Consumer_Banking_Primer_spring_2008

Consumer_Banking_Primer_spring_2008 - Consumer Banking...

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1 Consumer Banking Primer Consumer Banking Strategy Customer Profitability Whither the Branch? Consumer Lending Credit Cards Mortgages Brokerage and Asset Management
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2 Consumer Strategy Transition from product focus to customer focus; shift to focus on profitable customers and share of wallet Customer focus decisions evolved as product/delivery extensions and included more branches, hours and accurate and responsive service But limited product cross-selling occurred without understanding overall customer needs Customer needs focused on advice and benefits with a relationship orientation Customer switching costs are increasing due to technology (e.g., bill payment) Customer focus decisions today can include: Customized rates and fees Selected waivers of fees and minimums Varied service levels Targeted marketing Products can include all or some of insurance products (life, health, property & casualty), secured and unsecured loans, credit and debit cards, checking, investments, financial planning, brokerage, trusts, etc.) Customer equity is value of relationships through the entire life cycle Analyzing existing relationships at a point in time may miss the potential value of a relationship Pricing should reflect risk Underpricing bad credits and overpricing good credits inevitably leaves the bank with under performing returns
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3 Consumer Strategy Customer Relationship Management (CRM) Identify most profitable customers and get the highest share of wallet while saving expense through lower cost channels like ATM and internet Core of customer segmentation is personalized private banking for the customers who want it and are profitable and low-touch, self-service for all else Define customer moments of truth and operationally excel Types of customers vary behaviorally and need to adjust to their needs and decision-making point (e.g., acquisition, retention, cross-selling) Quality of customer management has improved from identifying who is profitable to: Do we have programs to hold onto the profitable customers? Can we find more customers like them? Can we increase profitability of less than stellar contribution customers? Technology and operations support for CRM has evolved Silo operations and redundant systems have been replaced Enterprise data warehouse development and pulling info from one repository Data mining, models, etc. indicate customer’s lifetime value, credit risk, probability of defection and pricing variables
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4 Customer Profitability Historical approach to customer profitability assumed all customers had the same profitability for the same product However, product usage, balances, fees, transaction volume, etc. can vary significantly by customer thus the need for activity-based costing and actual revenues
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Consumer_Banking_Primer_spring_2008 - Consumer Banking...

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