Pilgrim Bank (a): Customer Profitability

Pilgrim Bank (A): Customer Profitability

Alan Green was working as an analyst in Pilgrim Bank in online banking group. He was informed by his boss about a meeting for discussing internet strategy. New channel i.e. online banking channel was getting used and for encouraging customers to use it more there were options of charging fees on use of this channel or offering rebates and lower service charges. The main problem was identifying whether the customers using this channel were better i.e. profitable and its more usage will produce more profits.

Data for the last year was analyzed by him. The customer profitability was dependent on balance in deposits, fees for services, interest due to loans and cost incurred for the services. While analyzing he came to know that most of the profits were due to a small number of customers. Also, there was no relation between balances and profitability for a customer. With the advent of any new technology, the cost per transaction was reduced but the number of transactions increased. Incremental increase in customer transaction didn’t increase the revenue but it caused the cost to increase. So, the only way for company was to move to low cost channels and may be provide some offers in the starting period.

For exact information, Alan has to check the average profitability for customers and compare it with the average given for the population. It will check whether the given sample is the representative of the population or not. Also, the relation between profitability and usage of online bank service is to be found out. This may be done using regression. Further, the data can be clubbed on the basis of age, income and some offers can be provided for some of the users accordingly on the basis of profitability.