Customer Profitability
Calculate and communicate profitability per customer
Failing to understand how much it costs to sell a mortgage or credit card to one customer over another – and how much it costs to sustain that relationship – can result in marketing to the wrong segments, losing valuable customers or even losing money on seemingly profitable customers.
" The top 20 percent of customers (by profitability) typically generate more than 120 percent of an organization’s profits. The bottom 20 percent generate losses equaling more than 100 percent of profits. Maintaining the top group and improving the bottom will have significant implications for a bank’s bottom line."
Selden and Colvin, Killer Customers: Tell the Good from the Bad – and Crush Your Competitors, 2004
How SAS® Can Help
The key to accurate customer profitability measurements is a system that can calculate the costs of all activities related to serving each customer, which will enable banks to quantify the value of each customer and focus on capturing, retaining and developing relationships with the most valuable clients. With SAS, you can:
- Consistently manage, analyze and report on relevant data by building an integrated software platform that provides access to and consolidation of relevant customer data within your enterprise.
- Calculate cost-of-sale per customer and, thus, profitability by implementing a powerful modeling engine that can calculate the current value and future potential of individual customers.
- Make the most compelling offers to the right customers by creating accurate, analytically derived customer segments that are optimized based on customer behavior and potential profitability.
- Improve your sales and marketing efforts by reporting customer value throughout the organization to those who need it in a format that works best for them.
How SAS® Is Different
Only SAS gives you the ability to calculate profitability down to the individual customer level. With SAS, you get:
- An integrated business analytics framework that includes data integration, storage, advanced analytics and business intelligence tools designed to provide consistent data collection, management, analysis and reporting.
- Activity-based costing methods that let you evaluate the cost to serve each customer, and a sophisticated analytics engine that supports the computer-intensive calculation of customer profitability, so you can generate accurate customer-level profitability measurements that can lead to better segmentation and targeting, which translates into more profitable customer relationships.
- Optimized customer segmentation that incorporates demographic, geographic, attitudinal and behavioral data drawn from multiple sources throughout the enterprise, enabling precise targeting that lets you deliver products and services according to value.
- The ability to identify and measure the profitability of customer segments, along with the behavioral characteristics associated with those segments, enabling you track changes in segment profitability over time.
In addition, the same software platform that supports profitability calculations also lets you manage, report and analyze data for risk calculations, financial management and marketing.
Related Products and Solutions
SAS® Activity-Based Management
SAS Activity-Based Management is an analytic application that models business processes to determine cost, profitability and drivers. With this solution, organizations can make informed decisions that streamline processes, deliver revenue growth and reduce costs across the organization. By providing process, cost and profitability insights, SAS Activity-Based Management reveals how unprofitable customers may be destroying up to 400 percent of your net profit – and helps you understand how to prevent this.
SAS® Profitability Management
SAS Profitability Management provides accurate cost and profit calculations based on the rule-driven allocation of expenses and revenue down to the individual transaction. By providing insight into profitability factors, the solution helps decision makers focus on opportunities for profitability improvement – such as preventing unprofitable customers from destroying up to 400 percent of your net income.
SAS® Customer Analytics for Banking
SAS Customer Analytics for Banking turns raw data into insight that you can use to manage marketing strategy intelligently and increase customer retention. Our integrated software infrastructure enables business users to analyze complex customer behavior hidden in large volumes of historical data. You can then use that information to answer critical business questions, such as which customers are likely to try a new product and which are likely to leave the bank entirely.
Ready to learn more?
Call us at 1-800-727-0025 (US and Canada) or request more information.
