Customer Profitability and Customer Relationship Management at RBC Financial Group

Royal Bank of Canada (RBC) Financial Group

RBC Financial Group

• Largest Canadian financial institution• 12 million clients worldwide• 700 products• 60,000 employees• C$270 billion in assets• 1.6 billion spent on IT in 2003• CIO: Marty Lippert

5 Major Business Lines

• RBC Banking personal and commercial banking

• RBC Insurance insurance• RBC Investments wealth management• RBC Capital Markets corporate and

investment banking• RBC Global Services transaction

processing

• 54% of Net income

• 1300 branches• 4800 ABMs• 1.4 million

online customers

• 300 offices in 30 countries

• Greatest opportunity for improvement

Insurance8%

Investment15%

Capital Markets

17% Global Services

6%

Banking54%

Banking

Insurance

Investment

Capital Markets

Global Services

RBC Banking

Change in the Industry

• Pre-1990’s 6 largest Banks enjoyed friendly competition

• Internet banking • Lowering of domestic protections • Oligopoly ended increased competition• How to stay competitive?• 1997 study to determine image perceptions

1997 Study

Major FindingCUSTOMER INTIMACY -MOST important FACTOR to the

customer.

Definition - trust, reassurance, a feeling that the bank knows them, understands their needs, recognizes who they are and value their business

This finding identified a whole new era for RBC

- A shift to differentiation based on customer needs

Importance to Client

Financial Institutions Proficiency at Delivering

HIGH

LOW HIGH

Mutual benefits Reciprocity Trust Reassurance Comfort Understanding Convenient Hours ATM access 1-800 Number Internet Banking Short Lines

1997 Study Results

• CRM Vision: Bring together in one place a view of all contacts, transactions, accounts, and interactions with each customer.

• CRM system would provide the following info to personal bankers (PBs): -Address, age, account balances -Contacts customer has had with company -Level of service customer qualified for based on current and

future profitability -What products customer was targeted and approved for -How customer responded to direct marketing

Focus on Customer: CRM

• VP of Marketing and Info Management- Richard McLaughlin-Responsible for CRM infrastructure, info management, alliance banking, internet banking, and privacy

Reorganization Around CRM

Customer Segments

3 Primary Customer Segments & 9 Total Segments A. Key markets:

1. Youth2. Nexus 3. Small business 4. Farming and lifestyle agriculture

B. Growth markets: 5. Building6. Business7. Agriculture

C. Prime markets: 8. Accumulating9. Preserving

• Product– Structured to sell a

specific product to everyone

– Multiple people selling to same customer

• Segment– Structured to satisfy all

needs with all products- Employees concerned

with meeting needs not selling a specific product

CUSTOMERS

SEGMENT

PRODUCTS

C B D A

E

CUSTOMER

Product & Segment Management

1997 1998 1999 2000

McLaughlin hired as VP of Marketing and Info Management

Software selection to facilitate CRM

1997 study creates a platform for CRM

CRM software and practices continue to be modified based on internal & external customer feedback

Info changes focus to profitable/ potentially profitable customers

Timeline: CRM Capabilities

CRM: The Results

• Satisfying customer needs– Important to stay competitive and keep current

customers

• Creating efficiencies– Not only invest in satisfying customer needs but

also save money while doing it

Satisfying Customer Needs

• Focus on customer needs: ensures right products at right time

• More efficient use of customer data-Customized marketing-Levels of service-Product design and pricing

• Increased profitability

$2,898

$2,435$2,208

$1,725$1,772

1998 1999 2000 2002 2003

Net Income by Year(in millions)

RBC Financial Group Net Income

Creating Efficiencies

Better Customer IdentificationBefore CRM: “A”, “B”, or “C” customers

Vague and not beneficial

After CRM: Customers can both be profitable and have

the potential to be profitable

Centrally Generated Sales LeadsBefore CRM:

Every branch had a different way of generating sales leads Low quality, not consistent

After CRM:Generated centrallyAccessible to everyone Reminder to call and offer products

More Efficiencies

Future Plans for CRM

Preference and Choice: Use info about customer’s preferences to design

packages of services at certain points in their life

Life Stages and Segments

Getting Started Building Accumulating Preserving

Graduation

Saving to buy a home

Saving for Retirement

Buying a home

Retirement

Transfer of Wealth/Succession Planning Planning

KEY GROWTH PRIME

Summary of Lessons Learned

• Always keep client front and center-

through process and implementation

• Manage change with communication and vision

• Integrate CRM into business strategy

• Continually reevaluate, test, learn, and improve strategies