Sample Case Study On Alpen Bank Credit Card Launch In Romania
Alpen Bank Credit Card Launch in Romania
The decision to launch credit cards into Romanian market is a precarious one. A quick survey of Romania's macroeconomic data shows a very narrow market – an upscale one – for which a credit card launch is a profitable business. Exhibits 3, 4 and 5 are of particular interest. Based on Exhibit 4, Romania is at a very weak market positioning compared to Central / Eastern European countries. At 1.2 credit card per capita rate, Romania is hardly a viable market for Alpen Bank, at least in light of present market positioning conditions. Of note, as well, is Exhibit 5. Given Romania's annual distribution income (2005 estimate), income differentials are most pronounced between Romania's uppermost affluent segment and least earning segments. Additionally, Exhibit 4 is another indication of card issuance volume from different card issuers. Overall, Romania's credit card utilization is at very low rate, 20%. Thus, given current economic set-up, Romania is hardly a profitable market for Alpen Bank not only in short range but also in medium range. Further, cultural as well as purchasing habit patterns remain obstacles against effective market penetration. Under USSR economic influence for a long period, Romania – an Eastern European country – has experienced deep imbalances in her economic structure which has only isolated her from more open, economic practices. As well, used to cash, Romanians would still resist credit cards as decidedly insure and inexplicable but also because most merchandisers would accept cash.
Predictably, Alpen Bank should, ideally, approach Romania's uppermost economic segment whose utilization rates, although do not match comparative rates in Central / Eastern European markets, still reflect a viable utilization rate. Based on marketing channel matrix shown in Table B, Direct Mail and Branch Cross-Sell are most effective channels to approach Romania's affluent. Given how significant personalization is for more affluent consumer base not only for Alpen Bank's prospects but, virtually, everywhere, a personal approach is a proven approach style by which service pitch is individualized as opposed to more mass selling to broader consumer base. From a market positioning point of view, Alpen Bank could position her credit card as an added-value offering by which Alpen Bank can establish her business relationships with Romani's affluent. Further, as later discussed, Alpen Bank can invest in more affluent customers extensively than in lower economic bracket customers. This is justified even by long range expenditure patterns of both upper and lower economic bracket customers. In balance, lower economic bracket customers are expected to perform more purchases at initial phases of card acquisition. However, given price consciousness, lower economic bracket customers are predicted to show much lower utilization rates at medium and longer ranges. Conversely, higher economic bracket customers are expected to show solid utilization rates. Thus, common business sense makes investment in upper economic bracket customers a more viable – and profitable – decision. There is no need, in fact, to invest in lower economic bracket customers unless macroeconomic and sociocultural conditions in which Alpen Bank operates change.
In order for Alpen Bank to acquire new customers, a range of direct and indirect costs are involved. According to case presentation, approaching customers requires different marketing strategies and channels as well as infrastructure support.
For advertising and marketing efforts, TV spots as well as in-print media channels could be used for direct marketing efforts. The cost for TV spots and in-print (and, if required, digital marketing campaigns) – during premium periods and based on customer geographical spread – should be calculated per customer. This can be performed based on Romanian media consumption patterns, media spot price as well as season or timing. As well, according to case, Alpen Bank needs to invest in infrastructure in order to support services provided to customers, existing and prospective. Estimated at €5 million annually to support first 50,000 customers, staffing, IT infrastructure, customer support and additional overhead costs are required. Additional 50,000 customers would require €750,000 per year for overhead. Thus, advertising and marketing efforts as well as infrastructure support investment should constitute Alpen Bank's main market entry costs. Possible extra charges could include digital marketing campaigns on specific portals and across social media platforms.
One notable strategic move Alpen Bank could make is establishing business relationships with sales-point owners in order to secure more visibility for Alpen Bank's new credit cards. Through selected partnerships, moreover, Alpen Bank could develop partnerships with select merchants in order to not only promote her new credit cards but also to gain a competitive market positioning by securing priority for her own issued credit cards. This can, in fact, be performed by adopting a broad range of marketing and promotional activities. Possible branding activities would include uniformed staff at airports who would walk customers, existing or prospective, through long mazes of routines work. This staff should not, by any means, attempt to acquire new customers but to maintain existing ones.
