Page 1 of 2CASE:Citibank: Launching the credit card in Asia Pacific (A)Singapore market research to acquire 25,000 customersChannelUnit cost ($)Prospects reached (no's)Response rate (%)Responds (no's)Qualify rate Qualify (no's)card customer (%)card customer (no's)cost spendacquisation / customer ($)Proportion of Card CustomersPercentage based on prospectsReqd. Population to target 500000 customersReqd. Population to target 750000 customersDirect Mail1.5300,0002.0%6,0000.6674,00080%3,200450,000140.630.00060.0107888333313325000Take-Ones0.252,000,0001.5%30,0000.33310,00080%8,000500,00062.500.00150.004013325001998750Direct sales18000/person30,00050.0%15,0000.66710,00080%8,000234,00029.250.00150.266788833333133250000Bind -ins0.153,000,0001.0%30,0000.33310,00080%8,000450,00056.250.00150.002788833313325005,330,00027,2001,634,00060.0799937500149906250Note:assuming 20 days x 12months / sales person for 10 calls / day = 10 x 20 x 122400calls /yearto reach 30000 prospects12.5013 personsapproxtotal Annual revenue / customer =162.65 $

&"-,Bold"&14Group-2 Assignment

Page 2 of 2Break Even Analysis - CitiBank Credit Card EntryCustomers (nos.) 2,50,000 5,00,000 7,50,000 10,00,000 12,50,000 Average Revenue per customer ($)162.65162.65162.65162.65162.65

Variable costCutomer acquisition cost6060606060customer maintenace cost25191386total8579736866

contribution - new customer ($)77.6583.6589.6594.6596.65contribution - existing customer ($)137.65143.65149.65154.65156.65

New customer ( no's)250,000250,000250,000250,000250,000Existing customer (no's)250,000500,000750,0001,000,000

Total costNew customer ($)19,412,50020,912,50022,412,50023,662,50024,162,500Existing customer ($)035,912,50074,825,000115,987,500156,650,000Case 1 - Single country Total cost ($)19,412,50056,825,00097,237,500139,650,000180,812,500

Fixed cost ($)35,000,00050,000,00065,000,00080,000,00095,000,000

profit/ (loss) before advertising ($)(15,587,500)6,825,00032,237,50059,650,00085,812,500

advertsing expenses ($)2,500,0002,500,0002,500,0002,500,0002,500,000

net profit/ (loss) after advertising ($)(18,087,500)4,325,00029,737,50057,150,00083,312,500

Case 2 - With Singapore as base, entry into all 9 countries Total cost ($)19,412,50056,825,00097,237,500139,650,000180,812,500

Fixed cost ($) - based at Singapore35,000,00050,000,00065,000,00080,000,00095,000,000

profit/ (loss) before advertising ($)(15,587,500)6,825,00032,237,50059,650,00085,812,500

advertsing expenses ($) for 9 countries22,500,00022,500,00022,500,00022,500,00022,500,000

net profit/ (loss) after advertising ($)(38,087,500)(15,675,000)9,737,50037,150,00063,312,500Assumptions:1. Assuming the costs for acquisition of new customers, customer maintenance cost are same ( or averaged) for all countries2. Advertizing expense is considered as $2.5 mn for a country and it will not vary based on the no. of customers (case fact)Conclusion1. Business of credit card will be profitable once customers are over 0.5 Mn.To achieve this customer base, we require 99.937 Mn peopleOnly India & Indonesia has the population more than 99.937 millions2. Case 2 - Singapore is considered as the base and entry is made into all the nine countries. However assumption has to be made that customer acquisition and customer maintenance costs, advt. cost are same and proportionate to the figures given in the table