<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=815305791870634&amp;ev=PageView&amp;noscript=1">

Echo Partners Community Bank Blog

    Segmentation guides easy strategic choices

    [fa icon="clock-o"]} [fa icon="user"] Howard Lothrop [fa icon="folder-open'] deposit profitability, analytics

    Apple in a paper cutter.jpegSegmentation guides easy strategic choices...

    ...When you use deposit profitability in your segmentation. Here’s how this played out with a client recently.

    They were interested in understanding the differences between their Q3 (low balance but profitable) and Q1 (low balance unprofitable) accounts. Here’s what we found:

    Q3 had average collected balances (ACB) of about $2700 and earned about $32 in monthly profit.

    Q1 had ACB of almost $2100 but lost $10 a month, leading to a $42 monthly profit gap between these 2 small balance segments. You couldn’t tell the difference by looking at the accounts, and you certainly couldn’t understand why without segmentation analysis.

    Turns out the Q3 winners earned about $32 more in monthly revenue (mainly fees and interchange) but also had a delivery cost advantage (fewer transactions, less expensive channels) of about $10 every month.

    The winning prescription here was to increase Q1 revenue while cutting costs. Impose a monthly fee that allows the depositor to “earn out “or reduce some of the fee based on transaction volume/channel used.

    One quick point…Only the segment experiencing the profit shortfall is targeted for fee increases. Everyone else is already delivering profit to the bottom line. #DepositProfitability doesn’t penalize them.

    Do you want to grow your bank profits with little to no risk? Click Here to  Discover How
    Howard Lothrop

    Written by Howard Lothrop

    Subscribe to Email Updates

    Recent Posts