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Behavior-based Customer Value: The New Paradigm

Posted By Patricia F. Donohue, Principal, The Marketing Mix, Inc., Tuesday, March 1, 2011
Updated: Tuesday, November 19, 2013

Because of the economic downturn and new regulations, it's never been more difficult for banks and credit unions to grow revenue streams. It's even more difficult without a perspective that provides a clear understanding of account and client value.

Behavior-based value is a vital component in the sales and marketing planning process in this brave new world. The behavior-based approach reflects how individual clients actually use the accounts and services they own with your organization...the balances they keep...the interest they earn...the fees they pay...their channel-specific transactions. This methodology achieves results that are straightforward, provable and actionable. And with these results you can quickly and easily determine both what a client's value is as well as why accounts and customers are profitable or unprofitable.

Focusing solely on more traditional metrics like balances or cross-sell ratio often obscures key conclusions – impacting the success of your revenue improvement plans. For example, you may discover:

  • Households with substantial deposits can be a significant drain on your bottom line
  • Your least profitable clients often have as many services as your most profitable
  • You will have two distinctly different types of high value clients – and the strategies you employ for each group should be drastically different

The ultimate objective of a well-designed model is to provide clear direction on how you can enhance your bottom line. You'll uncover winning strategies for priority client clusters, including:

  • Retention: Focus on maintaining clients who provide 80, 90, or 100% of your company's revenue
  • Cross-Sell: Pinpoint profit-based initiatives to strengthen ROI
  • Product/Pricing: Explore cost/benefit trade-offs of various approaches
  • Prospecting: Target efforts on demographic profiles producing superior results
  • Network Evaluation: Observe the contributions of clients aligned with various business units to help direct service and staffing

Everyone is working with more limited resources these days. By adding a comprehensive value perspective to your strategic planning process you'll compete more effectively by knowing where to focus those resources to achieve the strongest payback.

Patricia F. Donahue will be speaking on this topic at our May conference on Thursday, May 12 at 4 p.m.

Tags:  consumer behavior  relationship  sales  segmentation 

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