| 4. Analyze the sales / expenses that Citibank incurs for the acquisition of 250,000, 500,000, 750,000 and 1 million customers. Consider revenue, contribution for new and existing customers and overall profit / loss analysis. Approximately how many customers does Citibank need to break even on their investment? |
| Direct Cost |
$25 |
| Customers |
250,000 |
500,000 |
750,000 |
1,000,000 |
| Revenue |
$6,250,000 |
$12,500,000 |
$18,750,000 |
$25,000,000 |
| Contributions for new customers |
| Contributions for existing customers |
| Total contributions |
0 |
0 |
0 |
0 |
| Total expense |
| Overall profits |
| Overall loss |
| Customers |
250,000 |
500,000 |
750,000 |
1,000,000 |
Note |
| Sales |
| Expenses |
| Infrastructure support cost |
$35,000,000 |
$48,000,000 |
$61,000,000 |
$74,000,000 |
For every incremental 250,000 customer, an additional $10-15 million per year |
| Direct Cost |
20 per card |
14 per card |
11 per card |
7 per card |
<- Estimates, use methodology |
| Marketing ( Direct Sales) |
$ 6,490,385 |
$ 12,980,769 |
$ 19,471,154 |
$ 25,961,538 |
<- Could all marketing be done through Direct Sales or is there a limit? |
| Table B |
| Annual Income |
% of Card Owners |
Average No. of Cards Owned |
No. of Cards Owners |
No. of Cards |
Annual Interest Payment per Customer |
Other Annual Revenue per Customer |
Total Annual Revenue Per Customer |
| Less than $6,200 |
- |
- |
- |
- |
- |
- |
- |
| $6,200 - $12,400 |
67.5% |
1.49 |
67,507 |
100,633 |
$ 102.18 |
$ 34.70 |
$ 136.88 |
| $12,400 - $23,200 |
20.9% |
1.96 |
20,938 |
41,118 |
$ 134.44 |
$ 62.87 |
$ 197.31 |
| Greater than $23,000 |
11.6% |
2.43 |
11,640 |
28,249 |
$ 166.97 |
$ 82.84 |
$ 249.81 |
| Total |
100.0% |
1.7 |
100,985 |
170,000 |
$ 116.46 |
$ 46.19 |
$ 162.65 |
| Exhibit 8: Estimated Distribution of Population and Cards by Income |
|
| Annual Income (head of household). |
|
|
|
| Total (in millions) |
|
| Above $25,000 |
$12,500 to $25,000 |
$6,000 to $ 12,500 |
$2,000 to $6,000 |
Below $2,000 |
| Australia |
| % of population |
12.5 a |
30 |
37.5 |
15 |
5 |
16.5 |
| % of cards |
30 b |
35 |
30 |
5 |
0 |
10.5 |
| Hong Kong |
| % of population |
10 |
25 |
50 |
10 |
5 |
5.6 |
| % of cards |
15 |
25 |
50 |
10 |
0 |
2.0 |
| India |
| % of population |
1 |
2 |
2 |
5 |
90 |
800 |
| % of cards |
10 |
10 |
10 |
70 |
0 |
0.280 |
| Indonesia |
| % of population |
3 |
2 |
2 |
3 |
90 |
168 |
| % of cards |
40 |
10 |
10 |
40 |
0 |
0.120 |
| Malaysia |
| % of population |
5 |
10 |
20 |
45 |
20 |
17 |
| % of cards |
10 |
45 |
45 |
0 |
0 |
0.380 |
| Philippines |
| % of population |
3 |
5 |
22 |
30 |
40 |
62 |
| % of cards |
50 |
45 |
5 |
0 |
0 |
0.240 |
| Singapore |
| % of population |
5 |
5 |
10 |
25 |
55 |
2.7 |
| % of cards |
30 |
70 |
0 |
0 |
0 |
0.630 |
| Taiwan |
| % of population |
12.5 |
30 |
35 |
10 |
5 |
20 |
| % of cards |
30 |
50 |
20 |
0 |
0 |
0.100 |
| Thailand |
| % of population |
5 |
10 |
10 |
20 |
55 |
55 |
| % of cards |
12.5 |
12.5 |
50 |
25 |
0 |
0.210 |
| Note: The minimum age for cardholders was 18 years in Australia and 21 in other countries. While the card issuers imposed their own income requirements, the government of Malaysia imposed a minimum income of $9,000/year, and Singapore imposed a minimum of $14,000/year |
| a - of Australia's 16.5 million people, 12.5% were estimated to live in households where the head (of teh household) has an income above $25,000 |
| b - of Australia's 10.5 million creadit cards, 30% were owned by individuals withincomes above $25,000 |