Charles Schwab is a financial services firm that aimed to reposition its brand from a discount broker to an asset management company. It targeted the mass affluent segment of $100k-$1m in assets. Schwab tested a new "Talk to Chuck" campaign in select cities that featured the founder to appear more approachable. The results were positive with a 5% reduction in attrition, increased customer contacts, and 6% revenue growth between 2004-2005.

1. TALK TO CHUCK – BRAND REPOSITIONING IN
A FINANCIAL SERVICES FIRM (Charles Schwab
& Co.)
Company background and customer segments
It allowed investors to manage assets and make transactions without the help of traditional brokers.
The company also launched online platform to buy and sell securities and within two years of launch the
company acquired 2.2 million customers.
The company had three main divisions of financial services
1. Schwab Investor Services ( Catering to retail investor - Revenue- $ 803 mn)
2. Schwab Institutional (Catering to independent fee based advisor firms – Revenue $2742 mn)
3. US Trust (acquired in 2005, catering to high net worth individuals – Revenue $832
one of the original brokerage firms to offer individual investors the opportunity to buy and trade equities at a
discount
In recent years, transformed itself from a discount broker focused on driving commissions into an asset
management company, making money by charging a percentage of clients' assets as a fee for financial services
(Asset Management Charges – 1-3% of the total book value for securities) – as opposed to fixed brokerage
earlier adopted.
Earlier fixed brokerages were too high for lower quantile investors – for example an entry load of US $ 30 (1997
Figure). The accompanying chart makes this evident. As this is the segment that is keen on seeking active
advisory from the brokerages and do not mind paying extra for return (as segmented by the investment )
High proportion of Self assured customers – likely to graduate to full service firm like Merryl lynch and lower
proportion of High Touch segment – the one that seeks active advice and high disposable income – CALLED
MASS AFFLUENT
Targeting of the mass affluent marketplace, a segment which represents 60% of the $25 trillion in U.S. retail
investing assets. With this focus on mass affluent customers, Schwab has carved out a unique position between
the discount and traditional brokers.
Fixed Brokerage charge (Entry load of US $ 30 for a
mutual fund - lumpsum)
40
30
20
10 Fixed Brokerage charge (Entry load
0 of US $ 30 for a mutual fund -
lumpsum)
Median Median Median Median
investment $ 100 investment $ investment $ investment $
1000 10000 100000

2. Mass affluent clients have between $100k and $1 million in investable assets and it will be important for Schwab
to continue to pursue them in order to grow its asset base. Currently, Schwab holds about $120k for its average
retail client and has aggressively marketed to this segment.
The positioning of Schwab was such that the target market had active and independent investors.
Switched to AMC as a more rational means of attracting the targeted segment.
Table Showing the difference between AMC as % points and the fixed brokerage charges for low value transactions
(mean book value of $1345/-) – source :- http://www.forbes.com/sites/advisor/2012/06/01/before-you-talk-to-
chuck-read-this-2/
25
20
15
Fixed Brokerage (Expressed here as
a % of median book value of
10 transaction i.e, $ 1345)
Asset Management Charges
5
0
Mutual Mutual Securities Personal Mortgage Automobile
Fund - Entry Fund - Exit transaction loan extension loans
Load Load Approval
Problems faced by the company:
The value of new assets deposited was less than the value of assets withdrawn- low net asset creation
o Reasons of assets withdrawal
Needed money for major purchase 21%
Wanted to invest less in stocks 12%
Change in personal situation 11%
Wanted lower commissions 9%
Wanted more investment advice 8%

3. Declining brand value
o Company’s perceived brand differentiation declined significantly due to which it looked less like
leading edge discount broker and more like a full service broker.
o Company was holding steadily in terms of momentum and innovation.
Issues in retail consumer segmentation
o The marketing of company to consumer depended on the profile of consumer according to the
segmentation
o Client satisfaction gap with both individual brokers and industry as a whole.
Industry and Competitor Analysis:
Current Positioning :
Meryl Lynch (Full service firm with dedicated Investment banking firm)
customer Schwab
point of view
Price
Etrade (Discount brokerage without active investment)
Cost to serve investor
Investment Styles : Active
Schwab Meril Lynch
Independent Advisor Dependent
Edwards
Passive

