"Customer Value Pricing - maximizing the total value of a customer to a bank throughout all interactions and transactions - has long been the "holy grail" of retail banking. The idea is simple - by identifying the needs of different customers and incorporating that information throughout all interactions, a bank should be able to simultaneously improve customer service and satisfaction as well as increase its own revenue and profitability through optimized pricing for customer value. While the concept is simple, actually realizing the benefits of customer value pricing has proven elusive for many banks. This white paper outlines how banks can realize the concept and create more profitable customer relationships."
Frank Rohde
Nomis Solutions, President and Chief Executice Officer
"To make profitable decisions a lender needs to understand how consumers value its offerings. Despite the substantial impact that price has on profit, it is surprising that many lenders do not have analytic solutions that directly classify customers based on price sensitivity."
Dr. Robert Phillips
Nomis Solutions, Founder, Chief Science Officer & Vice President, Research & Development Professor of Professional Practice in the Decision, Risk and Operations Division, Columbia University
A Forrester Research report advised bank and finance executives, "In order to remain competitive, and ultimately become more profitable, FSIs should invest in the analytical tools, data, and skills to support pricing optimization."
Frank Rohde
Nomis Solutions, President and Chief Executice Officer
This executive whitepaper illuminates the key pricing and process problems faced by most banks. It also provides guidance on how to leverage customer response and better manage through a dynamic market. "In a recent survey of pricing managers across the top 30 banks and finance companies in the US and Canada, 90% admitted that their pricing process was in dire need of improvement."
Frank Rohde
Nomis Solutions, President and Chief Executice Officer
According to a recent study by Economic Intelligence Unit and IBM's Institute for Business Value, 90% of the world's top banks recognize the need for transformation in pricing processes, methodologies, and use of client data. This white paper will evaluate the impact of price optimization for lending and explore potential next steps for banks seeking to upgrade their capabilities.
Pricing optimization has becoming an essential weapon in any bank's arsenal. With early adopters of profit-based pricing noting strategic, financial, and operational benefits, the argument for moving to such a pricing approach may seem obvious today. Among the benefits are 10-20% percent increases in profit margins and improved net present values, process improvements such as greater consistency in the pricing process, and the ability to respond to the market more accurately and on a timely basis.
Bobbie Britting
Research Director, Consumer Lending, TowerGroup
Understanding price sensitivity is critical to understanding how pricing decisions can best achieve business goals such as the optimal trade-off between volume and profit. Nomis research demonstrates that basing pricing and targeting decisions on a detailed understanding of price sensitivity can generate a 10-20% lift in profits.
As regulatory pressures and competition increase in financial services, pricing sensitivity of financial services customers will increase. In order to stay competitive, pricing can and should be used as a strategic lever to achieve an optimal balance between profit and market share. The ability to measure and understand price sensitivity is an essential capability for market leadership.
