Case Schwab Essay Example for Free

Case Schwab EssayUnder Pottrucks direction, the company suffered financial set-backs when they did non lower prices in the proudly free-enterprise(a) market instead deciding to guidance on expanding the stock to include institutional trading and research, dropping individual investors on their list of priorities. The strategy again shifted to their initial strategy, focusing on the companys extensive-term relationship with individual investors, providing warring attend fees, and c beful allocation of resources under the reestablished management of Mr. Schwabs.Customer retention, client attainment, establishing long-lasting guest relationships, and building upon a structure that supports effective course decision argon also key parts of the strategy. The strategy focused on node relationships, competitive pricing, and thoroughly analyzed resource allocation. With the changes in strategy at Schwab, information needs increased. In deliberate to the strategy, Schwab ne eded to restrain entropy that could successfully allow them to properly allocate resources and identify profitable areas, non-profitable areas, and toll saving opportunities.The changes in strategy at Schwab perplex required to a greater extent detailed data to be gathered for effective positivity analysis. The divergent versions of PAS (Profitability Analysis System) has satisfied the information needs for the pertly strategy. How? later identifying the information needs and the vital contribution of data for the support of business decision-making, Schwab developed MUSE (Model for ground Schwab Economics), it was the first equal system introduced and later MUSE II was developed. MUSE allocated costs among convergences, segments, and channels.Special focus was given to products since they had the most baring, arbitrary or negative, on customers, which was the focal point under the Schwab strategy. MUSE II was later introduced and reflected the original cost system with the addition of the activity-based costing principles in order to capture favorableness data. The cost systems developed in pursuit of establishing a advantageousness analysis system served a genuinely effective purpose. With the individual investor the root of the strategy it was important to maintain a positive relationship to stay on customers.Mr. Schwab implemented the new or initial strategy because it had be to be the key to success for Schwab. In order to assess the satisfaction of the customers, it made sense to zero in on the product and customer engagement and results. The cost systems developed provided that information for Schwab. MUSE II was very effective in providing invaluable insight for management by capturing very detailed and thorough data. With the division of segments, products, channels and customer segments, data was very specific and abundant.Muse II provided insight into Schwabs cost structure for effective decision-making. lens hood (Customer Accoun t Profitability) indentified individual customer positiveness which was limited information as to not create an bellicose sales environment. According to the aspect, both versions evaluated segments and channels on revenues they generated and costs that were under their direct control. By identifying profitability they post effectively price products and equally important, they can create cost savings for customers by identifying the trade-offs.For example, the study noted that by means of PAS, by waiving Schwab One customers helper fees for accounts with balances of at least $25,000 oppose to the current $50,000 requirement, they in turn would have a greater retention rate of clients in this category and found it applicable to do so also because these clients stand a greater chance of not only be a Schwab customer but also had great potential for portfolio growth or profitability. Overall, the versions of PAS developed by Schwab were highly effective in pinpointing profita bility among products, segments, and channels.Given this information, Schwab was able to turn that into savings for customers, better product referrals, customer satisfaction, higher levels of customer retention, and create a competitive edge in the increasingly competitive market. The information provided by the PAS cost systems proved to be invaluable to Schwabs success and position in the market and met Schwabs strategy information needs. 2. What factors have modifyd Schwab to extract value from the PAS? What elements have made it tall(prenominal) for the PAS to create value?There were many factors that enabled Schwab to extract value from PAS such as effective analysis, humiliated down data, capturing data from product, segment, and channel separately, linking profitability to different areas, identifying customer profitability, utilizing the data effectively for more conscious business decisions, perfecting product referrals, maintaining customer retention as the focus, quic kly acting on negative or positive trends to regard their competitiveness, responding to market fluctuations including price matching, and maintaining an ongoing analysis of data and the commitment to Schwabs proven strategy.Elements that have made it difficult for the PAS to create value include interpreting behavior costs in whiz case CLI (Cost Leadership Initiative) measures were implemented and determining whether costs were fixed or inconstant which is not provided through the PAS. Though the PAS provides valuable data, this data once analyzed has revealed cost saving opportunities however, persuading customers