Charles Schwab Case Summary

In 2004, Charles “Chuck” Schwab came out of retirement to reclaim his position as CEO and to keep the once industry leader’s net income from declining. The financial services firm was finding it difficult to maximize benefits when providing services that fall between full-service brokerage and discount brokerage. As a result, competitors like Merrill Lynch, a full-service brokerage, and Ameritrade and E*Trade, discount brokerages, were cutting into Charles Schwab’s profits. As competition intensified and technology grew to become a major tool for investors to trade independently, Schwab’s net income decreased 39%. Traditionally, Investors relied on their brokers for advice and guidance when making financial and investment decisions. By the

In 2003, Schwab had 6 different major marketing campaigns running simultaneously, in which all 6 campaigns were focused on one marketing strategy done strictly through direct mail or email mediums. This strategy caused cannibalism within the company. Schwab had collected an extensive amount of information and research on the Financial Services Industry; however, their efforts of transforming their knowledge into a strategy were inefficient. Schwab was once known as a leading discount brokerage firm, but when the value of their services began to increase they were perceived more as a full-service brokerage. Up to 35% of clients were leaving Schwab for lower commissions and fees in early 2004. Of the customers that left Schwab, 45% of the assets withdrawn went to competitor discount

The criteria for determining the test market to experiment their new campaign was that each location had to be at least 1% of the total U.S. population and could not be the location of their competitor’s headquarters. The cities must be where they had a strong field sales presence, needed to have a high concentration of clients with at least $250,000 portfolios and were also efficient and affordable media markets. Charles Schwab took these criteria and conducted their test market in three out of twenty-six major cities; Chicago, Denver, and Houston. These locations accounted for 6% of Schwab's total invested assets. They also created a control market that would continue to receive the original advertising prior to the TTC campaign and were similar to the cities chosen for the test market so the company had measures to compare their results with. Washington DC, Phoenix, and Dallas were the cities chosen for the control market. For the test to be effective, each region received an equal mix of TV, newspaper and print, radio, and billboard advertisements. They also used methods that weren’t traditionally used by other financial service companies like coffee sleeves, elevators, and designed some custom