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Published by: TowerGroup
Published: Jul. 14, 2008 - 10 Pages
Table of Contents
- Report Coverage
- Introduction
- Challenges of Implementing RBPP
- Best Practices in Commercial RBPP
- Commercial RBPP Providers
- Related Systems
- Summary
AbstractTowerGroup Take-Aways
- Relationship-based profitability measurement and the pricing it mandates requires enhancement to customer relationship management (CRM), product and customer costing, risk assessment, data timeliness, and pricing models.
- As banks overcome challenges to implementing relationship-based profitability and pricing (RBPP), best practices emerge.
- Banks are turning to third-party RBPP solutions that combine deposit, credit, and fee-based products to evaluate pricing scenarios that meet their risk and profitability goals.
- Banks that involve wholesale banking customers in pricing decisions benefit from greater loyalty and improved customer satisfaction.
- Banks combining commercial and small business RBPP with robust CRM have the tools necessary to implement one-to-one marketing for their business customers.
Report Coverage
As a result of the 2007-08 subprime mortgage crisis, banks are facing substantial declines in profitability. US commercial bank net income fell almost 40% from the first quarter of 2007 to the first quarter of 2008. These financial results highlight the importance of setting prices for new and renewing business (individual product purchases by business customers) that provide the bank sufficient profit while sustaining the customer relationship. Often, pricing in wholesale banking is negotiated or market driven, with little attention paid to profitability. Relationship-based profitability and pricing (RBPP) solutions ensure that pricing meets profitability goals.
This TowerGroup Research Note discusses implementation challenges, emerging best practices, and third-party solutions for commercial and small business customer RBPP.
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