Bank uses software to better understand the profitability of its products.

• Position: NEW PRODUCTS

BRIAN CANINA, VICE PRESIDENT AND CONTROLLER, PeoplesBank (assets: $1.6 billion), Mount Holyoke, Mass., says, "ProfitEntree has opened up a whole new world for us. For the first time, we are able to understand the profitability of our products, and how they are being used by our customers." The bank originally installed the software in 2008. The product is offered by Profit Resources, Lakeland, Fla.

According to Canina, with the product, "We came up with costs that everyone bought into, and they are now comfortable with the numbers." The extensive use of incremental costs in the product has really helped to make it take off within the bank," he says.

Incremental costs are the variable costs that are added when booking a new account, or removed when closing an inactive account. Most profitability systems calculate only fully allocated costs that include both fixed and variable costs. The use of fully allocated costs can dramatically understate the profitability of new accounts.

"The use of incremental costs is critical for measuring the success of our marketing campaigns," says Canina. "For instance, we recently ran a campaign to sell new DDA accounts. We used the account-level incremental cost and funds transfer pricing from [the product] to help us calculate the incremental profitability of our...