Great Dakota Bank - online Banking

Great Dakota Bank: Online Banking

1. What are the advantages and disadvantages to Dakota Bank of the new online customers?

Answer: Advantages –

• Increase in customer enrolment between the promotion period of July and December  2001 from 2,500 to 4,000
• Online customers were more active than offline customers.
• Increased numbers of transactions across a variety of channels.
• Customer friendly which enabled lot of its customer to sign up for various services like paying electronic bills etc. thereby increasing its revenue.

Disadvantages –

• Initial set up process is tedious and requires intensive labor.
• Enrolment had dropped since the promotion of free online service ended in December 2001
• There was no increase in revenue during the promotion period since fees were waived.

1. Does it appear that the online customers add to Dakota’s bottom line?  Compare the preliminary data to support your conclusion. Support your analysis using numbers given in the case.

Answer: Initially it did seem that online customers have added to Dakota’s bottom line from 2000 to 2001 for non-interest income, $768M to $786M, respectively and increase in number of customers enrolling for the online services, however due to their free online service as promotional activity the expenses also increased from $1,081M to 1,112M.

Therefore, net operating income has actually decreased from $366M to $349M, which concludes that the online customers have not added to Dakota’s bottom line.

1.  Is the price of acquiring a new online customer worth the cost?  Provide documentation using numbers in the case.

Answer: No, The price of acquiring a new online customer is not worth the cost spent by Dakota.

The campaign cost spent as part of promoting Dakota’s online banking is $2M for the 24,000 (4000 customers per month) customers that were acquired during the campaign period of 6 months. Each customer costed around $ 83.33 (campaigning cost/ total number of customers signed up during the campaign period).

However the revenue brought in by each customer is around $12.04 (total revenue/ month multiplied by 6 for the campaign period divided by 24,000 customers acquired during this same period).