Purpose: Alpen Bank is facing potential growth opportunities in terms of launching a credit card to the Romanian market. The overall goal is to increase annual profit by €5 million within two years of launch. Selection of the right target audience, while applying the appropriate launching strategy is the direction of our focus. Our goal is to extend the Alpen Bank premium service to customers via a new product market. Predictions of economic growth in Romania, proves that the market is growing increasingly ripe for credit cards. Therefore, the issue is not whether or not Alpine Bank should launch a credit card in Romania. The concern of Alpine Bank should be when to launch said services in Romania. Current models, statistics, and research are conclusive; the time to invest in Romania is now.
Position Statement: The recommendation standing and supported by enclosed financial statements are as follows: Launching a credit card in the Romanian market would meet the stated purpose by targeting the affluent and most affluent audience (Exhibit 1). The marketing approach will consist of direct sales in conjunction with branch cross selling (Exhibit 2). Also the use of magazine and television advertising strategies will enhance our position. This approach will add support for the recommendation of taking advantage of a primarily non-penetrated market. Reason: The opportunity to invest in the Romanian credit card market yields potential revenue growth, along with increasing the life time value of each customer, new and existing.
With Romania entering the European Union, Alpen Bank has been prompted to re-visit its previous credit card approach in the emerging economy. Additionally, there has been an increase in luxury products and purchases, displaying increased consumer purchasing power, a potential indicator of an increased interest in credit card. Furthermore, Romania is in a transition period, with cards gaining favorability over cash payments. Alpen Bank hopes to build upon prior methods explored in Romania by competing banks in penetrating the credit card market.
Decision Options (Exhibit 6):
1.Launch a credit card in Romania.
2.Do not launch a credit card in Romania.
Decision Option 1
a.Add a new market: Alpen Bank can continue its successful venture in Romania by adding a credit card to its portfolio. This will foster a continuing growth in an increasingly affluent Romanian upper class. As purchasing power is determined by income level and accumulated wealth, the affluent class is more able than the middle class to make purchases on credit. b.Increase revenue: Current models and predictions indicate a strong opportunity to significantly increase the yearly revenue by investing in the credit card market. Calculations display how the venture will increase the life time value of each customer, ensuring future growth. (Exhibit 1)
Decision Option 2
a.Focus on existing markets: Venturing into the credit card market could draw resources away from core Alpen Banking services already in effect for the Romanian market. b.Assure no potential risk: All investments come with inherent risks. By investing substantially into an exploratory market, Alpen Bank is running the risk of not meeting the expected outcome. The potential monetary risk could run into the millions of dollars, along with an incalculable risk to reputation.
How to measure Decision Option 1
a.Establish a customer base with the affluent and most affluent: By building upon the currently excising clientele, along with attracting untapped segments of the prosperous Romanian upper class. By comparing the actual number of clients utilizing the Alpen Bank credit card with the models and predictions made pre-credit card launch. (Exhibit 4) b.Increasing revenue from the credit card launch: Expected revenue from the credit card enterprise is projected to be €6,698,391 within two years (Exhibit 2). By updating current calculation models with on-going information as the enterprise proceeds allows for ongoing monitoring of predicted return on investment. The lifetime value of customers will also be assessed on a yearly basis, predicting the value of loyal, long term users of credit cards.
How to measure Decision Option 2
a.Projecting further growth without credit card. Venturing into the Romanian credit card market taps resources away from current banking business. Investments could also be put to use in other areas, such as higher frequency of branches opening or improving services currently offered. b.Customer awareness of the bank’s premium brand: By investing in already offered business services. Alpine Bank is committed to improving our superior line of service currently offered to the Romanian clientele.
Critique of Decision Options 1
Per limitations of senior management, the investment into the Romanian credit card market must prove itself profitable within two years, yielding at least five million euro. Investing in developing a profitable line of credit cards comes with several risk factors. Predictions of profit could be erroneous, leading to a less than expected return on investments. This in turn could lead to revocable and irrevocable damage to reputation, potentially resulting in a net loss of customer over short and long term. Projections of the positive effects of Romania’s’ recent acceptance into the European Union could also be incorrect. By investing time and energy into a new business venture, current banking services could suffer from subconscious neglect by employees involved in both enterprises.
