Solved: Customer Profitability Case
Infinity
Bank Case Memo
Case
Summary
The bank was controlling more than 1,800 retail branches
in the U.K., being among the largest banks. As per its management, branch
networks were key to Infinity bank s banking strategy, though this turned out
to be less cost-effective. According to
analysts, the bank was unable to cope with the numerous structural changes such
as bank alternatives, deregulations, and new technological innovations that
altered the interaction means between customers and banks.
Infinity bank’s retail division viewed branches as shop
and by 2003, its branch managers did not realize the most profitable products
and customers, and thus, did not optimize sales. The branch managers were
responsible for the branch’s P&L, and they were supposed to make money and
profits by selling products. This did not turn well as many managers argued
that customers can be profitable overall, despite buying unprofitable products.
And thus, the proposed retail divisions was rejected as too complicated as the
predictability of a product sale leading to a better relationship or future
sale of a profitable product could not be guaranteed.
By 2003, the bank hired Philippa Smith, who
believed that the firm s product-profitability study was critical in detecting
variations in customer profitability in each product and even at the consumer
relationship level. She sampled 1000 customers per product cross-holding from
the bank s databases and utilized the initial product profitability study to
link the bank s services and costs of services to individual consumers. From
her analysis, the most profitable consumer holdings were those that comprised
various products and also maintained huge balances.
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