The management team of Charles Schwab & Co., Inc. needs to do an evaluation of the advertising campaign "Talk to Chuck" and the campaign's success. This case study discusses the factors which were considered in coming up and which affected the implementation of the campaign.
John A. Quelch; Laura Winig
Harvard Business Review (507005-PDF-ENG)
January 16, 2007
Case questions answered:
- What circumstances motivated the development of the Talk To Chuck (TTC) campaign by Charles Schwab & Co.?
- Evaluate Charles Schwab & Co.’s strategy behind the TTC campaign. Do you agree with that strategy?
- How effective was the TTC test market? Evaluate the results. Be specific.
- Would you support Saeger’s TTC budget request for 2006?
- What changes would you recommend in budget, strategy, or execution? Why?
- How should the campaign’s effectiveness be measured in the future?
- What are the key takeaways from this case that could be applied to other cases?
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Charles Schwab & Co., Inc.: The Case Answers
What circumstances motivated the development of the Talk To Chuck (TTC) campaign by Charles Schwab & Co.?
The primary reason why Charles Schwab & Co. created the Talk To Chuck (TTC) campaign was to get in touch with most of its customers who were slipping away. The move was also to entice new customers to enable the firm to realize the success it enjoyed before its downfall.
Schwab entered the financial market segment as a unique player that offered attractive packages to clients who were seeking the missing link. According to the article, the firm’s entrance into the field was compelled by the desire to “reshape the entire financial services industry” (Quelch and Winig 2).
Schwab was the first and leading discount self-service brokerage firm. The firm allowed investors to make transactions and manage their assets without the assistance of traditional brokers. Having introduced a revolutionary package, the demand for Schwab services increased to the extent of setting an industry-low trade price within the equity sector.
Unfortunately, although at the time, the revenues realized by the company were at an all-time high, the relationship that existed between the company and its clients was dwindling. In the end, profitability began to decline.
The competition heightened due to the entry of similar low-cost brokerage providers, such as Etrade and Ameritrade (Quelch and Winig 4).
In a bid to retain its operations, Schwab escalated its prices. This decision caused a complete fall of the firm. The TTC campaign was an attempt by the company to get in touch with its customer base, as many of them had switched to the emerging low-cost providers.
2. Evaluate Charles Schwab & Co.’s strategy behind the TTC campaign. Do you agree with that strategy?
When rolling out the TTC campaign, Charles Schwab & Co. intended to target the mass affluent as prospective clients, most of whom had a “50k to 2M” value in investable assets (Quelch and Winig 8).
When focusing on its existing or previous customers, the firm hoped to address the client’s prevailing “pain points,” an aspect that would be achieved by redefining its value proposition.
For instance, the firm hoped to offer personalized investment advice from real people instead of the previously used computer algorithms.
Under its message strategy, the campaign aimed to portray that Charles was actively involved in issuing investment advice in a bid to enhance the client’s trust.
From a media portray perspective, the campaign intended to use colorful print Ads, television broadcasts, radio announcements, and Rotoscoping, which were impactful methods of capturing the target audience (Teixeira 2).
I agree with the campaign, for it was defined by an assessment of the impact criteria that aimed at determining the number of new clients investing in the firm.
Evidently, in the market research conducted by the firm, most of the clients began to rate the firm favorably, especially as the campaign progressed.
3. How effective was the TTC test market? Evaluate the results. Be specific.
A test market was conducted to evaluate the effectiveness of the new campaign (TTC) through two aspects: first, tracking net new assets, and second, the number of new households investing with the company.
The test was conducted in Chicago, Denver, and Houston. These cities were chosen based on the fact that the marketing campaign would be the only variable and the only constraint if it is not present, which is the case in the control market. The control markets chosen were Washington, D.C., Phoenix, and Dallas.
The test was conducted from April to September with all the same conditions and mixed with all the test markets. We can see that the campaign had positive results across all criteria in the test vs. control markets.
