Citibank Case Analysis

1662 words - 7 pages

Citibank: Launching the credit card in Asia Pacific
Country entry strategy

Objectives of this case ...view middle of the document...

 To understand market evaluation, target market selection, and product positioning issues in services operations.  To appreciate globalization/country entry issues in financial products.  To understand the underlying economics of customer acquisition and retention.

Key Strategic Issues
Should Citibank launch the card product ? Why ? Why not ? Given the upscale customer base , how should Citibank position its card, if it decides to launch it ? Which countries should Citibank enter first? Which countries should it avoid?

Few More Operational Issues
How should Rana ...view middle of the document...

3% of bind-in prospects become card holders.

Cost of direct sales
Assumptions

 10 sales calls /day, 20 days/month means

2400 calls per sales person / yr.  to reach 30,000 prospects , citibank would require 12.5 sales people (30000/2400)  at a cost of $18000 / sales person, total cost of direct sales approach is $225000

Customer Acquisition Analysis Direct Sales
 Prospects :30,000  Response Rate : 50.0%  No of Responses : 15,000  percent Qualify : 66.7%  Qualified Prospects :10,000  Percent Convert : 80%  Customers : 8,000  effective Customer Rate :27%  cost per prospect : $ 18000  Total cost : $225,000  Cost per customer : $ 28.11

Customer Acquisition Analysis Direct Mail
 Prospects :300,000  Response Rate : 2.0%  No of Responses : 6,000  percent Qualify : 66.7%  Qualified Prospects : 4,000  Percent Convert : 80%  Customers : 3,200  effective Customer Rate : 1.1%  cost per prospect : $1.50  Total cost : $450,000  Cost per customer : $140.55

Customer Acquisition Analysis Take one
 Prospects : 2,000,000  Response Rate : 1.5%  No of Responses :30,000  percent Qualify : 33.3 %  Qualified Prospects :10,000  Percent Convert : 80%  Customers : 8000  effective Customer Rate : 0.4%  cost per prospect : $ 0.25  Total cost : $ 500,000  Cost per customer : $ 62.56

Customer Acquisition Analysis – Bind inns
Prospects : 3,000,000 Response Rate : 1% No of Responses :30,000 percent Qualify : 33.3 % Qualified Prospects 10,000 Percent Convert : 80%
 Customers : 8000  effective Customer Rate : 0.3%  cost per prospect : $ 0.15  Total cost : $ 450,000  Cost per customer : $ 56.32

Customer Acquisition analysis - Summary
Total prospects: 5,330,000  Customers : 27190  effective customer rate : 5%  Total cost : $ 1,625,000  Cost per customer : 59.77 ( rounded to 60)

Fixed costs for a regional card center
 Initial investment of $35 mio. to support 250k customers. Incremental investments of $15mio.to support additional 250k customers.

Cumulative Contribution / Break Even Analysis

At 250,000 At 500,000 At 750,000 At 1 million Customers Customers Customers Customers

At 1.25 Mio Customers

Avg. Revenue Per customer (Table B)
Less :

$ 162.65 $ 162.65 $ 162.65 $ 162.65

$ 162.65

Avg. Direct Cost . Customer Avg. Acquisition Cost / Customer

$ 25.00 $ 60.00

$ 20.00 $ 60.00

$ 15.00 $ 60.00

$ 10.00 $ 60.00

$ 7.00 $ 60.00

Total Direct Costs
Contribution / New Customers

$ 85.00

$ 80.00

$ 75.00

$ 70.00

$ 67.00

$ 77.65

$ 82.65

$ 87.65

$ 92.65

$ 95.65

Contribution - Existing Customers

$ 142.65 $ 147.65 $ 152.65

$ 155.65

Cumulative Contribution / Break Even Analysis
New Customers Existing Customers New Customer Contribution ($Mio)

At 250,000 At 500,000 At 750,000 At 1 million Customers Customers Customers Customers 250,000 250,000 250,000 250,000
250,000 500,000 750,000

At 1.25 Mio Customers 250,000
...

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