Revenue Management: The true key to customer insight?

The Global Financial Crisis never really went away.  In 2023, Silicon Valley Bank’s unexpected collapse marked the beginning of a significant year for bank failures. The total assets of the banks that succumbed amounted to $548.7 billion, the highest ever recorded in a single year. This surpassed the figures from both 1984, marked by the failure of Continental Illinois (later acquired by Bank of America), and 2008, marred by the collapse of Washington Mutual (acquired by JPMorgan Chase).

The First Republic Bank, headquartered in San Francisco, now ranks as the second-largest failure in U.S. history, followed by Silicon Valley Bank, based in Santa Clara, California, at number three, and New York City’s Signature Bank as the fourth-largest to falter.

Additionally, 2023 also witnessed the voluntary self-liquidation of the crypto-friendly Silvergate Bank, contrasting with the failure of Heartland Tri-State Bank after its CEO reportedly fell victim to a crypto scam. In total, 2023 saw five banks fail, marking the highest count in a single year since 2017.

Alongside the loss of some very well-known names in the industry, Banks have to think about large scale restructuring to shore up balance sheets and march on with the long process of restoring client confidence in the financial system.  One way of restoring that faith is for banks to have a much deeper understanding of the customers and the way in which they transact. 

Transactional Banks now realise that they can no longer rely on their existing siloed view of customer data and management information. Let’s also consider that alongside decades of under-investment in the technology infrastructure to support business goals and ambitions, it is easy to see how the current business operating models have led to an inability to offer attractive bundling of services and dynamic based pricing to target customer segments used to attract deposits to mitigate against liquidity challenges.  Previous blogs have spoken about the value drivers for investing in Revenue Management applications that underpin revenue realisation objectives, and now we will discuss some of the reasons why the MI driven from applications such as EPM from ArcOne can help banks embrace true relationship banking. 

Without a full Revenue Management capability it is impossible for banks to be client centric and as a result they are unable to establish the true value of client relationships. Using AI driven Revenue Management platforms like EPM to drive a single source of transactional truth, it is now possible for banks to analyse their customer base from a more holistic perspective and strive for a single view of the customer and true customer profitability.  The underlying data model of the EPM platform for example allows for the in-depth analysis of all client data to improve sales, marketing campaigns and operational service.  It allows banks to interrogate their product catalogs to understand the ways in which customers transact, but more importantly, why they do so. The transactional basis of the EPM platform provides the raw materials for banks to be able to truly discern what products customers need aligned to what products are most profitable. Having a single view of the customer relationship, and single source of truth across the enterprise, it is possible to compile a complete view of customer behaviour including gaining deep insight and knowledge of customer needs and opportunities that have so far been invisible to the operation.  

EPM has the ability to create ‘what if’ scenarios that allow banks to simply and intuitively identify and evaluate the impact of variations of current and future pricing models – and all in one place.  This gives decision makers, such as product managers, the ability to understand the impact of a pricing change for an individual customer, or an entire segment, and gives the bank a tactical and strategic platform to mould the product set around client need and price competitiveness.  It also allows for marketing campaigns to be instigated around cross selling to targeted customer segments.  This approach allows banks to go beyond selling genericised products and services to all customers, to aligning to a well defined, segmented view of the customer base. Allowing banks to build product bundles with competitive, dynamic based pricing that appeal to target segments is clearly a road to sustainable competitive advantage leading to marketing campaigns to customers who are most likely to respond to upsell/x-sell offers.

Banks that invest in transactional based management information improve the efficiency and accuracy of marketing campaigns leading to delivering the right product at the right price for chosen market segments. Using the management information provided by the EPM platform, banks can test multiple scenarios and ‘what-if’ modelling before committing to the customer base.  Banks continue to bring in new clients and switchers tempted by price and promises made on the quality of service, but there is even more opportunity to sell additional products and services to existing clients leading to a deepening of the relationship and increased share of wallet. 

Increasing the number of products sold per customer is an obvious objective and relationship based pricing allows banks to reward their most profitable customers and increase wallet share.  With this kind of relationship banks can not only understand customer behaviour, but also begin to influence it too.  The resultant MI allows banks to interrogate data to identify profitable and non-profitable customers, and in the case of the latter introduce incentives to steer them towards other products and services. Banks who take this kind of interest in their customers could see a significant reduction in attrition rates therefore halting further revenue leakage.  

Those banks who leverage the analytical tools as a result of transactional revenue management will be able to build profits back into each line of business, or division. The insights gained can be used to improve customer relationship management by rewarding their best customers with attractive pricing on product bundles that are beneficial to the way in which the customers transact, such as using cost effective channels like electronic banking.

Using EPM’s capabilities to improve customer insight has far reaching implications across all divisions of a banking group.  It gives the business the opportunity to improve sales, marketing campaigns, the overall customer experience, and importantly builds a roadmap to true relationship based pricing using a single source of truth. With the EPM platform, true profitability and revenue realization for your products and customers is within reach………