A Primary Matters Total Cost of Ownership/ROI Analysis . . .
The Impact of an Inter-Departmental CRM Solution on Large Retail Banks with Multiple-Lines-of-Business
December 10, 2001
Primary Matters, Inc.
Table of Contents
CRM solutions can have a major impact on the bottom line of banks' multiple business units, especially if the business units have some customers in common. This analysis focuses on only one benefit of an inter-departmental CRM solution - providing a summary to the service representatives of a bank's contact centers of a customer's issues across different business units.
As can be seen in the chart below, product revenues increase dramatically. This is due to an increase in the customer life cycle. In addition, the productivity gains in the contact center provide significant cost savings. The productivity gains justify the acquisition of an inter-departmental CRM solution, even when ignoring the revenue increases. The Bank's product costs increase but this is because there are more customers, which is the source of the increased revenue.
This chart focuses on the total of three contact centers. It shows the Total Cost of Ownership (investment, expenses, operations and personnel costs) associated with implementing an inter-departmental information solution in the three contact centers compared to the savings. A CRM investment is recovered quickly based only on the savings enabled by the productivity improvements. Break even is accomplished in only a few months. The increase in revenues, not accounted for in this cash flow and breakeven analysis, is the most important benefit. The increase in revenues does not need to be considered to justify the investment.
The investment in CRM reaches break-even within 3 to 4 months of going into production based solely on the cost savings in the Contact Centers. Noting that the CRM solution does not go into production until Q2, breakeven is in a couple of months after the production date. This chart does not include the benefit of the revenue increases, which provides an even more compelling case for the inter-departmental CRM solution for a bank with multiple business lines sharing customers.
These charts show the annual revenue and profit increases due to the CRM solution's impact on the customer life cycle. A major part of the revenue increase is turned into profits since adding small increases to the customer life cycle leverages the current expense structure.
This chart shows the percentage change in the total revenues, total costs (including contact center costs and the costs of maintaining the credit card, retail and commercial customers), and profitability of these lines of business. An inter-department CRM solution has a major impact on these metrics, especially profitability. This is due to both cost savings in the contact centers and the longer customer life cycle extending the profitable portion of a customer's relationship with the bank.
The model used in this document is of a generic bank. Specific banks may differ, but such differences can easily be accounted for to better understand the specific impact of inter-department CRM features on an individual bank.
In providing this Total Cost of Ownership Analysis, Primary Matters has:
The Bank has three separate business units - Credit Card, Retail and Commercial. The inter-departmental CRM solution affects these businesses in several ways. These businesses, although independent, have customers in common. These customers call the wrong division and need to be transferred, or call one division but have questions that apply to the different business groups. These customer satisfaction and efficiency issues are addressed by the CRM solution.
For the contact center cost analysis, it is assumed that:
For the revenue and product cost analysis, it is assumed that the improvements in customer satisfaction from better service will result in:
Up-selling opportunities have not been included in this example. This refers to the greater ability of the agents to present products from other lines of business to their customers thus increasing the revenue per customer.
Assumptions and Profile of the Bank's Contact Centers for each Line of Business
Contact Center Impact: Annual Operating Budget for the Three Bank Divisions - Credit Card, Retail and Commercial
This budget comparison shows the pre- and post-CRM contact center budget. The productivity improvements are from the interdepartmental CRM features. There is a material impact on the cost side of the bank's major lines of business.
Contact Center Impact: Detailed Assumptions
The analysis of the impact of the inter-departmental CRM on the Bank's customer contact centers assumes the following:
Impact Based Only on Contact Center Cost Savings
This chart shows the ROI for the CRM solution based only on the cost savings in the Contact Centers. The CRM investment is justified solely on the cost savings even though the most important benefits are the revenue and profitability increases to the Bank.
NOTE: For ROI Analyses a Cash Budget is used. The annual and other budget figures differ from others in this document since this is a cash-based budget, and the others are operating budgets where investments are capitalized.
The follow table details the costs associated with the CRM solution across the three lines of business.
This Full Time Equivalent Agent Headcount comparison shows the pre- and post- CRM Contact Center staffing for Agents, Supervisors, and Operations Personnel. Variable personnel headcount (agents and supervisors) is reduced approximately 6%.
Business Unit Impact: Change in the Installed Base of the Credit Card Product Line
These charts compare the installed base of customers in the credit card division before and after the CRM solution is installed. This increase is due to an increased customer life cycle of 1 month from an average of 30 months to 31 months.
These charts compare the installed base of customers in the retail banking division before and after the CRM Solution is installed. This increase is due to an increased customer life cycle of 1 month from an average of 36 months to 37 months.
These charts compare the installed base of customers in the commercial banking division before and after the CRM Solution is installed. This increase is due to an increased customer life cycle of 4 months from an average of 36 months to 40 months.