5) PAM managers are in the process of testing a new product concept called SafeMortgage. SafeMortgage is a standard fixed rate 30-year home mortgage which allows the home buyer the additional protection of being able to skip up to 3 payments during the course of the mortgage contract (30 years). The rate for SafeMortgage is 60 basis points higher than the standard 30-year mortgage. To test the market acceptance of the product, PAM has chosen two comparable office locations in two similar cities in New York State . One location ( Greenburgh , NY ) is used as the control group, and the other (Woodlands, NY) is used as the test city where only SafeMortgage is offered and not the standard 30 year mortgages. Of the 239 individuals who visited the Greenburgh office during the month of July, 18 applied for a home mortgage with PAM. Of the 337 individuals who visited the Woodlands office during the same time period, 45 individuals applied for a home mortgage with PAM. Assuming that the cost of the two mortgage products for PAM is equivalent, in your opinion should PAM lauch SafeMortgage?

4) PAM intends to venture into the homeowners insurance market by hiring its own sales staff to call on a prospect base of three thousand individuals over the next 12 months. The typical sales person spends one day a week on desk work (e.g., prospect identification, processing of paperwork, etc.) and the remaining four week-days calling on potential clients (on average twenty client meetings/calls a week) and selling insurance products. The customer life-time value for each acquired customer for homeowners insurance policies is approximately $2,500 and each salesperson costs PAM roughly $80,000 a year. What is your assessment of this strategy?

3) If PAM were to enter the insurance business, in your opinion which regulatory body should have primary oversight authority on PAM and its competitors in the homeowners insurance market? Please explain why.

2) PAM has recently considered selling $1,000,000 term life insurance policies to males around the 40-year age range. PAM can obtain names of about 100,000 such individuals at a cost of $15,000 and can conduct the necessary mailing for an additional $35,000. It is estimated that about one in ten individuals pitched with the offer would purchase a term life policy from PAM. If PAM wanted to generate an annual profit of about $2,000,000 from this venture, what monthly premium should they be charging?

1) The following print ad was recently developed by PAM insurance marketing team.

It is proposed that the ad be run in local newspapers in 2 metropolitan areas. The newspapers would reach about 300,000 readers and the cost of the ad campaign is about $200,000. What is your assessment of PAM=s advertising strategy?

Let PAM Works for You

For over 20 years, Jim Friedman has been a customer of Pioneer Accelerated Mortgages. Mr. Friedman has his mortgage and home equity loan with us, and has recently purchased his homeowners insurance from us. APAM gives me the value and the service I works so hard for@, says Mr. Friedman.

Won=t you give us a try? For the competitive insurance rates you deserve and our generous insurance claims processing service, call us at 1-800-HEI-SAFE. HEI ... where you finds the finest kind of treatment.