# Alpen_Bank_Charts

Document Sample

```					REVENUE POTENTIAL

The process of determining revenue potential from the Alpen Bank case is based on determining revenue potential per customer segment and then
determining the overall value per customer. First, determine the relative value of each segment. Find the number of potential cardholders by segment
and weight the value of each segment by calculating the percent of the total potential cardholders each segment represents. (e.g. the middle class is
18.2% of the total population and 39.53% of total potential cardholders). The Annual Revenue per Middle Class Cardholder is €60.63. Calculate the
share of total revenue potential accounted for by the Middle Class. Complete the exercise for each segment and total to determine the average annual
revenue per customer.

Romanian Market                                                        Revenue per Cardholder
Romanian Market                                                Revenue per Cardholder
Segment            Annual Income     % of Potential             Potential         Interest Revenue    Other Revenue      Annual Revenue
€             Cardholders              Cardholders                €                     €                    €
(MM)
(Table A)            (Exhibit 5)      (Case Text: Page 4        (Table A)             (Table A)            (Table A)
@ 18.6M)
Middle Class       3.000-4,500          39.53%                  18.2%                37.13                 23.50                60.63
Affluent           4,500-6,000                                  15.0%                68.63                 36.75                123.38
Most Affluent      6,000+                                       6.6%                 148.50                61.25                209.75
Annual Revenue per Cardholder (all customers)                                                                                   € 393.37
Annual Revenue per Cardholder (Affluent + Most Affluent)                                                                        € 333.13

ACQUISITION COSTS

Table B provides the basic data necessary to calculate the relative strength and reach of the several acquisition tools available to Alpen Bank to acquire
credit card customers. Recreate this table to establish the parameters for implementing marketing communication plans to acquire customers.

TOOLS                    Unit Cost (€)                Prospects Reached             Response Rate                Qualification Rate
Direct Mail                   .50                            2,500,000                    3.0%                          60.0%
Take One                      .10                            2,000,000                    2.5%                          30.0%
FSIs                          .05                            3,500,000                    1.5%                          30.0%
Direct Sales                  3000 per rep                   60,000                       25.0%                         60.0%
Branch Cross-Sell             1.00                           50,000                       50.0%                         90.0%
Having reproduced this table you can then calculate the cost of acquiring customers. The exercise can be done for both all customers and affluent
customers. In addition to the information above the case provides a conversion rate of 85% of qualified prospects.

Customer Acquisition Costs (All Customers)

Tools          Unit cost       Prospects    Response      Qualifying    Conversion     Effective       # of         Total Cost    Cost per
Reached       Rate          Rate           Rate        Hit Rate     Customers         (€M)       Customer
Direct Mail     .50                2,500,000   3.0%          60.0%          85%                         38250         1,250,000     32.68
Take One        .10                2,000,000   2.5%          30.0%          85%                         12750         200,000       15.68
FSIs            05                 3,500,000   1.5%          30.0%          85%                         13387.5       175,000       13.071
Direct Sales    3,000 per rep      60,000      25.0%         60.0%          85%                         7650          1,800,000,000
(10 reps=30,000)
Br Cross-Sell   1.00               50,000      50.0%         90.0%          85%                         19125         50,000          2.61
All Channels                                                                                            91162.50      1801675000      91763.334
W/o Direct
Mail
Top 3: Mail,
FSIs, Cross-
Sell

Customer Acquisition Costs (Affluent Customers Only)

Tools          Unit cost       Prospects     Response      Qualifying   Conversion      Effective       # of        Total Cost     Cost per
Reached        Rate          Rate          Rate         Hit Rate     Customers        (€M)        Customer
Direct Mail     .50                1,250,000    3.0%          60.0%         85%                          19125
Take One        .10                1,000,000    2.5%          30.0%         85%                          6375
FSIs            05                 1,750,000    1.5%          30.0%         85%                          6693.75
Direct Sales    3,000 per rep      60,000       25.0%         60.0%         85%                          7650
(10 reps=30,000)
Branch          1.00               50,000       50.0%         90.0%         85%                          19125
Cross-Sell
All Channels
W/o Direct
Mail
Top 3: Mail,
Sales, Cross-
Sell

Upon completion of the work to be able to estimate revenue and acquisition costs, the process of estimating the relative values of successfully
attracting customers at various levels of market penetration. The goal is to determine, based on revenue potential and acquisition costs, how many
customers need to be acquired to achieve objectives the objectives of breakeven and the required ROI of €5 M.

The case adds the information regarding fixed cost s. There is a cost of advertising at €2 million and infrastructure fixed costs of €5 million for the first
50,000 customers and an additional €750,000 for every additional 50,000 customers (changing the relevant cost range).

Variable cost additions to support customers were €20 per customer for the first 50,000 customers. Economies of scale are calculated to drop the per
customer charge by €2.50 with every additional 50,000 customers.

Number of Customers (Middle Class + Affluent)

Per Customer                                 50,000                         100,000                        150,000                        200,000
Revenue
Acquisition Cost
Direct Cost

Costs: New Customer
Costs: Existing Customer

Contribution: New Customer
Contribution: Existing Customer

New Customers
Existing Customers

Credit Card Profitability
New Customer
Existing Customer
Total Contribution
Fixed Cost: Infrastructure
Profit (Loss)
Cumulative Profit (Loss)

Breakeven (#of customers):

Number of Customers (Affluent)

Per Customer                      50,000   100,000                 150,000   200,000
Revenue
Acquisition Cost
Direct Cost

Costs: New Customer
Costs: Existing Customer

Contribution: New Customer
Contribution: Existing Customer

New Customers
Existing Customers

Credit Card Profitability
New Customer
Existing Customer
Total Contribution
Fixed Cost: Infrastructure