Large corporations often look to their financial systems for a better understanding of their most profitable customers. Unfortunately, most financial systems are not configured to accurately measure the drivers of customer profitability.
Financial Systems Do Not Provide Meaningful Insight
Financial systems do not have the capability of analyzing profit analytics in a complex manner. This prevents corporations from obtaining important insights and can lead to poor financial decision making. Financial systems lack information about reasons why a customer is profitable or unprofitable. Is the decline in profit due to pricing, products mix, channels utilized, marketing activities, or high operating costs? With the data from the financial systems alone, it is difficult to pinpoint.
Profit Analytics Models Drive Actionable Data
With a profit analytics model, corporations can gain information on customer activities, products, and services purchased, and the channels through which customers access them. A profit analytical model is specifically designed to provide a 360-degree view of the customers who are the most and least profitable to your company.
For large banks, the profit analytics model will also reveal insights on hard-to-track variables for institutions such as teller activities, customer relationship management, ATM interactions, loan processing and more within the system. The most intelligent banks use the profit model as an analytical and behavioral tool to focus attention on critical aspects of business and find the best ways to improve profitability.
The Importance of Profit Analytics
The major benefit of analyzing profitability is the ability to drill deep into the factors that determine the causation of differences in customer profitability. For instance – if you can identify the key factors impacting customer profitability are transactional or channel based, profit analytics could allow you the opportunity to focus on customer-facing activities specific to the most profitable channel. These types of insights will allow you to identify and focus on areas of high cost or process inefficiency that need to be improved. Using the profit analytical model you can then base future forecasting and strategy on specific, actionable, and reliable data.
Profit Analytics Are Worth The Investment
The total implementation of a profit analytics solution requires design, implementation, training, and maintenance resources. The installation can be a very involved process, but the deep profit analytical insight is well worth the investment. Profit analytics systems yield a wealth of information on all dimensions of profitability and their underlying operating costs, highlighting key areas for improvement. Identify customers who yield the highest return on investment with mathematical certainty. Confidently make the difficult decisions that would normally be a massive subject of debate internally.
Take The Guess Work Out of Big Decisions
Until now, corporations have largely been guessing when deciding what services their customers want, and how to make money on those services. Expansion into new digital and mobile channels like online banking and mobile apps are large investments and require analysis to ensure profitability. For healthily and profitable growth, industry leaders need to utilize the insight that profit analytics provides so they can be confident when making difficult and more importantly expensive decisions.
Benefits of Profit Analytics Software Implementation:
- Retention of profitable customers
- Customer development model based on risk adjusted lifetime value
- Discover optimal pricing of services
- Development of new products and services for profitable customers
- Create profitable channel strategies including mobile and Internet
- Restructuring of branches based on profitability
- Process improvement and cost reduction at the corporate and branch level
Want to see how our Profit Analytics Software can benefit your company?
Peter B. B. Turney Kogan Page, 1996 – Activity-based costing – 322 pages