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ALPEN BANK CASE

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11/06/2014

TO: Gregory Carlyle
FROM: XYZ
RE: Alpen Bank: Recommendations for new Credit card Business in Romania
DATE: 11/06/2014
Mr. Gregory
Purpose:
The purpose of this memo is to report my observations after careful analysis of economic opportunity of credit card business for Alpen Bank in Romania
Recommendation:
After thoughtful research, I would recommend you that starting a credit card business for affluent and most affluent will be more profitable. The break-even point, return of investment and profits after breaking even are all favorable for Affluent classes alone.
Analysis:
I have started with my analysis of customer acquisition. Keeping in mind the importance of publicity for a successful launch of credit cards from our bank, I went ahead using all the modes of publicity. After careful calculations (Seen in Exhibit 1 and 2) of customer acquisition, I came up with the cost per customer value. To begin with, the cost per customer for affluent population alone is less compared to all customers.
Having decided to check the feasibility of starting the credit card business for both middle class and affluent or just for the affluent class, I calculated the weighted revenue of these classes. (Exhibits 3 and 4). It is clear that the revenue from affluent class alone is about 40 Euros higher.
Then I proceeded in calculating the Net profit for a customer size of 50000, 100000 and 150000 individually for two cases.(Exhibits 5 and 6) After taking fixed costs, advertisements costs, cost of acquiring new customers, cost of maintaining existing customers, I carefully evaluated the values I got.
After calculation of break even and return of investment using marginal revenue and marginal cost. We can come to a conclusion that: 1. By targeting only the Affluent customers first, we can break even with half the number of customers.

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