Group-2 Assignment
CASE:
Citibank: Launching the credit card in Asia Pacific (A)
Singapore market research to acquire 25,000 customers
Channel
Unit cost ($)
Direct Mail Take-Ones Direct sa sales Bind -ins
1. 5 0.25 18000/person 0.15
Prospects reached (no's)
Response rate (%)
300,000 2,000,000 30,000 3,000,000 5,330,000
2..0% 2 1.5% 1. 5 0 .0 % 50 1.0% 1.
Responds (no's)
Qualify rate
6,000 30,000 15,000 30,000
0. 0.667 0. 0.333 0. 0.667 0. 0.333
Qualify (no's)
card customer (%)
4,000 10,000 10,000 10,000
card customer (no's)
8 80 0% 8 80 0% 8 80 0% 8 80 0%
cost spend
3,200 8,000 8,000 8,000 27,200
acquisation / customer ($)
450,000 500,000 234,000 450,000 1,634,000
Proportion of Card Customers
140.63 62.50 29.25 56.25 60.07
Reqd. Population to target 500000 customers
Percentage based on prospects
0.0006 0.0015 0.0015 0.0015
0.0107 0.0040 0.2667 0.0027
Reqd. Population to target 750000 customers
8883333 1332500 88833333 888333 99937500
13325000 1998750 133250000 1332500 149906250
Note: assuming 20 days x 12months / sales person for 10 calls / day = 10 x 20 x 12 2400 2400 calls calls /year /year to reach 30000 prospects 12.50 13 persons approx
total Annual revenue / customer =162.65 $
Break Even Analysis - CitiBank Credit Card Entry Customers (nos.) Average Revenue per customer ($)
2,50,000
Variable cost Cutomer acquisition cost customer maintenace cost total contribution - new customer ($) contribution - existing customer ($) New customer ( no's) Existing customer (no's)
5,00,000
7,50,000
10,00,000
12,50,000
162.65
162.65
162.65
162.65
162.65
60 25 85
60 19 79
60 13 73
60 8 68
60 6 66
77.65 137.65
83.65 143.65
89.65 149.65
94.65 154.65
96.65 156.65
250,000
250,000 250,000
250,000 500,000
250,000 750,000
250,000 1,000,000
19,412,500 0
20,912,500 35,912,500
22,412,500 74,825,000
23,662,500 115,987,500
24,162,500 156,650,000
19,412,500
56,825,000
97,237,500
139,650,000
180,812,500
Fixed cost ($)
35,000,000
50,000,000
65,000,000
80,000,000
95,000,000
profit/ (loss) before advertising ($)
(15,587,500)
6,825,000
32,237,500
59,650,000
85,812,500
Total cost New customer ($) Existing customer ($) Case 1 - Single country Total cost ($)
Break Even Analysis - CitiBank Credit Card Entry Customers (nos.) Average Revenue per customer ($)
2,50,000
Variable cost Cutomer acquisition cost customer maintenace cost total contribution - new customer ($) contribution - existing customer ($) New customer ( no's) Existing customer (no's)
5,00,000
7,50,000
10,00,000
12,50,000
162.65
162.65
162.65
162.65
162.65
60 25 85
60 19 79
60 13 73
60 8 68
60 6 66
77.65 137.65
83.65 143.65
89.65 149.65
94.65 154.65
96.65 156.65
250,000
250,000 250,000
250,000 500,000
250,000 750,000
250,000 1,000,000
19,412,500 0
20,912,500 35,912,500
22,412,500 74,825,000
23,662,500 115,987,500
24,162,500 156,650,000
19,412,500
56,825,000
97,237,500
139,650,000
180,812,500
Fixed cost ($)
35,000,000
50,000,000
65,000,000
80,000,000
95,000,000
profit/ (loss) before advertising ($)
(15,587,500)
6,825,000
32,237,500
59,650,000
85,812,500
advertsing expenses ($)
2,500,000
2,500,000
2,500,000
2,500,000
4,325,000
29,737,500
57,150,000
83,312,500
Total cost New customer ($) Existing customer ($) Case 1 - Single country Total cost ($)
net profit/ (loss) after advertising ($)
2,500,000
(18,087,500)
Case 2 - With Singapore as base, entry into all 9 countries Total cost ($) 19,412,500
56,825,000
97,237,500
139,650,000
180,812,500
Fixed cost ($) - based at Singapore
35,000,000
50,000,000
65,000,000
80,000,000
95,000,000
profit/ (loss) before advertising ($)
(15,587,500)
6,825,000
32,237,500
59,650,000
85,812,500
advertsing expenses ($) for 9 countries
22,500,000
22,500,000
22,500,000
22,500,000
22,500,000
net profit/ (loss) after advertising ($)
(38,087,500)
9,737,500
37,150,000
63,312,500
(15,675,000)
Assumptions: 1. Assuming the costs for acquisition of new customers, customer maintenance cost are same ( or averaged) for all countries 2. Advertizing expense is considered as $2.5 mn for a country and it will not vary based on the no. of customers (case fact) Conclusion 1. Business of credit card will be profitable once customers are over 0.5 Mn. To achieve this customer base, we require 99.937 Mn people Only India & Indonesia has the population more than 99.937 millions 2. Case 2 - Singapore is considered as the base and entry is made into all the nine countries. However assumption has to be made that customer acquisition and customer maintenance costs, advt. cost are same and proportionate to the figures given in the table
