Less-Profitable Customers MayJust Have to Wait

NationsBank Corp. is putting its huge storehouse of account- profitability data to a new use on the front lines of customer service.

The Charlotte, N.C.-based company kicked off a major initiative last week to adjust service and sales efforts according to how much a customer contributes to the bottom line.

Systems capable of calculating individual customers' profitability will make it possible, for example, to let less-profitable customers sit on hold longer than others when they call into a telephone center.

"For everyone, we want to give good service. For our more profitable customers, we need to give better service," said G. Patrick Phillips, president of NationsBank financial products.

NationsBank, whose call centers handled 132 million calls last year, is starting the program with Florida customers, phasing in the changes over three months.

Barnett Banks Inc., First Bank System, and BankAmerica Corp., among others, are similarly in the forefront of using technology to gauge customer profitability. But NationsBank is seen as distinguishing itself by using its customer knowledge for more than pricing and sales purposes.

"It's the most obvious move we've seen by the major banks in this particular area," said Hope Willard, an analyst with J.C. Bradford. "We haven't seen any other banks that are directly adjusting service quality. But it makes sense. You want to raise your service for your more profitable customers."

Banks are increasingly "moving to leverage their data, to match their best people and their best service levels against their best customers," according to consultant Les Dinkins of NBW Consulting Group, Westport, Conn.

However, Mr. Dinkin sees hazards in what NationsBank is attempting.

"One of the major assumptions is that they have a complete understanding of the customer's relationship with the institution," he said. If the bank doesn't, it "runs the risk of potentially providing a lower level of service than a customer would warrant or, more importantly, would expect."

Richard Parsons, president of direct banking for NationsBank, said the Florida program is a small part of a much larger strategic undertaking with "huge ramifications" nationally.

NationsBank began the program April 18, mailing out fliers promoting a 24-hour banking service. Customers calling in are assigned personal identification numbers, on which the bank relies in routing calls on the basis of a predetermined profitability score.

"We'll end up with a virtual call center," Mr. Parsons said. You call one number and the call is then intelligently distributed to one of our six call centers." Customers will be routed "to agents trained to handle their special needs."

The idea is to give customers in the most profitable tier bend-over- backward service within seconds. Customers ranked in lower tiers, who make up 70% of the retail customer base, will be routed to different service representatives. Because of the larger volume, they may experience longer hold times, according to bank officials.

Thirty percent of NationsBank's retail customers are in the top tier, which the company calls "grow and retain." They account for 148% of retail profits. Customers in the second and third tiers lose money for NationsBank. They are referred to as "migrate up" and "lower cost to serve."

Unprofitable customers are defined by bank officials as those who maintain minimum balances to avoid service charges, write lots of checks, and make heavy use of branches and call centers. The people who take calls from these customers will work to raise their revenues, while personnel talking to top-tier customers will focus on retaining their business as well as expanding sales.

The first phase of the program started with about 4% of the bank's Florida customers. The second phase starts May 12, the third June 7. The project will begin in the rest of NationsBank territories over the next 18 months.

Though many major banks are adopting profitability modeling techniques, they are wary about how far to take them. Separating customers into classes can be dangerous from a public relations standpoint, said industry observers.

"I don't think you'll see a whole lot of banks out advertising this," said John A. Pandtle, an analyst with Robinson-Humphrey Co. "You need to focus on customer perception, because you can get too objective. But most of the banks are wise enough to balance the data."

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