While it has become commonplace for banks and thrifts to gather detailed information about their customers, most financial institutions do not use these data very well, according to a study by Mentis Corp.

The Durham, N.C., market research firm said it surveyed nearly 300 U.S. and Canadian banks and thrifts by telephone last fall. It found that 35% of these financial institutions were not identifying customers who could be enticed to use other, more profitable products and services offered by the companies.

Only 14% of the banks and thrifts described their use of customer data as effective.

The results are not surprising, said Mentis research manager Mary C. Knox.

"Bank information systems are structured to track transactions but not to understand entire customer relationships," said Ms. Knox, who wrote the 112-page report. "You need to understand which channels customers use (and) how frequently they use them. These things are not easy to capture."

Banks and thrifts are trying to increase the amount of knowledge they have about their customers. As nonbank firms continue to steal away their business, these institutions are attempting to perfect methods for enticing customers to use more and different bank products and services.

According to the survey, 58% of the banks and thrifts with more than $1 billion of deposits assess the profitability of individual retail customers using methods ranging from complex computer models to less sophisticated data mining.

"For banks to remain competitive, they are realizing that they just have to do this," Ms. Knox said. "It is central to the business."

But once they gather this information, she noted, banks and thrifts are generally ineffective at putting it to work. A major culprit, Ms. Knox said, is the fact that sales staff members are inadequately trained.

"Traditionally, bank staffs have been transaction processors and order takers," Ms. Knox said. "A new skill set is necessary."

The survey also found that few institutions felt able to determine customer profitability accurately. Overall, 23% of banks and thrifts said their assessments were inaccurate; 14% described them as accurate; and 63% did not feel strongly either way.

The accuracy of profitability assessments is harmed when banks and thrifts rely on industry cost averages rather than their actual costs, the survey said.

The study also found that while most banks and thrifts break down customer groups only by demographics, product use, and credit history, a significant proportion of financial institutions-30%-said they plan to begin using profitability to segment customers by yearend.

In addition, because profitability changes over time, more banks and thrifts are looking into grouping customers by estimated lifetime profitability. While 24% of the institutions said they use this criterion, 48% said they plan to do so by yearend.

James McCormick, president of First Manhattan Consulting Group, said most institutions are in the very early stages of developing reliable methods to determine customer profitability. Of those that have adopted workable systems, he added, many have not mastered the art of using the data to boost earnings.

"Customer profitability is only a means to an end, and without a significant investment in creative analysis and change management, the tremendous potential of better customer information will lie fallow," Mr. McCormick said.

However, he added, several banking companies have managed to harness the data successfully.

"There are at least 10 banks that are already enjoying significant bottom-line benefits from utilizing customer profitability information," he said. However, Mr. McCormick would not name the banks he thought were best at using these data.

Charles B. Wendel, president of Financial Institutions Consulting, said Wells Fargo & Co., San Francisco, and Norwest Corp., Minneapolis, are two companies effectively using customer profitability data.

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