CaM a A Case 4-2 New Frontiers ‘Rob Richman, president of AmenBank, takes off is glasses, rubs his eyes in exhaustion, and equnts et the clock m bis study, I rends 3 and For the last several house, Rob has been poring over AmenBank s Teascal statements from the ast ee quarters of operation. AmeniBank, » medium-sized bank with trunches throughost the Unite State, is headed for die economic strats. The bank, which provides ummation, srvings, investment, an loan sevice, has been expesncing a Ready decline in ts net i. ome aver the past year, and trends show thatthe decline wil continue. The banks simpy losing cus- tomers to nonbank and foreign bank competitors. vCameriBenk is not alone in its struggle to sty out of the ro, Prom his daily industry readings, Rob ncn that many American banks have beca effering significant losses because of increasing cormpeti- on fom nonbenk and foneign bank competitors offering services typically inthe domain of American henks Beceuse the ponbank and foreign bank competitors specialize in particular services, they are able to beter capture the mat for thse servioes by ofering lest expensive, more efficient, more conve tient services. For example, large corporations ow turn to foreign banks and commercial paper offer- Jigs forloana;and affluent Americans now tur to money-market funds for investment Banls fae che daunting challenge of distinguishing themselves from nonbank end foreign bank competitor. "Rob has conetnded that one strategy for distinguishing AmeriBenk from its competitor iso improve services that nonbaakc and foreign bank competitors do ot readily provide: transaction sevies. He has > fetided that a more comvenient rantaction method must logically succeed the automatic teller machine, nt ne believes that electronic banking over the Internet allows tis convenient transaction method. Over the Interact. custoniesi are able tg perform: transactions on their desktop coniputers either at home oF ‘york The explosion ofthe steroel means tht many potential customers understand and use the World “Wide Web. He therefore eis that ifAmesiB ankoers Web banking (es the practice of Intec banking is commonly called) the bank will tact any new customs, ‘Befoce Robsundertakes te projet to make Web baking posible, hoveves, he needs wo understand te mates for ob banking ed the services AzerBank should provide over the Internet, Fr example, -sbpuld the bane onl allow costaners to adcest accoua'balances and historical transaction information «dyer the inert oF sold the bank Gevelop a-etategy to allow oustornées to make deposits and with- revale vee the Taterne? Soule task ey 1 secaptare-+portion ofthe investment maket by con- sorrel sen and llowing customers to make stock transactions over the Internet for 2 rinizal fee? Berause AmerBank is notin the busioess of performing surveys, Rob hs decided to ontsobes the survey peojocttos pofessiouel survey company. He has opened te projéct up for bidding by several sar- vey companies and wel ewd the project to the company tat is willing to perfarm tho survey for the least cost. Rob provided each aurvey company with alist of survey requirements to ensure that Ameri Baunkcreceives the needed information for plinning the Web banking project. ‘Because diferentage groops¥lsre ditTeent services, AmeciBank is interested in surveying four dif: {ereatage groups. The fist grbieencompisees customers Who tre 18 to 25 years old. The bank assuénes that hs age qroup has limited yearly income and performs minimal trinsictions. The second group en- compasses customers who are 260 40 yeas old. This age group bas significant sources of incor, per~ forms many transaction, requceg mumerons Joans for new houses, and cars, invests in various secu sites. The third group encompasies customers who.are 41 to 50 years old. These customers typically have the sues Ive ofInoome nd perfoon the sune mer oftansecons a the second age group, Bute _ ‘bank aesurnes tt thege customers are lees ikely to use Web banking since they have not become 8s com- fortable with the explosion afeomputars othe Inerpet. ically, the fourth group encompasses customers ‘who are 5} years of agecand over. Thexe customers commonly crave security and require coninuovs in- {formation on retirement funds, The bank. believes that itt highly unlikely that customers inthis age ‘rovp wll use Web banking, but the bank desires'to learn te needs of this age group foc the firure ‘ArneriBai. wants to interview 200 customers wih at least 20 percent from the firs age group, atleast 2Sperceat from the second age group east 15 percent fom the third age group, and a least 15 per- cent from the fourth age group: ‘Rob understands thatthe Internet isa fecent phenoinenon and thst some customers may not have” ‘heard ofthe World Wide Web. He therefore wens to ensure thatthe survey includes a mix of customers ‘whe low the Internet well and those that have less exposure tthe Intemét, To sure that AmeriBank obtain the correct mil, he wants to interview at leat LS percent of customers from the Silicon Valley where Internet use is igh, atleast 35 percent of eustomers from big cities where Intemet use is media, snd at east 20 percent of customers fim small towns where Intemet use is low, ‘Sophistioated Surveys i one of tive survey companige competing forthe projet. It has performed annie analysis of these rurvey requirements to dstermine the cost of surveying diferent populations. ‘Tae ease per person surveyed ae listed inthe following table: PTO.‘Sliggn Vaiey $650 $5.00 Big cities 5.25 57: 525 . _ Age Group Region Wie 261040 atte and over S475 $6.50 5 625 Smal towns 650 7.50 7.50 °- 725 4 Reb tele that Sophisticated Suey, the I840-25-year-old popula peers mmr fom the 180-25 yearant ion and the Silicon iduals can be dation Waemittea and ne mere than 650 ine sureyed fom the Silicon Valley poptlation. Wha is the wen toy ulations easiest. Ina recetly come opis crn et is ening rag Re ‘“sring th 1840-25 year-old populated slates below: Region Cost per Person ‘Silcon Valley > $6.50 an Soe nee Hee be eat ‘set pipultion. The rqubmment artes nee “3 41 to 50 20 51 and over - Be Silicon Valley 20 ee Big cities 50