4. Effects of Gramm-Leach-Bliley Act 1997 : Uneven Consolidation
removed barriers in the market among banking companies, securities companies and insurance companies that
prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and
an insurance company.
Example - A year before the law was passed, Citicorp, a commercial bank holding company, merged with the
insurance company Travelers Group in 1998 to form the conglomerate Citigroup, a corporation combining
banking, securities and insurance services under a house of brands that included Citibank, Smith
Barney, Primerica, andTravelers.
Much consolidation occurred in the financial services industry since, but not at the scale some had expected.
Retail banks, for example, do not tend to buy insurance underwriters, as they seek to engage in a more
profitable business of insurance brokerage by selling products of other insurance companies.
Many banks and brokerage firms that went on to formulate investment bank could not sell it to lower or advice
seeking customers. As Charles Schwab did not target that particular segment, it never considered to create an IB
arm or foreign treasury or clearing services for that matter.
Greater deregulation of the industry resulted in confusion amongst various consumer segments and sub-
segments.
Issues in Marketing at Charles Schwab &Co.:
The Company’s brand advertising had been haphazard. The emphasis had been on creating direct-mail and e-
mail for specific products and services. At one point, it had six major marketing campaigns running
simultaneously.
It was using multiple advertising agencies that were tripping over each other.
It was collecting enormous amount of data, but wasn’t using it strategically.
It had priced its brokerage services too high vis-à-vis its low-cost competitors.
The Company had erred by restricting customer access to research and information according to a customer’s
transaction volume.
Goals
Schwab’s advertising goal was to exploit satisfaction gap and broaden the brand beyond the
discount brokerage arena.
To position Schwab as a company from which mass-affluent investors could seek reasonably priced
advice for long term relationships
2005 Wealth Distribution of Mass Affluent Households – source (www.investopedia.org)
Asset Class Percentage Principal
Residence 23%
Investment Real Estate 14%
Liquid Financial Assets 22%
Pension and Employee Retirement Plans 16%
Insurance and Annuities 9%
Privately Held Business 16%

5. Steps taken
Lowering of prices to counter the problem of low net asset creation- so that the earlier lost 45% of asset to
discount traders was effectively reclaimed.
140
120
100
80 Charles Schwab
60
TD Waterhouse
40
Merrill Lynch Merrill Lynch
20
0 TD Waterhouse
2004 Charles Schwab
2005
2006
2007
Net Asset Creation (billions of US$) – source (www.investopedia.com)
An advertising agency- Euro RSCG, decided to try to leverage Chuck the man by casting that informality more
broadly to Chuck the company. It proposed a new tagline- ‘Talk to Chuck’ which contrasted with the formality of
traditional Wall Street advertising.
The corporate brand marketing budget was $16 million. The company decided to spend almost the entire
budget on test marketing. This was needed to justify a higher level of funding.
Chicago, Denver and Houston were selected as test markets. The test ran from April 2005 through September
2005.
o Chuck himself got involved in the test.
o The total earmarked budget was $15 million compared to equivalent television spending on national
television costing US$ 100 million.

6. Results:
 Schwab was rated favorably which was even more pronounced for innovativeness category.
 5 % reduction in attrition
 Call centre customer contacts and field sales activities increased.
 6 % increase in revenue from 2004 to 2005
 153 % increase in net income and 10 % immediate increase in net asset creation over previous month.
Class Inputs:
There are 3 components in advertisement
Message
Creative
Copy
Psychology of investor: The investor will go that brokerage firm which will give the highest return.
The customers’ point of view would be that the brokerage firm would charge low price for the transactions on
the investments.
Customer point of view- Price
Company point of view- Cost.
From company’s perspective, the price as well as cost should be low.
The sources of revenue are:
Brokerage from investors
Fee from institutions
Expenses are in the form of cost to serve investors. Besides, Pain points of various customers may not be the same as:-
Advisory fees
Very high cost
No right advice
Service provided
Copy:
Untraditional means of advertising, informal way of communication, approachability, relevance.
Copy Strategy:
1st advertisement was not clear in the message it wanted to convey. It came out as if mocking the customers.
The Sales representatives were easily available all the time which created an image of the company as
Approachable.The services offered to the customers are always relevant to them.
Submitted by:
Ishan Pratik
12FN-059
Section S7