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14-39 (Cont'd.)

3.The pros of charging for individual services include:

a.Additional source of revenues.  If  Bay Bank is able to charge more than the cost of each service, it may prefer that customers be prolific users of its services.

b.If Bay Bank is not able to charge the "full cost" for each service, the charge may reduce customer usage (thus reducing the losses associated with providing services at below cost).  For example, Customer B may make fewer inquiries about his or her balance.

The cons of charging for individual services include:

a.May cause customers to drop card or decrease its usage vis-à-vis competitors’ cards that have zero or minimal charges.

b.May attract much negative publicity from consumer groups who target companies such as banks and credit card companies.

4.Factors to consider include:

a.The growth potential of individual customers.  Some low-volume credit customers (such as students) may be high-volume users in the medium run.

b.The costs saved by discontinuing low-volume credit card customers.  Many costs may be relatively "fixed" and may not be eliminated by dropping customers.

c.The publicity Bay Bank may attract from discontinuing these customers.  There is the potential for much negative publicity from such decisions.

d.Alternatives available to discontinuance, e.g., adopt individual service charges.

5.The pros of providing the service at Lucky Roller include:

a.Potential increased profitability due to higher usage by Freedom Card holders at Lucky Roller.

b.Potential increased attraction to current and future Freedom Card holders.  As  a general rule, the more services available, the more attractive the card.

Possible cons include:

a.Potential bad debts.  While money advances in general may have been profitable, it is possible that some specific money advance outlets may be unprofitable.  Verdolini should examine this issue in more detail to determine if Bay Bank has made money advances at other gambling venues.

bPotential negative publicity from media stories arguing that the Bay Bank is helping gamblers to lose money.  These stories often focus on individuals with gambling addictions.

c.Ethical position of the Bay Bank regarding gambling.  Providing a money advance service at the casino may conflict with the ethical beliefs of senior management or the Board of Directors.


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