Segmenting Your Customers As A Profitable Strategy
It pays to give your customers what they deserve—EdgeMark Partners can show you why. Our relationship pricing marketing strategy helps banks specifically target customers according to profitability, offering considerable potential benefit for your organization.
What is relationship pricing?
Experience shows that the top 20-percent of customers can generate a whopping 150-percent of profits, while the bottom 20-percent of customers can drain profits by at least 80-percent.1 Relationship pricing guides you in dividing your customer base into value segments, allowing targeted relationship-building strategies to be developed for the more valuable households and up-sell/repricing strategies for unprofitable ones.
Segment your customers by household
Motivating customers to act in ways that improve profitability requires getting to know your customers as households. Benefits such as fee waivers, best rate incentives, free services or trips can motivate high-value customers to maintain or enhance the banking relationship, while up-sell incentives and the opportunity to avoid fees can motivate mid-tier as well as low-value customer relationships.
The benefits can be substantial
Precision targeting and relationship pricing can help you encourage higher value household relationships, enhancing your ability to: strengthen customer loyalty, grow accounts per relationship, increase deposits, improve profitability per household and reduce resources expended on low-profitability households.
Take 5 steps to improved profitability
In summary, a relationship pricing marketing strategy can help you…
1) Identify your most and least valuable customers.
2) Plan a multi-tiered marketing strategy.
3) Invest in your most valuable customers.
4) Divest yourself of profit-draining households.
5) Build relationships; build profits.
In the long run, precision targeting can generate balances far in excess of any incremental costs.2 For a more detailed look at relationship pricing or to receive a free implementation guide, please contact Scott Highfill at 804.967.2000, ext. 103 or firstname.lastname@example.org.
1 Larry Selden, Angel Customers and Demon Customers
2 Josh Hyatt, “Playing Favorites,” CFO Magazine