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DLJdirect. 1. Segmentation • Evaluation of Criteria • Fit with DLJdirect 2. Growth/Margins 3. Are GRF profitable (as a target)? 4. Advertising Budget. Criteria Identifiability Substantiality Responsiveness Accessibility Stability Actionability. Evaluation
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DLJdirect 1. Segmentation • Evaluation of Criteria • Fit with DLJdirect 2. Growth/Margins 3. Are GRF profitable (as a target)? 4. Advertising Budget
Criteria Identifiability Substantiality Responsiveness Accessibility Stability Actionability Evaluation Good/Moderate: RBB and GRF segments appear different from PCC and AA segments. Harder to differentiate between PCC and AA, and between RBB and GRF, with respect to net worth, income and age. Segments appear different with respect to their commission and asset fee contributions. Segments appear different with respect to end-benefits desired. With the exception of the GRF segment, other segments can be reached via targeted communications. Low. Likely to be wholesale changes in size and complexion of the segments. Good. 1. Segmentation • Evaluation of Criteria
RBB PCC AA GRF Speed 0.1 0.05 0.3 0.3 Availability 0.2 0.1 0.2 0.2 Research/Advice 0.4 0.5 0.3 0.05 User Friendliness 0.2 0.3 0.1 0.05 Commissions 0.1 0.05 0.1 0.4 DLJdirect Schwab Fidelity E-trade ML Datek Speed 4 1 2 3 2 3 Availability 4 4 3 4 3 4 Research/Advice 4 4 3 4 4 2 User Friendliness 3 4 3 4 3 3 Commissions 2 1 2 3 1 4 1. Segmentation • Fit with DLJdirect Importance Ratings
DLJdirect Schwab Fidelity E-trade ML Datek RBB 3.6 3.4 2.8 3.8 3.1 2.9 PCC 3.6 3.7 2.7 3.9 3.35 2.65 AA 3.7 2.8 2.6 3.6 2.8 3 GRF 3.15 1.9 2.3 3.3 1.95 3.55 1. Segmentation • Fit with DLJdirect Scores Market Shares DLJdirect Schwab Fidelity E-trade ML Datek RBB 18.37 17.35 14.29 19.39 15.82 14.80 PCC 18.09 18.59 13.57 19.60 16.83 13.32 AA 20.00 15.14 14.05 19.46 15.14 16.22 GRF 19.50 11.76 14.24 20.43 12.07 21.98
RBB PCC AA GRF Growth (%) Source of fees fees commissions commissions Margins fees fees Rank 4 3 1 2 Investors 1 trade/day @$10 = $2,000 annual commission Variable Contribution Margin = 50% Variable Contribution Margin = $1000 Acquisition Cost $500 $500 2. Growth/Margins 3. Are GRF profitable (as a target)?
Average Lifetime Value of an Active Account • Average annual revenue per active account $600 • Average pre-mktg operating margin 30% • Contribution margin 50% • Contribution margin per account $s $300 • Retention rate 90% • Average retention rate in yrs 10 • Discounted cash flow stream of $300 for 10 yrs $1843 • Customer acquisition cost $500 • Lifetime value of a customer $1343
Average Lifetime Revenue (NPV) by Segment RBB PCC AA GRF Av. Trades/yr 6 4 10 120 Av. Net Worth ($000) 49 362 323 38 Fees($) 490 3620 3230 0 CommRev/acct($) 120 80 200 2400 Annual Rev/acct($) 610 3700 3430 2400 Av. Life (yrs) 10 10 10 10 NPV/acct($) 3748 22735 21076 14747
9495 96 97 97 99 2000 Total Accounts Retained Accounts New Accounts 153,000 207,000 280,000 390,000 529,000 768,000 1,120,000 145,350 196,650 266,000 370,500 502,550 729,600 1,064,000 7,650 61,650 83,350 124,000 158,500 265,450 390,450 Regressions Total acct = 137,250 + 16825 adv. New acct = 21,012 + 6238.1 adv. Total acct = 1,120,000 need 60m 2000 New acct = 390,400 need 59m 2000 4. Advertising Budget
