Alpen Bank Case Study: Gregory Carle Decision

Gregory Carle, the Romanian country manager for Alpen Bank, must decide whether or not the bank should launch a credit card program in Romania. Before deciding to go through with the credit card launch Carle must be certain that the Romanian credit card market is large enough to add € 5 million in annual profit to Alpen Bank’s Consumer Banking segment. Carle has two real options here, he can either choose to launch the credit card program or he can choose to do nothing. If Carle decides to offer the credit card program he will need to choose how to market and who to market the credit card to. In order to find out if the credit card market is lucrative enough to warrant launching the product, Carle, must first take a look at Alpen Bank’s current business in Romania. Alpen first entered the Romanian market in 2000 and has since grown to over 200,000 customers and 15 branches. Alpen bank has mainly catered to affluent Romanians and has established itself as the bank for the wealthy. Since 2000 the Romanian economy has improved and incomes have risen dramatically especially within the affluent and middle classes.

Since Romania joined the EU affluent Romanians have began to prefer branded products over locally made less expensive ones and have increased their demand for luxury items. With this the demand for cards has grown with both debit and credit cards growing 35% in 2006. I found the total number of middle, affluent and most affluent Romanian citizens as well as the total potential revenue of each market segment based on these numbers. (Exhibit A,B). Under my analysis I believe the time is right for Alpen to enter the credit card market. According to Carle’s forecasting I concluded Alpen would add 58,969 affluent credit card customers in year 1 which would amount to € 400,619.35 in profit (Exhibit C,H). I then assumed Alpen would come close to matching year 1’s results for year 2 but wanted to allow for a margin of error so I took a conservative estimate. Since Alpen already has over 200,000 affluent customers I believe it would be quite conceivable for Alpen to at least get half of these customers to open credit cards.

If Alpen was to have 99,610 total customers by year 2 Alpen would generate net income of € 5,000,151.25 and reach their income goal. Total customers of 99,610 after year 2 would assume a 68.92% growth from year one which I believe is attainable (Exhibit H). If Alpen is able to match year 1 new card customer numbers they would have 117,938 customers with year 2 profit of € 7,346,082.46 (Exhibit I). Alpen should pursue all 5 of the available marketing strategies to ensure the highest number of customers will be obtained. I analyzed the contribution margin per marketing strategy per card and contribution margin revenue per marketing avenue and found even though the direct mail segment looks expensive it generated the second largest amount of contribution revenue behind the branch cross sell (Exhibit D). I believe Alpen should only target the Affluent customers and not include the middle class in its credit card program. The middle class customer segment is smaller in revenue potential than the affluent and most affluent segments combined and would expose Alpen to great default risk. Because Alpen’s market niche has been the affluent consumer Alpen should continue to position their products as being for the wealthy.