Bank Customer Retention a Good Defensive Strategy in Recessionary Times

In an article in CRM magazine, An Opportunity in Chaos, the author reminds us of the idea: "Don't fight forces, use them." To use, rather than fight, the forces of a recessionary environment, focus on customer retention.

SEDONA's take: In these recessionary times, community and mid-tier banks can benefit most from CRM technology by doing the following:

·        Measure customer and household profitability.

·        Identify the 10% of your households that contribute the most profit. (A typical situation for a bank has the top 10% of households contributing 150% of profits, with the bottom 60 percent of households unprofitable.)

·        Focus your limited budget on customer retention efforts for these households.

If you cut defections from your most profitable households from 15% to 10%, you are holding onto an additional 7.5% of your profits (5% additional retained of 150% of profits = 7.5%).