The outstanding value delivered every day to consumers by core demand deposit account (DDA) services through retail banking operations of consumer banks is getting lost in the currently fashionable cacophony of media bank bashing. As an industry we have been remiss in communicating just how good we are at serving the interest of individuals, businesses and even the government through provision of deposit services. Let's revisit what we should be talking about in addition to fee levels...
David McNab
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David McNab
Objective Business Services | FlowTracker Analytics-
0 comments 1,720 readsPosted on 2010-03-20
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0 comments 1,770 readsPosted on 2010-01-02Too often we see articles and blogs claiming expertise in customer value and customer profitability management that are regurgitating lessons learned at business school instead of in the trenches of business. Simple two-by-two martices that show "how you should use customer value to manage customers" are only illustrations - we fear for those who take them as strategies.
Why ? Because these "strategies" are one-size-fits-all ideas that frankly are too naive to be a basis for proper customer management strategy. There is a vast amount of judgement and nuance implicit in the calculation of cusomter value, and these judgements that go into making calculations of customer value have a direct impact on how the results can be properly used. For example if one is using current value to rank customers in a matrix this does not reflect lifetime customer value. Similarly if actual... -
0 comments 1,168 readsPosted on 2009-12-15We have been hearing a lot of talk in Washington and Main Street about how credit card issuers are managing risk and rates lately, so I thought it would be a good idea to offer up a quick analysis of the so-called rationale that supports raising rates on deteriorating-credit clients.
The pricing mantra goes like this...
the expected credit losses on the portfolio is rising so we need more revenue to pay for those losses. And we raise the rates more on people with the worst credit scores because they are the most likely to go under.Well, this is not very sensible, folks. There are several problems with this way of thinking.
First and foremost the issuing card company (that is, issuing the credit i.e. making the credit card loan) is supposed to be in the business of adjudicating credit and taking managed amounts of risk. When they oversell by issueing cards to people who are bad risks the issuing bank/ card company is supposed to take a hit - it's their fault for... -
0 comments 1,999 readsPosted on 2009-12-15One of the more interesting aspects of customer value measurement - the precedent to customer value management - is that it can have so many different temporal definitions. There is a vast difference between each of these terms:
- customer current value
- customer historical value
- customer present value
- customer lifetime value
Getting basic definitions right is crucial to successful acceptance of your customer value measurement techniques. Each of the value metrics identified above has validity - there is no one right answer or single version of the truth that everyone seeks. The reality of customer value measurement is that the techniques and policies used to define the metric must be... -
0 comments 1,357 readsPosted on 2009-12-15
Customer value helps identify the top tier customers we need to focus retention activity on, but what of the other 80% of customers who generate nominal or even negative contribution? Are they naughty or are they nice to have in your portfolio?
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