What are the key elements of CRM at RBC financial Group? At RBC , initially the the CRM model worked as follows -
• Customer Profitability and Potential Measurement • Aggregate Information rather Actual Data
For Customer Profitability measurement, the model aggregated information from a base of 8million data points(customer base) and distributed the profits over 1/10th each
The 100/20 rule- this meant that 20% customers accounted for 100% profit.The model divided the customer base into three large baskets -
a. Basket “A” = > customers made the most profit
b. Basket “B” => customers made some profit
c. Basket “C” => customers broke even or lost money
This helped in aligning the sales force to customer profitability and laid the foundation for a customer centric firm. However, this wasn’t evolved sufficiently to enable channel optimization and relationship pricing. Also, it was observed that in some instances customers were treated without consideration of potential business they can contribute.
Customer profitability calculations were not enough as customer could be both profitable and potentially profitable, bank needs both kind of customers.
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Finally, calculated Future Profitability and Lifetime Value & segmentation is done based on Future Profitability and Lifetime Value
1) Calculate Present Value of Profit : We assume that profitability percentile of client remains constant throughout expected lifetime, and calculate the present value of those profits
2) Factor in Variables: Such as: Age, Tenure with Bank, Number of Products Held, Acquisition and Attrition of products.
3) Lifetime Value calculated individually: This can largely be aggregated up to Segment Level.
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How is customer profitability used for marketing decision making?
After profitability and lifetime values are determined, these measures are included for determining