Customer Relationship Management: The Profitablity Challenge

By Hutt, Larry | The Journal of Bank Cost & Management Accounting, January 1, 2000 | Go to article overview

Customer Relationship Management: The Profitablity Challenge


Hutt, Larry, The Journal of Bank Cost & Management Accounting


In the world of finance and accounting, most analytical thinkers deliberate until issues fit neatly into terms of "black" and "white." However, while schooled in these disciplines, thinkers within the industry can still explore the gray area around the issue of customer relationship profitability and arrive at a satisfactory solution.

For example, the executive management of Marshall & 11sley (M&I) Corporation, a $24.4-billion holding company based in Milwaukee, Wisconsin, needed better profitability analysis information within their 28 affiliates and their affiliate's 243 offices. Monthly statements alone did not help them understand their customers' profitability. This lack of information hampered the corporation's ability to maximize their customer's profit potential while, at the same time, staying focused on their needs.

However, reaching this level of information required more than a purchase of profitability software. It required a commitment from senior management and the development of multiple project initiatives.

STRATEGIC SUPPORT

Executive support is critical to an institution's success with customer profitability. Customer relationship profitability is a philosophy foremost and a software solution second. Executives must commit to the concept before adding the technology.

However, often understanding the concept and strategic commitment are key obstacles executives encounter in implementing customer relationship profitability Fortunately, with M&I Corporation, the lack of understanding was not an issue. Instead, senior management ensured the development and communication of strategic project goals. These objectives were:

*To provide a consistent and financially vigorous measurement system for identifying the core components of profitability from a managerial, rather than a legal entity, perspective.

*To identify trends in profitability over time, to allow the effective employment of capital and resources, and to enhance the management of risk.

*To provide a financially sound framework for pricing decisions across product lines and to ensure a vigorous competitive position while maximizing the long-term rate of return for shareholders.

* To influence the perspective of operating managers to focus on longterm profitability and renewed growth.

*To identify strengths and weaknesses through development of benchmarks and analysis of peer group comparisons.

With a set of objectives firmly in place, our team focused our efforts first on retail, with plans to expand into commercial banking. This is important because financial institution managers who do not plan enough for data integration on the front end will complete a portion of the project and realize that they need to go back and redo other systems.

DATA WAREHOUSE FOUNDATION

The foundation for the Relationship Profitability System (RLP) needed to begin with a data warehouse. A data warehouse captures a majority of the information needed by a financial institution to analyze customer profitability. This data can translate into customized reports that employees at all levels - senior management to tellers - can use. By storing information in a central location, the data warehouse allows users to collect and analyze data from across business lines. Prior to this solution, employees relied on a clumsy mainframe system. Before that, people searched for information among piles of monthly reports filled with stale data.

Today, M&I Corporation considers their data warehouse to be essential to its operation, as it is the only place where all system information can be accessed. While PC-based tools are relied upon for additional insight, they all feed from the data warehouse.

Although it remains a primary source for data, the data warehouse does not include all customer relationship profitability information. For example, users must develop activity-based product costs or rely on industry standard costs from other sources. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Customer Relationship Management: The Profitablity Challenge
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.