Taking a deeper look into the results, we can find that the highest impact was in mainly 4 criteria: Good value for money, Unique alternative to other financial service firms, Net brand gaining momentum, and Growing popularity.
This summarizes the real effect of marketing, which is increasing awareness of a brand and creating value for consumers, which in return can make consumers start using this brand or switch to another one if they are already using another brand, even if the latter is cheaper because the value created through the earlier brand outweighs the price difference.
Even going nationwide, we can recognize the effect of the Ad mostly on increasing awareness of the product and “% who agree that Charles Schwab & Co. is a company you are hearing a lot about lately’, and these two points are crucial in this case as the test was conducted in markets that had no presence at all, and shows that the Ad and hence the brand are on the top of the consumers’ minds.
4. Would you support Saeger’s TTC budget request for 2006?
Saeger suggested a budget of $200 Million for 2006, allocating $55 million to the TTC brand campaign. In 2005, the budget was increased from $160 million to $195 million, including the TTC tests, and for this budget, an annual increase of 6% in revenues was achieved and 153% in net income.
Assuming the company will continue growing at the same rate of in revenues and net income, which is a conservative estimation as it should grow more given the fact that the company is opening in new markets, increasing awareness of the brand, and building a stronger relationship with customers.
So, increasing the budget in 2006 from $165 million (excluding the TTC test) to $200 million, which is approximately 2.56% taking the TTC test into consideration or a 21% increase excluding the TTC test, is reasonable considering the expected outcome from the campaign.
As a learning, we found out that decreasing the marketing has always a negative correlation on the brand and its perception to the consumers.
5. What changes would you recommend in budget, strategy, or execution? Why?
I would recommend that the company increase the investment for marketing, focus on one advertising campaign, and compile this information to determine the best strategies moving forward with Schwab.
The major problem that the company faced was in analyzing market segments using different market analysis information from the data of multiple campaign projects. Had there been more of a narrow focus, the money would have been used more efficiently, as well as the information, to be able to make better decisions for the company.
The advertising campaign provided Schwab with an increase of 6% in revenues and in net income but failed to paint a clear financial direction for the company.
Brand-building initiatives play a vital role in the company’s growth. Charles Schwab & Co.’s claim is that it relies on the relationship established between affluent customers and their long-standing affiliation with their company.
In addition, Schwab’s hope is to bring more awareness to the company’s capability of being approachable to these affluent customers while remaining moderately priced for financial advice and a long-term partnership. Their incentives appeal to the population.
Otherwise, there would not have been as steep an increase in aspects of the budget plan. However, Schwab would see optimal results if it were to continue expanding resources on marketing campaigns with narrow targets because more concentration would be provided and can be most effective in resolving the company’s doubts over its services.
6. How should Charles Schwab & Co.’s TTC campaign’s effectiveness be measured in the future?
The firm should use the following strategies to measure campaign effectiveness. The first approach should be the assessment of the customer’s level of satisfaction. This plan would play a vital role in enabling the company to realize how the consumers perceive their brand (Fallon 36).
In addition to this, the venture would be able to understand the existing customer’s concerns and expectations. Thus, it would enable the enterprise to adopt policies that meet the client’s demands.
In the second strategy, the venture would assess the value of assets under its management and compare it to the previous year’s statistics. Through the strategy, Schwab would assess its progress by determining whether its portfolio is developing or deteriorating.
7. What are the key takeaways from this case that could be applied to other cases?
Focus marketing efforts on 1 or 2 campaigns so that data can be used strategically. At the time, Charles Schwab & Co. had 6 major marketing campaigns running simultaneously, and while there were loads of data being collected, the information was not used strategically.
The greatest takeaway is that marketing campaigns and data should be used to make better decisions for a company; in order to do this, the focus of the campaign ought to be narrower.
There is a positive correlation between the marketing budget and the increase in brand awareness and perception to the final consumer, so decreasing the budget is usually accompanied by opposite effects that the lost value is way more than the saved amount from the marketing budget.
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