The profit decile report: an eye-opener.

• Author: Coffey, John J.
• Position: Database Marketing

There are dozens of reports within a CRM that contain some aspect of profitability, but the most eye-opening report for us is the profit decile report. This report can communicate more to your senior management and your board than any other CRM report. The reason this report is so important is that it can show: (1) Who your most profitable (and least profitable) customers are; and, (2) Why they are profitable or unprofitable.

If you were to ask your bank's leadership what they thought about the profitability of your customers, they would probably say that 20 percent of the bank's customers provide 80 percent of the bank's profits--and they would be wrong. The fact is that it is much worse than this!

In fact, the top 1 percent of the bank's customers can provide up to 45 percent of the bank's profits and the top 20 percent of the bank's customers can provide the equivalent of 175 percent of profits! Furthermore, it is not unusual that only 30 percent of customers are profitable at all. That means that the other 70 percent are at breakeven or pose as a drain on the bank's profits.

So what is this report and what kind of information does it contain? First of all, the CRM builds the profit decile report using account-level profitability within your CRM. Generally, factors used for computing this account-level profitability are determined from outside the CRM, which have been integrated into the CRM. The CRM then aggregates the account-level profitability at the customer level. Then, the CRM divides each customer's profitability by the total profitability within the CRM and places each customer in a profitability percentile.

Finally, the CRM aggregates customer profitability into 1 percent groups called "centiles" and 10 percent groups called "deciles." Each row of the report contains the Centile (e.g., 1 percent, 2 percent, etc.) or the Decile (e.g., 10 percent, 20 percent...