When it comes to customer-based strategies, it's tough to find a Financial Services Provider as strongly committed as Royal Bank of Canada (RBC). Since its CRM journey began six years ago, the company's customer-centric philosophy is so deeply ingrained, "We no longer view CRM as a program," says Richard McLaughlin, VP for CRM. "This is our core strategy," he emphasizes. "It's our goal to make each relationship profitable."

How is RBC's strategy faring? In 1996, the company was growing revenues at a 10% annual clip, with profits increasing by 10% to 15% annually. "That was respectable for a large, mature organization," says McLaughlin, "but not attention grabbing." Today however, performance is nothing short of stellar. "Even in today's economy, we're running revenue growth from 10% to 15%, and profit growth in the 25% range," explains McLaughlin. "We absolutely conclude that our CRM strategy is paying us back in spades. It has enabled us to grow both the top of house revenue line, and at the same time achieve huge cost savings."

Staying on course
RBC views profitable customer relationships as a journey, not a destination. "We have to continually reevaluate, test, learn, share learning through centers of excellence, and improve our strategies," says McLaughlin. RBC uses three sets of measures that help the company stay on its CRM course.

First, every new investment is subject to the company's standard, capital-allocation procedures. "If we want to introduce new functionality in a CRM context, new pricing, or some new differentiated service," McLaughlin explains, "it goes through the same ROI/IRR business case evaluation process with everything else."

Second, RBC watches "micro measurements" closely: deposit rates, credit limits, direct-mail response rates, etc.; and RBC tests the impacts of these measures on new initiatives. For example, if the group wanted to try something new, it might launch the program with 50,000 customers, then compare results against a smaller, control group. As McLaughlin explains, "We'd look at both cells to evaluate how both sets perform over a period of time."

Third, the company is keenly focused on "top of the house" metrics like revenue growth, profit growth, cost control, risk, and debt writeoffs. RBC is now entering its third year of reorganizing around customer segments rather than products. As McLaughlin explains, "We now have full P&L accountability at the segment level."

CRM's time is now
McLaughlin believes today's sagging economy is an ideal time for the pursuit of CRM. "These strategies are very effective at reducing costs," says McLaughlin; and over the past three years, Royal Bank has done just that, reducing its cost of acquiring $1 dollar in revenue from 63 to 55 cents. "So even if you don't manage to get the revenue up," says McLaughlin, "getting the costs down is a pretty effective survival technique." And, he continues, "When the economy turns around, it's those companies that have this wired, they're going to come out of the gate the fastest."

Why is Royal Bank succeeding when the press indicates so many others are failing? "When I hear things like 'CRM is a black hole you throw money into,' my response is: 'Unless you view it as a strategy, you've missed it. It's change management. It's strategy. If you view it as a project or a piece of technology, then it becomes just a place to spend money and not get results. So it's all in your attitude and how comprehensively you approach it."

© 2001 Peppers and Rogers Group. Do not duplicate. Copyright strictly enforced.