Banking & Financial Institutions
- The bank was experiencing flat growth in profitability in its payments business due to a relatively saturated market and, most of all, extensive discounts granted by the sales force.
Situation and Objectives
- One of the main issues was related to the lack of transparency on pricing performance and on the direct costs of delivering the service to clients.
- Essentially, top management was operating under the assumption that driving volumes was more than enough to generate increased returns.
- Sales teams, on the other hand, weren’t provided with any guidance in terms of minimum prices to charge to break-even.
- Simon-Kucher ran an extensive analysis on the pricing performance of each sales team, each geographical area and each product, identifying correlations between discounts and client demographics.
- The objective was to highlight the situations and the types of client that were more likely to deliver insufficient profitability due to excessive discounting.
- Moreover, Simon-Kucher investigated on the real cost of making a payment by allocating direct costs such as materials and network processing, and indirect costs, such as IT and resources.
- This allowed the bank to have transparency both on the revenue generation and the cost allocation on their products.
- Simon-Kucher blended the analyses and created an overall profitability model for each product.
- Therefore, recommending the following points: communicate minimum prices to the sales force; introduce a non-linear pricing model for certain products; launch cash-backs to incentive utilization; re-price the most unprofitable situations.
- 6% increase in payment fees on a yearly basis
- improved pricing and cost transparency
- helped to change the culture from volume-oriented toward profitability-oriented