Critique of Decision Option 2
A decision not to invest in the Romanian credit card market will be a hinder of growth. Currently, competing banks are investing and have invested in the growing credit card market. By delaying a venture, Alpen Bank is permitting competitors to gain establishment and credit market branding. Alpen Bank currently holds the potential necessary for a successful venture into the credit card market. By failing to employ said resources, Alpine Bank is neglecting talent and opportunity, which could lead to failure in expected profitability.
Being accepted into European Union brings increasing prospect of higher return on investments in the credit card market. By choosing to stay out of the market, Alpine Bank is also forcing excising customers to other banks for credit card services. As experienced in other emerging markets in developing countries, credit card customers are less likely to switch from one credit card to another. Therefore, failing to introduce a line of credit cards now will make it increasingly difficult to attract customers when Alpen Bank eventually starts its credit card venture.
•Launch a credit card
•Reach the affluent and most affluent
•Launch marketing and adverting that appeals to our audience Action Steps:
•Marketing Plan: Release a Premium Marketing Plan that is focused, achievable, compelling, and simple. As evident by exhibit 1, the chosen target group is the affluent and most affluent segments of the Romanian population. By ensuring a proper understanding of the dynamic characterizing the targeted demographic, we are able to construct the appropriate marketing plan. This will instill the programs, tactics, incentives, and budgets necessary for a strong image and a consistent message reaching the targeted customers.
•Marketing: Investing in direct sales and branch cross-selling holds the highest effective rate of potential customers reached. These two methods also have the lowest cost per customer. Combined they ensure the most effective tactic in recruiting customers to Alpen Bank’s credit card. (Exhibit 2)
•Advertising: Magazine and television advertisements. Our advertising goal is to capture the attention of perspective applicants as well as converting prospects involved with other credit card venues. Establishing a clear message for the audience is essential in launching advertising Alpen Bank’s advertising campaign. “A premium clientele deserves a premium banking experience.” The launch of the campaign considers the sophisticated, vernacular culture of our Romanian clientele. The goal is to assure the same quality experience in our established bank while adding an innovative credit card product to allocate more options for our clientele.
-Magazine advertisements could feature admired Romanian model Diana Dondoe, to highlight Alpen Bank’s image of being an upscale and exclusive provider of banking services. -Television advertisements could consist of 30 second runs of a Romanian couple being picked up by their driver and dropped off at the premier launch of the credit card. These are some alternatives in order to illustrate how the product could be marketed.
•Launch of promotional events by the Alpen Bank’s public relations department. Evening events could be held at elegant local venues for charitable fundraising purposes.
•Continuing growth in the Romanian market, with special focus on the credit card market. •Attracting customers to Alpen Bank by focusing on its premium image and superior services. •Expansion in the credit card market, to have established a customer base of 200,000 customers five years following initial launch. •As the Romanian economy is growing, the percentage of population with a disposable income is increasing. Alpen Bank will focus on attracting new members of the affluent segment of the population. •Increase the lifetime value of each customer, by further expansion of the financial services offered. •Increase credit card utilization by informing clientele of benefits associated with credit card purchases, along with temporary potential incentives offered in order to change consumer habits.
Risk and Countermeasures
•The chosen target demographic of affluent and most affluent Romanians could prove itself too limited for effective penetration. However, as the Romanian economy is growing, the targeted demographic is also expected to expand in size. Therefore, even if the current market niche is too limited, it is expected to grow substantially over the next two to three years. •The expected profit of five million could not be achieved within the timeframe of two years. As limitations set by senior management calls for a substantial profit to be made within a relatively short amount of time, there is a risk of the time restraints not being met. Yet these restrictions add a clear vision, enabling a structured approach in order to meet the expected outcome within the set timeframe.
Final recommendation and conclusion
By venturing into the Romanian credit card market, Alpen Bank is capitalizing on a ripe product opportunity. Current predictions and models consistently indicate that by pursuing the recommended strategy, Alpen Bank will see profits grow by a minimum of €6.6 million over two years. Romania’s recent acceptance into the European Union, accompanied with an increase in purchasing power among the affluent fragment of the population will ensure a substantial return on investment. (Exhibit 4, 5)