to alter practices is not easy. For example, the case discussed consumer behavior in regards to trading activity. They found it was necessary to charge for transactions consummateed at off-peak times for IT cost purposes.Although this information was helpful and fees were attached to influence more desirable transaction times, customer trading patterns did not change and also induced back-office processes due to the IT fee structure. Would you advise Velez to pursue the idea of providing different levels of service to customers in the same segment, depending on their profitability? More specifically, in page 10 of the case Velez mentions the mishap of differentiated call routing as a function of customer profitability.Keeping in mind that one of the factors determining profitability is the frequency of calls to the call center, please consider the following dimensions of the policy What are the advantages and disadvantages of providing different call waiting times for customers in the same segment, as a function of customer profitability? How would you implement this differentiated call routing? Would you inform customers in advance about the different levels of service? If so, how? How long should Schwab observe a customers behavior before routing him/her to the long wait queue? Do you believe that the new routing will affect customer pro fitability? In particular, how would you calculate the cost of call center qualification for different customers? If priority call routing was implemented then the more profitable segments would be better served and have a better perception of Schwab in their ability to execute and resolve their needs. An advantage would be the more profitable segments would be less likely to jump ship and maintain loyalty to Schwab.Priority routing would enable Schwab to serve and assist their most profitable clients and improve their client relations which could lead to new clients as a result of their reputation. A disadvantage of priority routing would not improve their less profitable customer segments perception of Schwab. Although the less profitable customer segments may not trade as often, they are tacit a customer and if they do not life valued by Schwab then they would not feel the need to reciprocate loyalty and turn to a competitor.Seeing that the less profitable segment does not tra de as often, Schwab would be missing out on the few opportunities to create a positive customer interaction. With the lack of significant interaction the customer is likely to base their opinion on service during the few transactions they make and having to hold for long periods result in unsatisfied customers. Perhaps it would be more effective to inform customers in advance about the higher level of service for those employ customers. I would steer clear of the term different levels of service, that would not be received well(p) at all.By telling/advertising to customers who perform frequent transactions that because of their transaction activity, they would be assist promptly for their convenience, lets the customer know they are valued thus, creating greater customer loyalty. Schwab should observe a customers transaction history over about a six month period to capture reliable information in regard to their profitability. Recent activity should also be analyzed to take roo t a possible change in the customer behavior which would prove to be an exception in an effort to improve relations with the customer for retention purposes.The new routing system could potentially increase the profitability of the already profitable customers. The profitable customer segment will be more willing to perform more transactions based on the efficient service they experience being a high priority client. To determine the conglomeration cost of call center capacity for different customers, first indentify total calls by segment and allocate a percent of cost based on duration of interaction while identifying transaction type (trade, inquiry, or balance transfer). 4.Describe the compensation system for the division motorbus for example, John Clendening and the branch manager. What metrics are at the root of the variable compensation system? What are the advantages and disadvantages of this system? The variable compensation system provides compensation for higher levels of management based on a series of measures such as customer satisfaction, customer retention, market share, successful transactions, product engagement, quality of customer interaction, capacity or productivity, and alignment with business strategy, all of which are reflective by specific branches.The variable compensation system is subjective to a number of factors therefore, what to compensate is unclear. Selecting meaning and fair metrics can also pose as a problem since there are external factors that change business trends and may misrepresent the branchs performance figures. With the added pressure, management may be inclined to talk through ones hat the figures for a better representation of branch operations.Variable compensation can motivate management to ensure their branch or district is producing positive performance figures. By offering management stock options, shares, or even bonuses, Schwab encourages management to act in the best interest of the company. Through v ariable compensation, what is mature for the Schwab is good for management. The incentive-type monetary compensation like any motivates Schwabs management to out-perform competition and maintain that operations are in alignment with Schwabs strategy.