BankAmerica Corp. is stepping up its customer retention effort as its complex merger with NationsBank Corp. looms.

The California-based banking company is increasing the frequency of programs launched under the highly analytical and technology-driven initiative it began in April 1997.

The goal is to keep the most profitable customers and boost revenue from less profitable or money-losing accounts.

"The more you develop a cohesive customer strategy, the more you can move a customer up the value scale," said Christopher Kelly, senior vice president.

More than 40 systems feed customer data from 38 million accounts into a data warehouse. The bank then separates customers into business and consumer segments using a number of variables, including current profitability, place of residence, behavioral characteristics, demographics, and "channel preferences"-branches versus electronic delivery alternatives.

"The main driver of segmentation is customer value on current profitability," Mr. Kelly said.

The bank then establishes strategies-usually involving changing the price of a basic retail product such as checking accounts-to move customers continually up the profitability ladder.

"We organize around the customer and establish measurable goals for segmentation," Mr. Kelly said. "In order to really make the segments effective, they need to be measurable. To be measurable, they need to be identifiable."

With a relatively low $125 required to open an account with free checking, only 50% of retail customers are profitable, Mr. Kelly said. In a skew typical of leading retail banks, the top 20% of BankAmerica's customers provide 100% of pretax profits, he said.

Bank of America is driving harder to retain these and other desired customers, instituting 12 retention programs in 1998, up from the five it ran last year.

In one tactic, 2,000 financial relationship managers have been assigned to keep in frequent touch with the top 10% of customers according to profits. Many have high net worth, and the bank wants to get them to "feel comfortable with full disclosure," Mr. Kelly said. "Timely communication can drive sales and opportunities."

The bank is also collecting information on "life events," such as marriage, childbearing, home buying, or retiring, and pitching appropriate loan or investment products.

In a program pilot tested in 1997, the bank used predictive modeling techniques on 33,000 small-business customers. The bank said the analysis helped save 2,000 accounts representing 1,400 customer relationships and $12.5 million in liability. The program is now carried out every other month.

The bank also targeted its most profitable small-business customers for a loans-by-phone program.

Bank of America's successes with these programs are leading it to focus on retaining existing customers rather than adding new ones. "Our focus is on our current customer base," Mr. Kelly said.

New customers will be subject to the same retention strategies as longer-standing ones, Mr. Kelly said. He noted that 30% of customers end their banking relationships within the first year.

"As we gain more intelligence on customers, we can recalibrate the segments and see opportunities," he said.

Bank of America uses data warehousing and data mining products from SAS Institute Inc. to support the retention efforts.

When the bank combines with Charlotte, N.C.-based NationsBank, segmentation strategies will become even more important. The new BankAmerica will essentially have double the branches -4,200 branches in 22 states. It will serve 30 million households, compared with BofA's 20 million.

Said Mr. Kelly, "In a world of ubiquitous access, the difference will be the relationship-not just sales to, but servicing of, the customer."

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