management case study

Citibank Case Study

Complete a team case write-up and team powerpoint (12-18 slides total). Answers from questions 2,4,5 are somewhat linked in terms of financial analysis.

Citibank Case Study Questions

1. Decide whether you think Citibank should enter markets and IF you recommend market entry, the advantages of a premium versus mass market product. IF not, why not. In your analysis include discussion of any implementation issues that need to be overcome for successful launch. ()

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2. Analyze the ways Citibank can acquire a customer and the effectiveness of marketing channels. In your analysis, include customer conversion rate by channel, the cost of each customer acquisition and the total cost per customer acquired. ( )

· Table A Comment by Uyehara, Rodney: I can turn this into excel

· Direct Mail: $1.5*100/2 = $75 per response

· Bind-Ins: $0.15*100/1 = $15 per response

· Take-Ones: $0.25*100/1.5 = $16.66 per response

· Direct Sales: Find out how many customers are reached by each sales person to calculate cost

· Calculate how many responses convert to a customer

· Maybe acquire customers through dealerships with auto loans?

3. Indicate two different product strategies that you believe Rana should propose to Citibank. Support your strategies with rationale focusing on positioning. ()

· 2 diff credit cards

· High initiation fee and low annual fees

· Less acquisition but more retention

· Lower initiation fee and higher annual fees

· Higher acquisition but lower retention

· Use Hong Kong to estimate revenues

· Based on income levels

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? ()

· New customers but also existing customers

· Use excel

· Marketing channels are the same for both types of cards

5. Prioritize which countries you think Citibank should and discuss the criteria you use for market attractiveness. Indicate how many customers you can get per country. ()

· Not summary of each country

· Analyze each market

· Create methodology about why each country is chosen and create model on excel

· Australia, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, Taiwan, Thailand

6. How can Rana Talwar reach his target of $100 million in revenue by 1990? How many countries will Rana need to launch in to reach his target? Discuss details of any banking products or partnership included in Rana’s strategy ()

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Steps for a Successful Strategy

1. Determine if we should focus on premium or basic cards

· Which type of card generates more profit?

· Lower acquisition cost, higher customer LTV

· Think long term and focus on customers that could use other Citi services

2. Based on 1, determine which markets have the best audience

3. Determine the expenses and investment required to achieve desired results

Factors to consider

· Marketing costs to acquire customer

· Customer income and average profit/ customer based on income

· Average number of cards held by each person

· Saturation of competition

· Growth

· Legal stability and credit stability (default risk)

· How many branches are allowed in each country

· Benefits of having a branch?

· Are branches costly to maintain, are they necessary

· Is it cheaper to deliver cards in countries with a branch vs without?

· Cultural differences between countries

· Do people typically avoid credit or they embrace it?

· Ex/ Japan culture leans against using credit and therefore may not be profitable

· Partnerships?

· Would partnering with local businesses reduce acquisition costs

· Batched delivery?

· Do we need enough merchants to accept the card in order for consumers to be willing to have it?

· Currency

· Local vs. U.S. and how does this affect costs

Strategic Strategy

· Target customers that are cheaper to acquire

· Premium vs. Basic card

· Depends on demographic (willingness to pay)

· Which type of card generates more profit and has less expenses

· Focused on long term retention or short term acquisition?

· Long term retention

· Higher initiation cost but lower annual fees

· Short term acquisition

· Lower initiation cost but higher annual fees

· DELIVERY EXPENSE IS VERY HIGH RELATIVE TO REVENUE

· Exhibit 1

· What is included in delivery expense and which areas have less of this expense?

· Existing branches are sunk costs

· Could we leverage our existing branches to expand quicker and cheaper?

· USE EXHIBIT 8 AND TABLE B TO CROSS REFERENCE THE POTENTIAL PROFIT BY INCOME CATEGORY

Expansion Options

· Australia

· Hong Kong

· India

· Indonesia

· Malaysia

· Philippines

· Singapore

· Taiwan

· Thailand

Rana Talwar

Go from 70 to 100 million, 40% growth

15 countries

Add excel table in case study

Cost, customer conversion rate

Is the response rate the conversion rate?

Answer: They just responded, but did they actually convert?

Add lots of columns to determine conversion

Figure out how many sales people there are

Premium card

Mass market

Local currency

USD