SDM Institute for management development

Alpen Bank Launching Credit Cards In Romania -A Case Analysis-

Service and Customer Management

Submitted to:Professor Mohan N.J. Monteiro

Submitted by: Group-1_Section-CAastha Vyas 12001

Ankita Dhandharia 12067Soham Bhattacharya 12109

Kumar Piyush 12145Sarthak Rohatgi 12182

Date of Submission:

11/14/2013

THE CASE

The case debates about the challenge Gregory Carle, the country manager of Alpen bank

faced while launching credit cards in Romania. There are many factors to take into

consideration and if it is decided to be launched, Carle also needs to decide how it should be

positioned in the market. The firm had rejected the idea several years earlier due to poor

economic conditions in Romania. However, Romania now is experiencing a period of

economic growth after joining the European Union and Carle believes it is time to reconsider

the opportunity despite continued scepticism within the company.

Gregory Carle, the country manager of Alpen bank needed to make sure that if launched, the

credit card division needed to generate €5 million within two years. Alpen Bank had over

200,000 customers in a country of 7.7 million households. Total disposable income in

Romania had increased due to rapid economic growth and rising incomes in the country. In

2006, total financial cards including both debit and credit cards, grew by 35% over the

previous year. There were an estimated 9.5 million cards in circulation in Romania, with

8000 ATM’s and 150000 points of sale terminals for card transactions. Alpen Bank’s current

customer base was largely affluent households and an easier segment to target. Top 10% of

the population in Romania had 24% of the country’s wealth with their average net incomes of

€500. Alpen Bank wanted to focus on the middle class segment that earned €200 monthly,

and comprised of young professionals and families that valued quality. Revenues in card

industry are determined by transaction volume. Sources of income that Alpen Bank was

contemplating through card business were annual fees, penalty fees and interest income. A

consumer behaviour study indicated that over one third of Romanian households were likely

to purchase branded imports from the EU rather than low priced domestic products, with a

growing interest in luxury goods.

Alternatives

Target Existing customer base (Affluent Customers) Target Middle class and Affluent both

QUESTIONS

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Question 1: What level of customer acquisition would be required to break even, and how

quickly the business would generate profit beyond break even?

Solution: The process of determining revenue potential from Alpen Bank case is based on

determining revenue potential per customer segment and then determining the overall value

per customer. (Quantitative analysis done in Excel)

Question 2: How should the new card is positioned particularly given the current upscale

customer base?

Solution: Regarding the positioning strategy, the company should emphasize on its current

strength since it’s easier to sustain the current brand image rather than build a new one. Alpen

already has an excellent affluent client base, and it can leverage it to build on its reputation.

Question 3: How would the credit card opportunity compare to focusing on the core business

of banking services for the affluent?

Solution: The Company has an exciting opportunity to introduce the credit card business in

the country. The bank has been successful in establishing and sustaining itself in the core

business of banking services with a strong client base of 200000 customers, and with a

population of 7.7 million, the figures indicate that Alpen Bank has fairly been able to

penetrate into the banking industry. The macroeconomic factors of the country indicate that it

is ready to step on to the growth pedestal; therefore it is essential for Alpen Bank to recognize

the growing importance of providing a variety of services to target existing as well as new

customers. By doing so, the bank will be able to acquire more customers and therefore

improve its business. Also, the bank can hire more staff to ensure that both the core banking

division and the credit card division operate smoothly. The fact that the bank has an

established affluent client base, it can indulge in cross selling where the existing customers

can first be targeted to sell the credit cards.

Therefore, the core banking service that the bank’s current client base can act as a leverage to

generate more revenues and attract new customers.

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