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 • 54% of Net
17% Global
S ervices
income
6%
• 1300 branches
Investment
15%
• 4800 ABMs
• 1.4 million
online
customers
Insurance
8%
• 300 offices in 30
countries
Banking
• Greatest
Insurance opportunity for
Inve stme nt Banking
improvement
Capital Marke ts 54%
Global Se rvice s
Change in the Industry

• Pre-1990’s 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

Mutual benefits
HIGH Reciprocity
Trust
Reassurance
Comfort
Understanding

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

LOW HIGH
Financial Institutions
Proficiency at Delivering
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 Management-

Richard 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 • Segment
– Structured to sell a – Structured to satisfy all
specific product to needs with all products
everyone - Employees concerned
– Multiple people selling with meeting needs
to same customer not selling a specific
product
PRODUCTS
C
SEGMENT
B D
A E

CUSTOMER

CUSTOMERS
Timeline: CRM Capabilities

1997 1998 1999 2000

McLaughlin 1997 study Info changes CRM

Software
hired as VP of creates a focus to software and
selection to
Marketing and platform for profitable/ practices
facilitate
Info CRM potentially continue to be
CRM
Management profitable modified
customers based on
internal &
external
customer
feedback
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
$2,435
$2,208
$1,772 $1,725

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 customer’s preferences to design
packages of services at certain points in their
life
Life Stages and Segments

KEY GROWTH PRIME

Getting Started Building Accumulating Preserving

Saving for
Retirement
Retirement

Saving to
buy a home
Buying a home Transfer of
Wealth/Succession
Graduation Planning Planning
Summary of Lessons Learned

• Always keep client front

and center-
through process and
implementation
• Manage change with
communication and vision
• Integrate CRM into
business strategy
• Continually reevaluate,
test, learn, and improve
strategies