Assignment Question 1:

Are DLJdirects financial results good? (use 1-3Q1999

results) Have they been stable over the years?
The OI% for 1-3Q1999 is 11.6%. Compared with the general benchmark in service
which is 9%, the DLJdirect's financial results looks good. But concerned with the
industry benchmark 75%, the DLJdirect's OI% is not as good as Schwab and
Waterhouse, it's only ranked 40%, so it's seems not good. But as we can't get the
data for it's other competitors like Datek and Fidelity, so this measurement is not
accurate but can only give us a hint about this. Overall, the company has a strong
and stable track back record over the 1990s. According to Exhibit 16 and 17, we can
see that the company has been increasing their revenue throughout the years.
Although there were a huge loss in 1998 before September, but the company
managed to recovered the loss and succeed in 1999 getting a over $50 million
increase in revenues. And the company's total trades, average daily trades, total
customer assets, total accounts and total active accounts has been steadily
increasing these years.

Does DLJdirect have the financial capability to address

new segments, e.g. to modify its whole product, or to do
more advertising to attract new kinds of customers?
Specifically, how much money might be available for
advertising in 2000, assuming DLJdirects 2000
projections (Exhibit 17) come true?
Yes, the DLJdirect does have the financial ability to address new segments.
We can see from the chart the 1999 year's revenue might be 161.8$ million, so
if the 2000E com true, the company will get more revenues, the increase will
be much more than $50 million, so even though the company planed to spend
$65 million, they still has the ability to do the marketing. Specifically, if the
2000 projections come true, the total revenue for 2000 might be over $230
million, so there might be over $80 million for the company to do the
advertising.

Identify the ways DLJdirects service is currently

dierentiated from competitors oerings.
Like Product (E*Trade, Schwab, and Fidelity)

DLJdirect targeted customers with net worth in excess of $100,000,

who are in the "Aggressively Auent" segment. DLJdirect targets at
high-end while others like Schwab targets at both high-end and lowend.
DLJdirect provided tiered service for accounts with high asset
balances. Customers with dierent asset balance will enjoy dierent
level of services.
DLJdirect has near top execution speed in the industry. It provides
shortest response time and highest availability among its competitors.
Substitute products(Full-service Broker)
Cheaper to trade and pressure free, the customer using DLJdirect
spend way less than using full service and can take their time making
own decision.
Faster execution and more fun in serving themselves.
No worry about crooked brokers and no irritating calls from full service.

What are the key needs of each of the four customer

segments? Which are well-matched to DLJdirects
dierentiators and other capabilities?
Retirement by the Book(RBB): this segment's key needs are advice and longterm stability. RBBS were interested in reliable trade execution, user-friendly
interfaces and variety of financial oerings.
Portfolio Cruise Control (PCC): for this segments, their key needs are advice,
high-quality information and best site performance. Since they are the
wealthiest and more at ease with human brokers, so they would not trade very
often but value advice and information so as to better manage their assets.
Aggressively Auent (AA): for this segment, their key needs are transaction
confidence, low fees and timely execution. They were typically willing to pay a
modest premium for a high-quality service.
Get Rich Fast (GRF): for this segment, their key needs are low fees, fast speed
execution, and the site performance. They frequently trades to accumulate the
gains related to minute-by-minute fluctuations.
DLJdirect's target customer with net worth in excess of $100,000, so the AA
and PCC segment can meet its dierentiator. Also, for DLJdirect's tiered
service, the RBB and PCC segment can both benefit from its service for there
can be a personal team assisting with the advice. DLJdirect can provide much
less charge fee compared with full-service, matching the needs of AA and
GRF. The timely execution speed well-matched all four segments's needs.
Considering all those, I think among these four, the AA and PCC are wellmatched to DLJdirect's dierentiators and other capabilities.

Use your judgment to rank the customer segments

according to the profit potential in serving them (hint: for

each segment estimate both the number of customers,
and the average profit/customer)
The rank from high-ranked to low:
PCC
AA
RBB
GRF
The AA segment coms the second place for that in the following years it
shrinks a sharply although they have high profit/customer rate, but the number
of customers will drop.
The PCC segment comes first for that their group will increase sharply in the
following years and they also have the high profit/customer rate. And they
don't care too much about the expense on the premium service. Another
reason for that ranking is that PCC also belongs to the high-end group, the
DLJdirect has already do a lot on this side, targeting at PCC is suitable and a
natural progression for it to maintain and enlarge its reputation. And its service
is appealing to this group so might be less expense on acquiring new
customers since its market share is not big so as to get focused and
dierentiated from its competitors.
The RBB ranks at third place for its market size keeping increasing and it's
more profitable than GFR segment. The GFR segment shrinks sharply in the
following years.

Assignment Question 2:
Should DLJdirect also target the Get Rich Fast (day
trader) segment? Why? Identify the positives-andnegatives of targeting the GRF segment.
DLJdirect should not target this GFR segment. Reasons are as follows:
Positives:
Right now targeting on GRF segment will bring more market
share and probably become more well-know among the market.
Since the company's website is best at the response time and

availability, it's easier and less expensive to get the new

customer in the GRF segment compared with other segments.
Negatives:
The GFR segment sought for low fees, site performance and
transaction confidence. These DLJdirect can provide but will
definitely cost money. But this segment is not so profitable as
there are very little portion of wealthy traders. So it will not be
beneficial for company to target this segment and spend too
much.
This segment, as can be seen from Exhibit 10, the market share
is shrinking as year goes by. Target on this segment will be not
wise.
In the long run, it will just consumes the ability to serve better
high-end customers and very likely lose competence in other
segments as competitors are targeting on others. Targeting on
this segment will erode the previous established brand image
among high-end customers and get DLJdirect less dierentiated
from Schawab will targeted at both high-end and low-end
customers.
Also this segments' loyalty is not worthy trusting for they mainly
pursue low fees. If the company cannot keep the low fees then
they will jump ships to another competitors.

In your opinion, which other customer segment(s) should

DLJdirect target? Identify the positives-and-negatives
of your choice. (you may choose to not target any
additional segments, and if you do, give the positivesand-negatives of that choice)
I think DLJdirect should target also PCC segment as well other than just AA.
Positives:
The PCC segments is requesting advice, high-quality information
and ease of use which DLJdirect can provide. The service now
DLJdirect providing caters to exactly what the PCC segment
needs. Also, targeting at this segment is a well-match for
DLJdirect's brand position and image and helps them to stay
dierentiated from their competitors and keep the impression of
being a premier online brokerage and portfolio management

company.
In the following years, the AA segment market shrinks sharply
while PCC markets takes the trend and makes the majority of
the whole market, it's necessary and essential to target this
segment.
Also, this segment cares less about the commission fees and
has the higher ability to pay and the willingness to buy all the
products the company can provide. It's a profitable point for the
company.
Negatives:
Targeting on this segment will require the company to put more
money and people into the customer service since the group will
require more on one-on-one service. Right now over half of the
company's employees are customer service representatives, and
targeting high-end customers will require nearly 800 people to
maintain it's high service level will be a burden for the company.
The competitions in this segment is very fierce. Other
competitors like E*trade and Schwab also targets at this
segment and are putting much more money on pursuing the
PCC customers. So this will also be an burden for DLJdirect to
keep up with their competitors who now own larger market share
than it.