Rbc Bank

Whether bull or bear market, the Royal Bank of Canada is piling up the ROI; and its customer-based strategy gets all the credit.

When it comes to customer-based strategies, it's tough to find a Financial Services Provider as strongly committed as Royal Bank of Canada (RBC). Since its CRM journey began six years ago, the company's customer-centric philosophy is so deeply ingrained, "We no longer view CRM as a program," says Richard McLaughlin, VP for CRM. "This is our core strategy," he emphasizes. "It's our goal to make each relationship profitable."

How is RBC's strategy faring? In 1996, the company was growing revenues at a 10% annual clip, with profits increasing by 10% to 15% annually. "That was respectable for a large, mature organization," says McLaughlin, "but not attention grabbing." Today however, performance is nothing short of stellar. "Even in today's economy, we're running revenue growth from 10% to 15%, and profit growth in the 25% range," explains McLaughlin. "We absolutely conclude that our CRM strategy is paying us back in spades. It has enabled us to grow both the top of house revenue line, and at the same time achieve huge cost savings."

Staying on course

RBC views profitable customer relationships as a journey, not a destination. "We have to continually reevaluate, test, learn, share learning through centers of excellence, and improve our strategies," says McLaughlin. RBC uses three sets of measures that help the company stay on its CRM course.

First, every new investment is subject to the company's standard, capital-allocation procedures. "If we want to introduce new functionality in a CRM context, new pricing, or some new differentiated service," McLaughlin explains, "it goes through the same ROI/IRR business case evaluation process with everything else."

Second, RBC watches "micro measurements" closely: deposit rates, credit limits, direct-mail response rates, etc.; and RBC tests the impacts of these measures on new initiatives. For example, if the group wanted to try something new, it might launch the program with 50,000 customers, then compare results against a smaller, control group. As McLaughlin explains, "We'd look at both cells