Rbc

1. In the post-war era, RBC Financial had devised a philosophy of being “all things to all people.” However, as the banking industry involved and became more deregulated, niche players entered the markets with focused product offerings and several technological advancements re-shaped the industry. In order to keep pace, RBC re-focused its energies on creating an environment of customer attentiveness and satisfaction as a way to retain existing clients and attract new clients. To this end, the bank developed a customer relationship management (CRM) technology which attempted to centralize all critical information about certain key customers and make this information available to certain personnel throughout the bank. RBC also realigned its structure along primary customer segments – Key, Growth, and Prime. The goal was to group customers by the life stage of their banking business and their profitability and to service them accordingly. Given RBC’s CRM philosophy, this structure made sense as it ensured that the appropriate bank personnel would properly service clients in an appropriate manner and that they would have access to key information before interacting with the client. This would lead to a more streamlined interaction and potentially more business. I believe RBC’s new philosophy made the bank better equipped to compete with niche operators as it made the bank more customer-oriented and easy for the customer to navigate. One of the main reasons customers choose to use such niche players is because they are often more efficient and easier to use than larger banks. However, RBC’s new CRM system sought to take away this competitive advantage.

2. Lifetime value computations allow RBC to evaluate the profitability of a given customer over the life of that customer’s potential relationship with the bank. The lifetime value analysis is thus much more comprehensive and appropriate than an annual profitability analysis. An annual profitability analysis almost puts the customer in a vacuum and only looks at what the customer provides to the given year’s bottom-line. However, in many instances, a customer will prosper exponentially and be more valuable to the bank in future years than in the present or near-future. It makes sense to factor this profitability into account when analyzing the customer’s overall worth to the bank and servicing the customer.

3. In order to be successful, RBC needs to compute lifetime values at both the segment and the individual customer level for strategy formulation and execution. RBC’s original profitability model placed customers into three buckets – A customers made the most profit, B customers made some profit, and C customers broke even or lost money. Based on these buckets, RBC would design and implement targeted marketing strategies to customers in each bucket. However, it is important for the bank to also consider each individual’s “lifetime value” regardless of the bucket they reside in. For instance, a customer who is currently losing money (a C customer) but had great earning potential would not be eligible for certain marketing and other offers if the bank did not consider their lifetime value during strategy execution. In essence, RBC needs to remember that customers are often with the bank for their entire lives and the bank needs to tailor its marketing initiatives to the customer accordingly.

4. No, I believe that all employees