1) How should Alpen Bank position its card? Alpen bank should position its credit card as a high end premium product as its existing customers belong to the affluent class and it would be easier to establish itself in this segment. Furthermore this class represents the top 10 % of population which has about 24% of wealth. They are less price sensitive and more conscious of their image so positioning the card on high end would be beneficial for the bank. This segment includes professionals who would like to purchase products and services through credit card considering it a status symbol. Moreover, for countries like Romania, it is seen that credit cards are somewhat stickier as compared to the developed countries. This shows that if Alpen positions its card as a high end product, it will gain a share of market which would stick to its card. The middle class also has a huge potential especially in terms of the size of market however they are more price-focused and would only welcome this new credit card if the interest rates are low. They also have a monthly income which supports them to have a credit card. Based on the attitudes of customers in other emerging economies it can be s aid that customers in middle-income class have a lower actual utilization rate when compared with affluent class. 2) What
is the cost of acquisition of customer? Customer acquisition cost is the cost associated with convincing a consumer to buy your product or service, including research, marketing, and advertising costs. The cost of new customer acquisition is one of the best ways to measure sales and marketing performance.
3) What
a)
are the economies of each customer?
What
is the breakeven number of customers?
b) Is it available and in what time period?
4)
Should Alpen Bank launch a credit card? Why? And how does the credit card opportunity tocore business operations? Considering
the economic and market conditions as explained in the case, Alpen
should launch a credit card. Economy is growing rapidly with increasing incomes and making upper middle and middle class a substantial part of the society. Moreover disposable income is also increasing dramatically. The country has 10%households who have 24% of the wealth so they have sufficient income per month. They are conscious about their social image and are less sensitive to prices. The middle class is also a potential market for the credit card. This class includes young professionals who make price driven decisions so the bank might think about lowering the interest rates for them. Todays middle class may become affluent tomorrow. The credit and debit card market of Romania is also seen to grow at a good pace of 35% in 2006 and about 9.5 million cards were being used in the market. Romania has ATMs and point of sales terminals for card transactions too. On the other hand, there are some problems in the credit card market too. Firstly, majority of the cards being used by customers are debit cards which means Alpen has to convince and make special efforts to make use credit cards too. People use cards generally for withdrawing cash rather than for buying products or services so there is less revenue driven from transactions. Even merchants are still ignorant in accepting credit cards and prefer payments through cash. These all points show that Alpen has an opportunity to cash on the credit card but it would require efforts especially in marketing the card and making people realize the utility and purposefulness of the card. This would also cost them in the beginning as customers need awareness but as the market would grow it will become a profitable business. More specialized people will be required who have the knowledge about credit cards operations and how to handle them properly. Marketing and RnD departments would require effective implementation of marketing techniques and research respectively to make credit card a big success. This would enhance their customer base as compared to core banking.
5) Is Romania ready for cash-free transactions? The macro-economic in Romania are encouraging businesses to expand and explore new possibilities. The rapid economic growth has led to higher incomes which has increased the proportion of middle class in the economy. These factors
have also led to an increase in the disposable income of people which means that the Romanians now have more money to spend. In recent years Romania has experienced a significant growth in the number of financial cards. As the Growth in total financial cards including debit and credit cards grew by 35%. This growth is also matched by an increase in the number of ATMs and point of sale terminals as Romania has 8,000 ATMs and 150,000 point of sale terminals. However
the majority of these cards are debit cards used for the purpose of
withdrawing cash rather than making credit purchases using credit cards which could be a concern for the Alpen bank. Furthermore the actual usage rates for these credit cards are very low which indicates that at present customers do not use credit cards as a prime means of making purchases. Romania also has an affluent class which is status conscious and has greater purchasing power. They are career oriented; active professionals who would like to use their cards frequently for making purchases. Based on the above mentioned factors it can be concluded that as Romania has also become one of the emerging markets therefore it is shifting towards new trends and Romanians especially the affluent ones are more status conscious and consider the usage of credit cards a status symbol. So Romania offers a huge potential of becoming a cash-free transactions but at present it is not ready for cash-free transactions.
