"May you live in interesting times" is an old Chinese saying, a backhanded curse perhaps but also a blessing because meeting challenges also can mean creating opportunities.
How to survive and hopefully thrive in these "interesting times" of expensive, expanding regulations and rising innovation costs was the theme of much of the BAI Retail Delivery conference in Las Vegas this week, including a session on relationship pricing and product bundling.
The session, beginning with a play on that old proverb, was presented by Daniel Tuccillo, senior vice president of retail pricing and portfolio management of PNC Bank in Pittsburgh, Pa. He was joined by Bill Handel, vice president of research and product development at Raddon Financial Group in Lombard, Ill.
In the retail banking world, opportunity often comes in the form of providing old and new products and services through both traditional and new channels, which can put the bank or credit union in the position of meeting demand but not necessarily making a buck.
Taking a hard look at individual costs and profits, whether from a product or a person, takes an analytical eye and technology, the presenters said, and with shrinking margins, the time is now.
"Given the impacts of technology, changing customer behaviors and regulations, quantifying the value exchange calculus precisely has never been more critical,"
"We all now really have to look at what that individual customers brings, what their economic value is," he added. Customers also will leave an institution for another based on getting the services they want and the best price available for it, so relationship pricing and product bundling becomes ever more important, Tuccillo said.
Handel at Raddon agreed, and added, "What makes this more interesting is that every new channel adds costs, while others don't go away. Remember when ATMs came along? We thought the branch would go away, but that didn't happen," he said.
The presenters said that as far as holding onto customers and members, checking is the critical factor in defining the primary relationship, with 87% of respondents telling Raddon that in its recent research. The primary relationship also delivers the greatest share of wallet when it comes to adding other products, Raddon found, but the question at the session then became, how do you win their business and keep it?
Rewards programs have become very popular, but Handel pointed out that they only go so far. "Rewards programs generally will not drive consumers to change financial institutions. We found that six out of 10 consumers said they would not move for that reason. They are much better for retention of existing customers," he said.
Tuccillo showed examples of simple and complex rewards and pricing programs at various banks and said a common denominator for successful programs is integration of people and systems across the enterprise.
That kind of integration allows for knowledge gained from data analysis to make its way into the front line of service delivery, using seamless tech tools to move the information along, Tuccillo and Handel said.