Charles Schwab

About Schwab

Launched in 1975 by Charles Schwab headquartered in San Francisco World’s first discount brokerage firm Discount brokerage concept was driven by the objective that there was no conflict of interest between brokers’ incentives and customer interests. Offered a wide variety of third-party investment alternatives and general investment advice Vision – “to be the most useful and ethical provider of financial services in the world”

Issues with e.Schwab

Curtailed the level and type of customer service e.Schwab customers could receive as a trade off for low-price Created distinction in service e.Schwab customers could received unlimited free email service but only one free call to customer service per month Branch employees lacked access to e.Schwab account information

Schwab – Strengths Innovative products and superior customer service Multi-channel strategy – branch offices, telephone-based brokerage services and online trading

Schwab – Threats Deep discounts by online brokerages such as E*Trade and AmeriTrade, commission $8 per trade Consumer perception that they have to trade off service for price

Role of Technology

Technology is a key tool for Schwab Follow high-tech, high-touch approach to brokerage business based on consumer needs First discount brokerage to open a branch office and 24X7 entry and quote services Launched OneSource - first no-transaction fee mutual fund Portfolio of products - Equalizer, TeleBroker, StreetSmart, Electronic Brokerage, e.Schwab

A decision was to be made , t0 cut prices on January 15, 1998 $39.95 to $29.95 . Is it the right decision?

Variables Favoring Price Cut

Increased interest in internet trading due to increased internet coverage among investors coupled with excellent market conditions Schwab increasingly found that its policy of providing differential service countering the company’s value More price elasticity at $29.95 than at $39.95, Hence if the company was to increase the internet...