Barclays France Improves Customer and Product Profitability

Optimized relationship management, new cost-benefit ratios drive better targeting of sales efforts and distribution channels

By Carole Boustani

Barclays Bank France specializes in providing financial and investment solutions for international, private and corporate customers with high net worth. In a market where competition is rife and market shares are anything but stable, how can valuable customer and product profitability data be translated into increased profits? Patrick Moyon, Director of Management Control, Planning and Project Finance, answers questions on how Barclays France does it.

What is the market context in which Barclays operates?
PATRICK MOYON: In France, Barclays is operating in a market of 4 million customers, which makes it the fourth largest in Europe after Germany, Great Britain and Italy. This market is encountering strong growth while at the same time suffering from heavy fragmentation due to more than 1,000 suppliers. We have, therefore, significant potential to develop our business.

What strategy has Barclays deployed to grow market share and retain customers?
MOYON: The financial awareness and level of expectations of these customers has increased, and in many cases they have accounts with several banks. The key to our success is a distribution model based on personalized relationship management.

What means are available to you for leveraging profitability?
MOYON: There are several, and the key to it all is improving our understanding of each one of them, whether it is the profitability (versus costs), the overall number of products, the optimization of each field of activity (possibly involving outsourcing), the identification of the best distribution channel for each product or even finding specific responses for each customer segment (commercial companies, private banking, international customers).

Barclays France improves its product and client profitability management by using SAS Activity-Based Management. It gives us a new view of profitability by product and client to support action plans for the business and the operations.

With SAS technology, including Enterprise BI Server, we are now able to anticipate our customer needs and target our marketing efforts. But it provides much more than that. We are also able to analyze customer profit and preference together with product profit versus cost for a much deeper understanding of how each affects the other.

What were the factors that sparked your recent management project?
MOYON: Faced with this need to improve our knowledge, there were really two factors that caused us to kick off our management project. First, subsequent to an internal reorganization, we had to integrate a customer base of 1,200 international corporate customers. Second, it was then necessary to merge the business models of two activities recently integrated in the group, namely those of ING Ferri and ING Private Banking, which meant exploiting the synergies and the creation of a common fee structure.

When did the management project begin?
MOYON: Our management initiatives go back to the mid-'90s and have been ongoing. Set up in 1995, our data warehouse already had the management information. Two years later, we developed a tool for measuring the net yield per customer, which was made available to the relationship managers. Then we added a summary analysis and reporting tool. The distribution functionality of this tool has not yet been developed.

The real problem was that the system was not adaptable, and could not provide a basic view of costs or profitability by customer and by product. Our new management initiative rectifies this.

What are the objectives of your new management initiative?
MOYON: The objectives are to improve company management by means of a tool for measuring profitability on a per-customer basis, and at the same time to review the adequacy of the reallocation of our costs. Basically, it is a question of optimizing the cost-benefit ratio and allowing the sales force to adjust its goals for each customer segment, based on profitability criteria.

This means that many of the management teams have a direct interest in this project initiated by Finance Management: for example, Risks Management to define lending policy and set profitability targets; Marketing Management for improved targeting and one-on-one operations, while at the same time standardizing marketing policies for each customer segment; or even Distribution Management, which sees an opportunity to improve the customer knowledge of its financial consultants.

Could you describe the approach taken?
MOYON: Following a framework study carried out in January/ February 2005, we benchmarked the solutions. We had to take account of certain elements guiding our choices, including on the one hand technical constraints (integration of existing architecture, handling large volumes), but also others, such as whether calculations could be audited, the user-friendly distribution of the data or even the integration of management forecasting functions.

We developed a prototype between February and June 2005, which we subsequently deployed for corporate customers. The last quarter of the year was devoted to restructuring costs allocation per cost center, then by activity, product and customer. We are currently in the process of integrating our retail banking customers.

Finally, information is disseminated on several levels: The relationship managers have access to operational profitability data, to which is added the commercial profitability for the bank branch managers and cost center profitability for headquarters management.

How would you evaluate the outcome today?
MOYON: The principal outcome is our ability to have the overview, which allows us to position customers not only in terms of the income they bring but also in terms of their profitability. In this way we have highlighted customers showing negative profitability, the operational implication of which was a review of their balance sheet. So the net profitability per customer is no longer the only criterion taken into account, as it is essential to integrate the profitability criterion into our analysis. More generally, we have an overview of income together with the cost of doing business, and thus a preliminary idea of the cost of the products.

And the learning points?
MOYON: I think it is important to appropriately manage the risks associated with this approach and those linked with the sensitivity of the information obtained and handled, especially by properly defining the objectives of such a project. It is vital to share the same vision of such a decision support tool in terms of the way it is handled and the use to which it is put.

Regarding the implementation, there are two key lessons: the need for an in-depth review of the historical situation before implementing any kind of a forecasting or behavioral approach, and the importance of the synergy generated within the project team.

About Barclays
Barclays is present in more than 60 countries via 800 international branches serving more than 20 million customers. In France, Barclays provides financial and investment solutions for 150,000 international, private and corporate customers, and has more than €11 billion (US$14 billion) under management, via a network of 53 branches.