Industry Environment and Competitive Landscape

I - Industry Environment and Competitive Landscape

In 1999, the Gramm-Leach-Bliley Act removed barriers in the market among insurance companies and commercial and investment banks resulting in intensive price competition and commoditized basic brokerage services. The company, Charles Schwab, was threatened by mutual fund companies such as Fidelity, full-commission brokers, and discount brokers that offered lower equity trade prices than Schwab. Among these competitors, Fidelity posed an intensive threat to Schwab. In the tracking survey, Charles Schwab ranked second compared to Fidelity in the category of “consideration to open account.” Both Schwab and Fidelity looked for growth in similar areas such as online brokerages. Moreover, Fidelity is not only the largest mutual fund company in the U.S. but also a leader in administering 401(k) retirement accounts. By the end of 2005, Fidelity managed $708 billion in retirement assets compared to only $159 billion for Schwab. As baby boomers aged and their retirement accounts grow, Schwab’s retirement account clients might turn to Fidelity investment advisor to guidance.

Additionally, progressive technology allowed investors to be more savvy and independent in researching and investing securities online. In response to the hard situation, Charles Schwab went beyond discount brokerage to offer a broad range of financial services through three business divisions.

II - Critical Issues

By 2004, Charles Schwab suffered from a trend of lower profitability and the net income had declined by 39% in just 12 months. Although the marketing budget was among the first to be cut to relieve profitability pressure, the positive result of the TTC test encouraged Saeger to believe that the TTC campaign was strong enough to drive future growth and brand revitalization. However, how could she persuade the CEO and CFO to increase the budget for the TTC campaign in 2006?

III - Company Strategy behind the TTC Campaign

Target Market Analysis

In 2005, an investment attitudes segmentation study showed that Schwab’s client base was underweighted in the high-touch segment and overweighted in the self-assured segment. In order to broaden the brand beyond the discount brokerage arena, increase its asset base, and differentiate Schwab from competing brands, the TTC campaign positioned Charles Schwab as an approachable place where investors can get the respect they deserve, and targeted “mass-affluent”