Marketing of Financial Services Assignment

Marketing of Financial Services Assignment Words: 415

What are the differences in the way customer profitability is computed at RIB and at Coop Bank? Royal Bank had been experimenting with customer profitability measurement since the early sass’s. It used the aggregate data instead of actual data. As per the model, customers were divided In to three “buckets”. “A” Customers making high profits. “B” customers making small profits. “C” Customers making no profits.

But there was a drawback In the model, that It doesn’t consider the future reparability potential of the category “C” customers. So, RIB contacted NCR Corporation which was developing a software called “Value analyzer” which was supposed to do much faster and accurate calculation with very high volume of complex data. The result came out to be more than expected with a least change of 2 deciles for 70% of the customers. RIB also applied the “Activity based costing system” for calculating the customer profitability.

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RCA not only concentrated on calculation of he present profitability of the customers but also the future potential of the less or non-profitable customers. RCA also experimented on the way to calculate the future profitability and lifetime value of its customers. It looked at two measure to calculate the above. (l) calculating the present value of the profitability of customers assuming that the current profitability percentile of the customer would remain constant throughout his or her projected lifetime.

And (II) calculation of life time value base of individual variables such as age, tenure with the Bank, number of products held etc. And adding up the individual values. Comparing the customer profitability calculation model of Coop Bank and the RIB, RIB used actual net interest revenue by account using internal transfer pricing to calculate the interest revenue whereas the Coop Bank used Average revenue by product. These two banks differed on some other aspects of calculation of customer profitability. Such as, Inputs for profitability calculation I Coop Bank I RIB

Fees and commission I Average fee per product I Actual Fees I Direct Expenses I Average Activity Based costs I Individual account transaction cost I Indirect Expenses I Allocated across products I Allocated across products I Risk Provision I Average risk per product I Expected risk score by account I Q. What are the differences in the way customer profitability is computed at RIB As per the model, customers were divided in to three “buckets”. But there was a drawback in the model.

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Marketing of Financial Services Assignment. (2018, Dec 26). Retrieved November 29, 2021, from https://anyassignment.com/art/marketing-of-financial-services-assignment-32920/