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

RBC Banking
Capital Markets 17% Global S ervices 6%

Investment 15%

Insurance 8%

Banking Insurance Inve stme nt Capital Marke ts Global Se rvice s

Banking 54%

54% of Net income 1300 branches 4800 ABMs 1.4 million online customers 300 offices in 30 countries Greatest opportunity for improvement

Change in the Industry

Pre-1990s 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 Finding

CUSTOMER 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

1997 Study Results

HIGH
Mutual benefits Reciprocity Trust Reassurance Comfort Understanding

Importance to Client

Convenient Hours ATM access 1-800 Number Internet Banking Short Lines

LOW

Financial Institutions Proficiency at Delivering

HIGH

Focus on Customer: CRM

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

Reorganization Around CRM

VP of Marketing and Info ManagementRichard McLaughlin
-Responsible for CRM infrastructure, info

management, alliance banking, internet banking, and privacy

Customer Segments
3 Primary Customer Segments & 9 Total Segments
A. Key markets: 1. Youth 2. Nexus 3. Small business 4. Farming and lifestyle agriculture B. Growth markets: 5. Building 6. Business 7. Agriculture C. Prime markets: 8. Accumulating 9. Preserving

Product & Segment Management

Product
Structured to sell a specific product to everyone Multiple people selling to same customer
PRODUCTS C B D A E

Segment
Structured to satisfy all needs with all products - Employees concerned with meeting needs not selling a specific product
SEGMENT

CUSTOMER
CUSTOMERS

Timeline: CRM Capabilities

1997 1998 1999 2000
CRM software and practices continue to be modified based on internal & external customer feedback

McLaughlin hired as VP of Marketing and Info Management

1997 study creates a platform for CRM

Software selection to facilitate CRM

Info changes focus to profitable/ potentially profitable customers

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

RBC Financial Group Net Income

Net Income by Year
(in millions)

$2,898 $2,208 $1,772 $1,725 $2,435

1998

1999

2000

2002

2003

Creating Efficiencies
Better Customer Identification
Before CRM: A, B, or C customers Vague and not beneficial

After CRM: Customers can both be profitable and have the potential to be profitable

More Efficiencies
Centrally Generated Sales Leads
Before CRM: Every branch had a different way of generating sales leads Low quality, not consistent After CRM: Generated centrally Accessible to everyone Reminder to call and offer products

Future Plans for CRM

Preference and Choice: Use info about customers preferences to design packages of services at certain points in their life

Life Stages and Segments

KEY
Getting Started Saving for Retirement Saving to buy a home Buying a home

GROWTH
Building

PRIME
Accumulating Retirement Preserving

Graduation

Transfer of Wealth/Succession Planning Planning

Summary of Lessons Learned

Always keep client front and centerthrough process and implementation Manage change with communication and vision Integrate CRM into business strategy Continually reevaluate, test, learn, and improve strategies