Charles schwab

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Charles Schwab Case Study

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  • Hi Jenny! The Charles Schwab (Charles M Schwab) is different from Charles R Schwab mentioned in the PPT. Charles M Schwab was an American steel tycoon while Charles R Schwab was the founder of the American brokerage and banking company, Charles Schwab Corporation
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  • Charles Schwab is a great manager. Here is another story about him: http://www.youtube.com/watch?v=lrDbjHIGASo
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Charles schwab

  1. 1. The Switchboard Business DesignBy Group 5:• Cheryl Correa (F11014)• Gitanjali (F11018)• Neha Thomas (F11035)• Ramya Chittigala (F11045)
  2. 2. CONTENTS• Introduction – How it all started• Business Designs: 1. The Discount Brokerage Design 2. Serving the Financial Planners 3. OneSource: The Switchboard Business Design• Bridging the Communication Gap – Talk to Chuck Campaign
  3. 3. How it all started• 1971 - Charles Schwab started ‘First Commander’• Initial business model similar to a conventional brokerage• No brand, No technology, No client base• 1975 - SEC outlawed fixed commissions• Schwab seized opportunity – business design changed to ‘discount broker’
  4. 4. Timeline• 1971- Started the brokerage, First Commander• 1975 – Started the discount brokerage• 1984 – Had 20% of discount brokerage market• 1985-89 – The Schwab Institutional Enterprise linking independent advisors• 1989 – TeleBroker system introduced• 1992 – Charles Schwab OneSource launched• 1995 – e.Schwab launched
  5. 5. The Discount Brokerage business• Conventional brokers - high fee due to Advice, Counseling and Trading capabilities• Listening Gap: No option for low-cost trades due to ‘Bundled’ package (Advice + Trading functions) Closing the Gap - Discount brokerage (to unbundle Advice and Trades)
  6. 6. Value-added Discounter model• Need for differentiation – ‘Why does the customer want to buy from me?’• Customer-centric service-design: • Salaries instead of Commissions • Reliable information to customers • Addressed investors need: Inexpensive Access to Market • Gave customers what they wanted ONLY, no additional costs • Up-to-date technology: More easily executable trades
  7. 7. • Emphasis on greater value to customers influenced Customer- Perception• Re-invested Profit in: - Building brand-name and branch network - Establishing local presence - Computers & Technology - Investor-support - Advertising: Charles Schwab on TV, radio, billboard and print ads• Addressed Competition by: - Strong differentiation - Sharing services with new customers instead of hard-selling new products to existing customers
  8. 8. Second Business Model: Servingthe Financial PlannersMarket Environment • Change in customer behaviour in the late 1980s – from savings to investment • Need for unbiased, independent financial advisors • Mushrooming of independent advisors – individual and partnership firmsWhat did Schwab do?Developed New Ways to deliver – Using Financial PlannerCreated a new channel to the investors/customers through independentadvisors.Leveraged the strength of the financial planners to grow his own business.
  9. 9. Gaps in the Existing ServiceModel• Listening Gap – Most traditional firms didn’t recognise the change needs of the customers Closing the Gap – The Schwab Institutional Enterprise linking Charles Schwab & company with independent financial advisors.• Service Performance Gap – The financial advisors were not technologically capable of meeting the necessary customers needs through efficient back end operations Closing the Gap – Schwab stepped in to become the back- office operation for many financial planners and thereby gained more customers for itself.• Communication Gap – Changing investor behaviour rendered traditional methods of communications unsuccessful Closing the Gap – Communication about Schwab services through financial advisors/planners.
  10. 10. Benefits Schwab Gained• Customer selection increased – financial planners as well as investors• Converting ‘perceived’ competitors into clients• Created a large pool of virtual sales force at no cost• Stayed ahead of competitors by taking advantage of their lack of response• Increased profits
  11. 11. The Next Leap - OneSourceWHY?• Enormous expansion in the Mutual fund market space • both in investments and rising of numerous fund companies• Caused mainly 2 problem to customers: • Dizzying array of mostly unbranded fund options • High overall transaction fee (load fee + brokerage fee) • The transaction fee proved to be not just a financial barrier but a psychological one• Complexity for customers to relocate assets among funds• Also Schwab focused on business model that had a floor of recurring revenue
  12. 12. OneSourceWHAT?• “There were thousands of salespeople out there selling load funds, with huge commissions,” explains Chuck Schwab. “We wanted to create a way for people to buy a variety of mutual funds directly through us — have lots of choice, diversification — in a way that they could do it conveniently and at low cost.”• This gave rise to ONESOURCE in July 1992
  13. 13. Service Adjuncts• Offered a no-load, no-transaction fee policy – “Discounted Mutual Funds”• All funds in OneSource was accessible through a single phone call and was tracked in a single account statement• Had a double advantage for both investors and mutual fund companies – Acted as a switchboard between the two• All backend work was carried out by Schwab for the fund companies thereby saving cost and time
  14. 14. The Switchboard BusinessDesign
  15. 15. Industry ResponseMainly 3 types of responses:• Denial : • No response, Thought that OneSource would be just a passing fad• Fee Structure: • Full service brokerage firms introduced new share classes with their funds with low or no fees• Imitation : • Replication of same Business Model • Eg: Fidelity included 370 funds
  16. 16. Technology and Schwab• 1989 – Tele Broker• Voice Broker• 1993 – Street smart Software• 1995 – e.Schwab • Complete account specifically designed for active traders • Used an e.schwab account to do trading at any time without the assistance of any account reps
  17. 17. Future of Schwab• OneSource as a gateway to bank customers - a customer segment unlikely to get• SchwabLife Insurance Services – “Discount Life Insurance”• AdvisorSource Program – advices clients with > $100,000 in their portfolio• Bought over UK firm – ShareLink Investment Services as expansion to new markets
  18. 18. Schwab’s Communication in the21st Century• Competition from low-cost providers causing withdrawals for Schwab Investor Services customers• New target market: Mass affluent• Fairly knowledgeable about investing, want quality services yet are cost-conscious• Communication strategies: Product-oriented, dispersed campaigns• Multiple campaigns conflict with each other
  19. 19. Talk to Chuck Campaign• Aimed to increase awareness levels among the target customers• Reposition the company as a value-for-money alternative to traditional high fee charging financial services firms• Communicate that the firm’s objectives are imbibed by each employee of the company.http://www.youtube.com/watch?v=_8rNyK1vGKQ
  20. 20. Campaign Attributes• Easy to pronounce and remember• References a known personality, whose values can be seen• Personifies trust, integrity, professionalism, and approachability, confidence in ability to serve customer needs, a personal touch and an overall care for the client as a person• Encourages investors to have straightforward conversations with a company employee about common issues in taking investment decisions• An informal feel that projects the feeling of being able to confide in a close friend
  21. 21. Communication StrategyCharacteristics• Target is new and existing customers who can invest $50,000 to $2 million• Affective component: Changing current investor attitudes towards financial services firms• Behavioral component: Call and talk to a Schwab representative• Essentially a pull strategy
  22. 22. Conclusions• Be sensitive to evolving customer needs• Be proactive• Ask the right questions• Be innovative – Seize opportunities• Be in constant touch with the customer

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