Introduction

• Gregory Carle -country manager of Romania (14 branches)

• 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
– public’s 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

• Required profit of €5million annually, skepticism

• 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

• Management of the bank double minded

• The need for the most cost effective marketing channel

initially
 Suggestions
• Upcoming trend favored the usage of Credit Cards
(Usage increased by 35%)

• Alpen Bank needed to set its target to the upper-

middle 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)
• Less risk of default of the customers of Alpen
Bank

• Increased sales of the merchants by the usage of

credit cards

• The bank can use the cross sell method

– High response rate 50% & Qualification rate 90%
– Cost per customer will be 2.2 Euros

• Second best method is the direct sales

– Response rate 50%, qualification rate 60%
– Cost per customer will be 3.3 Euros
Financial Analysis
 Revenues

% of total Annual Revenue

Segments Annual Income No. of customers
population 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
No. of Cost per
Prospects Response Qualificati
Unit Cost cardholder Total cost Card
reached Rate on Rate
s holder

Direct Mail 0.50 2.50 m 3.0% 60.0% 38,250 1.25m 32.68

Take One .10 2.00m 2.5% 30% 12,750 .2m 15.69

FSIs .05 3.5m 1.5% 30% 13,388 .175m 13.07
Direct
3000/ rep .06m 25% 60.0% 7,650 .03m 3.92
Sales
Branch
1.00 .05m 50.0% 90.% 19,125 .05m 2.61
Cross-sell
91,163

Total cost per customer = 1,705,000/91,163 = 18.70 Euros

Without Direct mail = 455,000/52,913 = 8.6 Euros
 Affluent
No. of Cost per
Prospects Response Qualificati
Unit Cost cardholder Total cost Card
reached Rate on Rate
s holder

Direct Mail 0.50 1.25 m 3.0% 60.0% 19,125 .625m 32.68

Take One .10 2.00m 2.5% 15% 6,375 .2m 15.69

FSIs .05 3.5m 1.5% 15% 6,694 .175m 13.07
Direct
3000/ rep .06m 25% 60.0% 7,650 .03m 3.92
Sales
Branch
1.00 .05m 50.0% 90.% 19,125 .05m 2.61
Cross-sell
58,969

Total cost per customer = 1,080,000/58969 = 18.31 Euros

Without Direct mail = 455,000/39844 = 11.42 Euros

 Break even analysis
# of customers 50,000 100,000 150,000 200,000

Rev. per customer 122.78 122.78 122.78 122.78

Acquisition cost 18.75 18.75 18.75 18.75

Direct Cost 20 17.5 15 12.5

Total V. Cost 38.75 36.25 33.75 31.25

Total Revenue 6.139m 12.278m 18.417m 24.556m

Fixed cost 7m 7.750m 8.5m 9.250m

V. cost 1.937m 2.687m 3.137m 3.437m

Net Profit -2.798 1.841m 6.78m 11.869m

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
Break even analysis (affluent)
# of customers 50,000 100,000 150,000 200,000

Rev. per customer 163.31 163.31 163.31 163.31

Acquisition cost 18.31 18.31 18.31 18.31

Direct Cost 20 17.5 15 12.5

Total V. Cost 38.31 35.81 33.31 30.81

Total Revenue 8.165m 16.331m 24.496m 32,662m

Fixed cost 7m 7.750m 8.5m 9.250m

V. cost 1.915m 2.665m 3.165m 3.415m

Net Profit -.75m 5.916m 12.831m 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