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Alpen Bank:
Launching the Credit Card in Romania

Case background
The Alpen Bank management has to decide whether they should launch a new credit card
in the Romanian market or not and what target audience they should choose. Alpen bank is
known as an excellence brand serving affluent clientele. The bank offers several services
such as deposit, checking, personal loan services and wealth management program helping
in financial planning and investing products. On one hand credit card business is related to
the growing companys strategy but at the same time Romanian market has its efforts: low
per capita income and poor infrastructure.
The credit card industry includes four main parties: networks, merchant acquirers,
merchants and card issuers. The revenue in the payments is determined by transaction
volume. Also, the bank can generate its revenue by setting annual fees, penalty fees and
interest income. Nevertheless, the potential profit must be protected from the risk of
default throughout economic downturns. According to the case, Romania lacked credit-
card growth because consumers use cash instead of cards. Moreover, Romanians are not
used to manage the credit, which made it hard to set interest rates that can attract
customers. Conversely, rapid economic growth and increasing income have enlarged the
total disposable income. The bank is questioning whether there are enough households
with enough money and what are the banking opportunities.

Market environmental analysis
Political situation:
Romania entries into European Union
Economical situation:
Rising economy stage in Romania
Total disposable income increased due to economic growth
Social situation:
Growing economy that allows customers to purchase luxury goods and products
from the EU
Rising incomes
Encouraging macro economical trends
Over one-third of Romanian households are likely to purchase branded imports
from the EU
Current middle class can become affluent customers
Technological situation:
The number of ATM has been increasing (8000 ATMs)
Increasing number of merchants using card machines (150 000 points of sale

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Data Analysis
Spreadsheet 1 shows us the revenue potential that Alpen Bank could obtain if it launches a
Credit Card in Romania. In order to obtain this data, the value of each segment had to be
determined. We had to find the number of future cardholders per segment and weight its
value. The annual revenue per cardholder is 122.78 M euros, this account to all customers.
However, the annual revenue per cardholder in the segments of Affluent and Most affluent
is 163.31 M Euros. This allows us to understand which segment would be most profitable
to target. In other words, this analysis helps firms to determine what can be done to
increase revenues significantly.

Furthermore, Table B estimates were taken in order to calculate the acquisitions costs for
the new credit card. We took into consideration the different acquisition tools available to
reach more prospects in the country. These marketing communication plans are shown in
Spreadsheet 2, along with the acquisition cost of each. The calculations are done for both,
All Consumers and Affluent Customers. It is extremely important to understand the cost of
acquiring clienteles, because choosing the right customer and making proper calculations
are keys to achieve revenue maximization.

Spreadsheet 3 shows the break-even analysis for Middle and Affluent Customers. The
break-even analysis allow us to understand when revenues equal total cost, it shows
exactly at what point losses turn into profits. The number of customers that the new credit
card in Romania needs is 72,758 customers to break-even. Moreover, Alpen Bank is looking
for a Return on Investment (ROI) of 5 Million Euros and we proceeded to do the
calculations. The results present that Alpen Bank needs 130,574 customers in order to
achieve the ROI goal.

Additionally, Spreadsheet 4 illustrates the break-even analysis for the Affluent consumers,
which we are thinking might be our target market due to what previous data have shown.
The amount of Affluent Customers Alpen Bank needs in Romania to break-even would be
53,604, a lot less than targeting the Middle Customer segment combined. Now, in order to
reach a viable return of investment of 5 M Euros, the company would need 92,820
customers. The amount of Affluent Customers needed to achieve ROI and break even is a
lot less than targeting Middle & Affluent Customers. This data allow us to acknowledge
which segment will result with the highest cost and largest revenue.

According to the current strategy, the bank should promote its premium banking service
since it is a strong brand image for a bank. Since the bank has an affluent client base (more
than 200 000 clients) it can leverage it to build on an excellent reputation.
Market environmental analysis defines that the company can succeed on the credit card
market. Nevertheless, it should primarily target affluent consumers offering them an
exceptional service. At the same time, the bank has a great opportunity to extend its
services providing them to new and existing clients (Exhibit 2).

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Alpen Bank should enter the Romanian Market, however in phase one it should only target
the Affluent customers segment. Figures show that this market segment will have the
highest revenue, will need fewer customers to reach the Return On Investment goal and
would need less attention to customers. This new credit card should be introduced as a
high-end product, destined to those who can afford a high credit limit. This product should
be positioned as a premium credit card. Alpen Bank maintains an excellent affluent
(existing) clientele, therefore the company should use it as a positioning strategy, use it as a

Furthermore, Alpen Bank should target the Middle Class & Affluent Customers in a second
phase. This would be a further approach the firm may pursue. After the company
establishes the Affluent Customer segment, it should attract the Middle Class with low
interest rates and interchange fees. Overall, the company should use the great brand image
it already has, because doing otherwise would result in higher costs.

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Spreadsheet 1

Spreadsheet 2

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Spreadsheet 3

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Spreadsheet 4

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Exhibit 1
Affluent Customers
Premium banking service
Revenues from several streams
Increasing per capita income
Rising incomes
Branded imports from the EU purchases
Potential middle class market
85% of prospects that qualified for the
credit card can switch to customers.

Ansoff Matrix
Market Penetration
Existing products for existing companies

Low customer base
Divergence with the high-end
positioning by targeting middle class
Lowe penetration of merchants
accepting card payments
Consumers are not used to manage the

Product Development
New product for existing customers
credit card for bank affluent existing
Market Development
Existing product for new market in the New product for new market credit
future current middle class can become card for middle class customers
affluent customers