Your client is the president of a bank. The credit card product of the bank has been profitable for the last 15 years. However, profits have declined 25% over the last 3 years. Three years ago profit was $100 million / year. The Current credit card market is saturated.
How to get bank credit card profit back to $100 million / year?
What caused the drop?
How do we counteract it?
What new products can be offered?
How would you structure your investigation and solve the problem?
Regional Focus – Mid Atlantic & NE – believe they understand the risks associated with this customer group
1/5 customers acquired through the bank branches – signed up during visit 4/5 customers acquired through direct mail
Cost Per Acquisition (CPA)
Very high – 50% higher than competition
Cost per solicitation is average.
- What caused the drop in profit?
- Substitute products
- What products are people using?
- Where do banks make their money?
Hit rate is low, the volume is higher.
- Grow current credit cards in new regions of the country.
- Offer points or additional products.
- Use the information to better target customers to lower CPA.
- Should try and quantify these new markets
- Can they actually grow revenue by 33% to reach $100 million?
- Is this where their competitive advantage lies?
- Should they be in this business?