Cost Info
Normal current account – introduce a fee but low eg $5 a month, hence bringing in more revenue.
Premium current account –
Will have higher fees than the existing current account, however if users deposit >$1000 a month this fee will be waived. Account will have more flexibility in unlimited withdrawals and transactions. While offering encouraging spending with a reduction of transactions fees per transaction
Reward system. Point systems. Visa 2 for 1, premium account 1 for 1
Encourage spending with VISA
over the advertisement of the new premium current account and advertisement of the existing VISA account program
added incentives for increased spending, loyalty programs, higher fees, increase in flexibility
The other way to enhance the ABC system is to reduce the sustaining cost, which accounts for 15% of the banks operating expenses.
As mentioned in the case, there are 10 large activities that their cost were not directly related to any products but rather supported the organization as a whole ( accounting, finance, strategy, planning, human resource management, information technology development, Real eastate etc. ). Because of the fact that it is hard to find out the cost drivers for these activities, therefore not all operating expenses were assigned to banking product.
In order to drive sustaining cost down to products and customers, the better decision should be made is trying to find the cost driver for each these activities and then trace these activities costs to the product as much as possible or outsource some activities and address saving opportunity costs . For example:
– Accounting: the tracing was accomplished by defining the