Fleet Financial Group has chosen customer profitability software from PMG Systems Inc. for its data warehouse.
PMG's software will manipulate data fed into it from Fleet's $28 million warehouse, launched last summer.
Fleet officials have said they expect the data warehouse to add $100 million a year of revenue by 2001. Financial terms of the PMG deal were not disclosed, but a PMG spokesman said Fleet tentatively expects the software to pay for itself in six months and pay back more than fourfold in 18.
A Fleet spokeswoman said bank officials will not give more information about the installation until the merger with BankBoston, which is exepcted to take place Sept. 1.
PMG's Customer Profitability Management System, or CPMS, will be used to measure the profitability of the merged bank's 20 million customers.
CPMS tracks the costs of serving a customer, which tend to be highest for those who use branches.
Fleet already uses PMG's Integrated Profit Management System, IPMS, which calculates product and organizational profitability. At Fleet, data from IPMS will feed into CPMS, said Jeffrey Slowick, PMG Systems project manager for the installation.
Fleet's IPMS also is being integrated with Computer Sciences Corp.'s Earnings Analysis System, formerly a Hogan Systems product. Unlike IPMS, EAS does not use activity-based costs to calculate product profitability, according to Mr. Slowick.
With IPMS, Fleet can capture costs related to different types of transactions, such as teller salaries, courier fees, operational processes, and technology, Mr. Slowick said. This lets managers compare expenses related to customers making branch deposits versus those of customers those making mail or automated teller machine deposits.
Besides Fleet, Canadian Imperial Bank of Commerce, First Union Corp., and PNC Bank Corp. are using CPMS, which was introduced in 1997.
Rick Miller, vice president of customer marketing at Canadian Imperial, said CPMS has "fundamentally changed our business processes."
Before becoming the first bank to install CPMS, Canadian Imperial segmented customers by the amount of funds they held. Now the bank also analyzes the actual transactions customers conduct, by channel, to calculate the cost of serving each one.
The bank now records "wild differences" in the profitability of customers who hold the same amount of assets, Mr. Miller said.
The information is helping Canadian Imperial to conduct better marketing campaigns and develop strategies based on customers' profit potentials, he said.
Highly profitable customers with potential to become even more profitable are now more easily identifiable and given personal attention, Mr. Miller said. Low-profit, low-potential customers are encouraged to bank through less costly channels, such as the telephone or ATM.
West Chester, Pa.-based PMG Systems was spun off from KPMG Peat Marwick 10 years ago. The company is preparing to go public in about two years, said Greg Nolan, chief executive officer.