSTOMER MANAGEMENT

PREPARED BY –

KRITHIKA G BHARADWAJ 12023

VIVEK G 12060

ABHISHEK SINGH 12122

SIDDHARTH R SHETTY 12168

Alpen Bank Case analysis

Case Background

Country Manager for Alpen Bank, Gregory Carle wants to launch credit cards in Romania

The objective is to decide whether its feasible to launch the services in the country and what should be the positioning strategy

Currently, the bank has over 200000 customers

Most of them are from upper middle class and rich background

Uncertainty is about the current market, potential customers, average income

Credit card industry

The credit card industry is divided into 4 sections

Card issuers are typically banks, and they own the relationship with the card holders themselves

Network or card associations such as Master Card or Visa and form the backbone of the payment system

Merchant acquirers are the distribution and sales arm of the payments industry and are frequently affiliated with banks

Merchants are the restaurants, retailers, gas stations etc

Romanian Credit card industry The macroeconomic trends during the first half of 2000’s are encouraging

Rapid economic growth and rising incomes, particularly among the emerging middle and upper middle class had dramatically increased total disposable income

Over one third of Romanian households were likely to purchase branded imports from the EU

Statistics show that Romania has 1.2 cards per household. Growth is 35% for both debit and credit cards

9.5 million cards in circulation in Romania, apart from 8000 ATM’s and 150000 point of sale terminals

Potential customers

Top 10% of the population by income controlled 24% of wealth

The potential customers of the affluent class had incomes of €500 per month where as those of the middle class €200 per month

The affluent base were the most attractive for the credit card issuers

Revenue to be derived from : joining/annual fees, penalty fees for late payments, interest payments and interchange

Delimma

Should Alpen Banks launch credit cards in the Romanian Market?

How quickly would the business generate profit beyond break-even?

What level of customer acquisition would be required to break-even

How should the new card be positioned, particularly given its current upscale customer base?

How would the credit card opportunity compare to focusing on the core business of banking services for the affluent?

Market Entry costs

Five options explored

Direct Mail

Take ones

FSI’s

Direct sales

Cross selling

SWOT Analysis

Strengths Loyal affluent customers

A premium banking service

Weakness Low customer base

Opportunities Increase in per capita income

People preferring luxury products

High disposable income with population

Threats Lower penetration of merchants accepting card payments

Already established players

Low awareness about card payments and more dependence on cash transactions

Alternatives

Target existing customer base - Product development

Target Middle class and Affluent customers - Diversification

Quantitative Analysis

Data Analysis Excel sheet

Some key figures

Average revenue per cardholder (all customers) : €122.78

Average revenue per cardholder (affluent) : €163.31

Acquisition cost (Middle and affluent customers) : €18.7

Acquisition cost (Affluent customers only) : €18.31

Break even (Middle and affluent customers) : 78713 customers

Break even (Affluent customers only) : 53604 customers

No of customers needed to reach ROI of €5 mn (Middle and affluent customers) : 130557 customers

No of customers needed to reach ROI of €5 mn (Affluent customers only) : 100971 customers

Recommendations

Target Affluent customers

The break even can be achieved with lesser customers and also can quickly reach the target of €5 million

The middle class segment can be targeted with lower interest rates later on, where although interest income could be lower, the bank should focus on volume based selling

Thank You