Pricing Analytics

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Banking Customer Insight
Pricing Analytics
2011
Copyright © 2010 Accenture. All Rights Reserved.

Document Overview
Banking Customer Insight : Pricing Analytics

Title

Description

Sponsors

Developers

Updated

The document briefly describes the concept & methodology adopted in the field of Pricing Analytics
Edwin VanderOuderaa (edwin.vanderouderaa@accenture.com)
John T Mchugh (john.t.mchugh@accenture.com)
Sanjay Ojha(s.ojha@accenture.com)
Gaurav Goyal (gaurav.a.goyal@accenture.com)
Rajat Mawkin (rajat.mawkin@accenture.com)
Anand Premsundar (anand.premsundar@accenture.com)

January 2011

Copyright © 2010 Accenture. All Rights Reserved.

2

Agenda



Market Trends


Accenture Differentiator


Accenture Point of View


Analytics Engine


Delivery Solution


Copyright © 2010 Accenture. All Rights Reserved.

Case Study/Credentials
3

Agenda



Market Trends


Accenture Differentiator


Accenture Point of View


Analytics Engine


Delivery Solution


Copyright © 2010 Accenture. All Rights Reserved.

Case Study/Credentials
4

Advanced Pricing capability is a key success factor for a
Financial Services organization in the current market scenario Global trends in the market
Credit pricing is a key lever to book new clients while ensuring profitability & optimizing risk level

Importance of pricing optimization


Every 1%
improvement in…*

…but it is too often priced on risk measurement (with limited estimation of marketing / client potential)

Copyright © 2010 Accenture. All Rights Reserved.

…yields this much in incremental pre-tax
contribution per annum

Pricing

$6-7M

Loan Losses

Service pricing based on the fee-based income is a key revenue lever • Service pricing for the key advisory financial planning/wealth management services accounts for a major portion of the bank‟s revenues.

• Service price increase has been used to compensate pressure on intermediation margins
External Economic & Politic Pressures
• Increasing pressure of politicians (national level + EU) and consumer protection associations
• Numerous consumer associations pressing on decrease of banking fees
• Trend to price deflation
• In Spain, retail banking price war has generated a 30% decrease of service prices
• In France, some banks have decreased their price by 10% (on key products)
• Pressure on increasing profits of banks

Pricing is the number one driver of profitability

$4-5M

Size of Customer Base

$3-4M

Retaining Current
Customer Profitability

$3-4M

Upgrading Existing
Customers

$3-4M

Processing and
Capital Costs

Based on research on mid-sized retail banks


Banks are developing specific pricing capabilities, transforming their intuitive approach in a fact-based and industrialized process for: • Service pricing
• Credit pricing
• Deposit and savings pricing

5

52% of the top banking executives are of the opinion that
price sensitivity & discount seeking is one the key emerging consumer behavior trend that will impact business
Emerging Changes in Customer Behavior
What do you think are the top three emerging changes in customer behavior that will impact your business over the next 1-3 years?

Executive Opinion on Pricing
52% of the top Banking executives are
of the opinion that price sensitivity,
discount seeking behavior will seriously
impact their business in coming 1-3
years.
Hence banks should focus on
developing advanced pricing capability
with analytics as its foundation.

Source: Accenture Customer 2012 Bank Executive Interviews, Spring 2010

Copyright © 2010 Accenture. All Rights Reserved.

6

Banks face several challenges that prevent them from leveraging the full potential of an advanced pricing strategy
Implementation of a comprehensive Pricing Strategy requires a new approach •

Silo approach

Service pricing, credit rates, and savings pricing...
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