Great Dakota Bank Case Study

By Rashmi and Saumyadip

Customer Lifetime Value

Customer

Acquisition

Cost

(A)

Annual Profit the

Customer

Generates (B)Length of Relationship with the Bank (C)

Customer Lifetime value is dependent on three factors

Customer Lifetime Value = (B*C)-A

Customers Acquired–New and Migrating

Customer Base During 6 Months

New Customers added (11750*6) 70,500

Existing Migrating Customers (4000*0.5*6) 12,000

New Customers Signing for Online (11750*0.17*6) 11,985

50%50%

Customers Signing for Online

Existing Customer New Customers

Note: Refer Page No 10

Customer Acquisition CostAcquisition Cost Heads Cost in $

Advertising Campaign 2,000,000

Free Online Service (Cost $0.17/unit) 4,077

Cash Sweepstakes 200,000

Credit for Accrued Bank Fees (Assuming Avg $25 given/Customer) 50,000

Total Customer Acquisition Cost 2,254077

Customer Acquisition Cost/ Customer $ (Total Acq. Cost / No. of Customers) 27.32

Note: Refer Page No 9 and 10, Exhibit 8

Customer Lifetime Value CalculationCustomer Lifetime Value Average A B C

Annual profit generated 273 1283 129 -65

Length of relationship 9.4 9.4 9.6 9.1

Profit * Length 2,566.2 12,060.2 1,238.4 -591.5

Customer Acquisition Cost 27.32 27.32 27.32 27.32

Customer Lifetime Value $ 2,538.9 12,032.9 1,211.1 -618.8

Note: Exhibit 7

Objective–Expand Bank’s Online Presence

Online Customers generate more revenue 42.05/month than offline customer 34.89/month

Online Customers have more accounts (1.96) than Offline Customer (1.56)

Online customers are more active

Note: Table B Page No 5

The Focus Area

Customers are Skeptical and Lack Awareness

Usefulness of Online

Banking

60% of Offline Customers have raised concern

Online Banking Fee

Hard for People to Develop Emotional Attachment

Build Strong Base of Loyal

Customers

Note: Refer Page No 9

Causes of Dissatisfaction and Non-adoption

Service Slow & Difficult to Use 29% 25%

Security Concerns 25% 41%

Price 21% 64%

Reasons Online Customers Offline Customers

Note: Refer Exhibit 12

Remedial Measures

Actions

Reduce Fee

Onetime Gift for 1st Online Transaction

Take Steps to make Bill Pay Hassle Free

Remedial Measures Cont.

Actions

Make the Website more User Friendly

Make it more Reliable, Fast so that Lesser Down Time

More Awareness on Security

Go-Forward StrategyCharge for OTC Transaction - Would Reduce Branch Visit (Highest Cost Incurred $1.59/unit) and may increase online transaction

Make 2 calls to the customer care free per month and then charge for any extra calls - Would reduce call center cost ($1.49/unit) and people may switch to online

Make online fee half to $1.5 from the current $3 for all customers - With Current Campaign, since we are able to double customer enrolment and getting people register for online transaction, revenue won't be impacted much. In the long run this would be more cost effective as future holds in online banking

Online Kiosk in Branches - To Educate people visiting branches about online Banking facility

Reward Points – For each online transaction customers earn points which can be accumulated and then used for buying some products from the catalogue

Note: Refer Exhibit 8