In estimating costs of acquiring new customers – particularly at lower economic segments – Alpen Bank would invest more on support for prospects from lower economic segments – given segment's particular sensitivity to price – than on higher income bracket customers in whom Alpen Bank has invested and acquired by a range of dedicated products, not least wealth management funds.
In order for a market entry process into Romanian market to be successfully performed, Alpen Bank needs to heed a set of concerns and to gain advantage of potential market opportunities.
Overall, Alpen Bank experiences a business dilemma which requires a lot of consideration for future business implications. By opting not to introduce credit cards into Romania's marketplace, only initially, Alpen Bank can better manage her customer relationship patterns. Surveying Romania's economic scene only uncovers notable gaps at almost every macroeconomic but also at more individual patterns. If anything, Romania's deep structural imabanlces can be attributed to an array of factors which, given current purposes, are not welcomed in a more open, liberal economy. Isolated under USSR's economic influences, Romania, like many European journals if not all do. Indeed many eoshops and edition.
Broadly, Alpen Bank will be bank of choice for not only one economic bracket of customers but also for as broad as possible economic brackets of customers. If anything, Alpen bank is better advised to invest more in upper economic bracket customers than lower economic ones. This can be justified by profitability viability of higher economic bracket customers as compared to lower ones. Over longer range, upper economic bracket segments are expected to show solid utilization patterns compared to lower ones whose utilization will surge initially only to abate over time.
But in order for Alpen Bank to acquire new customers, a set of direct and indirect marketing and promotional activities are required. These activities are meant to, mainly, help Alpen Bank achieve a reasonable, profitable share in a market historically skewed toward more affluent customers at less affluent ones' expense. By engaging more affluent customers more directly, potential of conversion is increased and hence more secure sources of revenue are guaranteed as opposed to less secure ones in which risks of default are much higher. Acquisition of new customer is not, in fact, confined to marketing and promotional efforts but is extended to cover a broad range of business functions, including but are not limited to, infrastructure support as well as staffing. Indeed, one most costly phase in which market entry becomes, often, prohibitive is market entry phase in which functions such as support infrastructure is under continuous pressure and continues to constitute a challenge for adequate market entry.
Again, Alpen Bank needs to establish business partnerships with intermediaries. This should not only be for mere profitability reasons but also for brand enhancement among what probably be most rowdy and unorganized persons on earth, i.e. teens. However, brand equity should be maintained more properly as old and new products enter marketplace. By changing dates for market entry, Alpen Bank would be well prepared and incurs less loss compared to last year's financial statement. Accordingly, Alpen Bank is better advised to invest in upper economic bracket customers whose long range prospects are of particular promise for business at least for short and mid-term ranges. Investments in a more affluent economic segment could include introduction of complex concepts which need be polished.
A successful market entry implies successful organization and effective business orientation and competitive marketing positioning. If anything, if Alpen Bank wants to launch credit cards into Romania, she needs to strike a balance between a broad range of market factors. For example, by deferring her market entry, Alpen Bank is at better market positioning advantage manifest in her focus on product development and service refinement for more affluent economic bracket. Accordingly, by enhancing her brand image as a bank of choice for wealthy Romanians, Alpen Bank could re-gear her strategic readiness later when macroeconomic conditions changes favorably for Romania. Indeed, timing cannot be most significant as for Alpen Bank credit card market launch into Romania. Thus, prior to actual market entry, Alpen Bank might better engage in more profit generating and focused activities. Finally, more careful, future consideration for Alpen Bank credit card launch should be made. If anything, narrow markets such as Romania's should be approached in a gradual fashion which cater for needs unfulfilled otherwise. One most notable feature of markets such as Romania is how cultural and economic factors combine as to shape how a country is lead. Consequently, market entries become a process of skillful examination of uncharted market waters.
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