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Customer Intelligence Example

The Challenge
Find the opportunity for enhancing profitability.
 
The Organization

A bank with 3 million customers.

Annual revenue per customer: $492
Cost of customer acquisition: $180
Gross margin: 35%

Analysis of Key Business Drivers

A targeted opportunity emerges once this bank contrasts and compares key performance indicators with "best in class" performance for the banking industry. Based on the information in the following chart, this bank should be focusing its attention on retention of high value customers.

Metric Bank Industry Average Variance (Points)
Attrition Rate 24% 15% + 9
Cross-Sell
Conversion%
3% 1 to 2% +2 to +1
Acquisition
Conversion%
1% 1% 0

How Big is the Problem?

Look at what a 24% attrition rate means to this bank…

Customers 3 million
Attrition Rate 24%
Actual Defections 720,000 customers/year
Average Revenue $492/per customer/year
Revenue Lost $354 million per year

What can the Bank Do About It?

The bank could leverage detailed customer data through analytical CRM (Customer Relationship Management)… the kind of solution offered by Teradata. This would give the bank the opportunity to:

Utilize effective customer segmentation: Find and emphasize the bank's most valuable customers
Leverage predictive modeling: Provide insight on who is likely to discontinue the use of the bank's products or services
Take action: Use a personalized offer designed to retain profitable customers
Focus: Marshal resources for effective retention and maximum impact
 
Using a Customer-Focused Strategy to Solve the Problem

Suppose this bank focuses its retention efforts on its highest value customers. It would be reasonable to say that the projected impact could be a 1.2 percentage point reduction in the overall attrition rate.

Assuming the bank made an investment of $4 million in a Teradata solution to address retention, the following chart answers the question

"What does a 1.2% reduction in customer attrition mean?"



Bottom Line

The bank could conservatively expect an immediate increase in its market value of $10.8 million.

This is the type of ROI Clarity the bank can achieve as a result of Teradata's Business Impact Methodology.

ROI Links
* What is a Business Impact Assessment?
* Customer Intelligence Example
* Operational Efficiency Example
* Today's decision, tomorrow's ROI: Teradata's Business Impact Model sees the future of your business.
* "What's the REAL Value of Full Cycle Value Assessment?" Dr. Robert Sweeney, Wright State University


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