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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