Akbank Designs Customer-Centric Pricing

The bank is making extensive use of customer data to develop price-sensitive product offers for its customers.
Customer Experience
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Business Boost: Total deposits increased significantly in 2013 compared to 2012. Meanwhile, customer profitability and the cross-sell ratios of deposit customers both rose substantially.

Akbank is one of the largest banks in Turkey, with nearly 1,000 branches and more than $51 billion (USD) in deposits. To help distinguish itself in the highly competitive Turkish banking market, Akbank has endeavored on becoming more customer-focused in all aspects of its operations, including its products, services, communications, and the channel experiences it offers.

Akbank's customer-centric approach also extends to how it prices its products. The bank is utilizing a next-generation CRM system it deployed in 2010 along with pricing analytics and other tools to provide more precise offers to its customers based on a combination of factors: customer needs, price sensitivity, and product and channel propensities.

Before the project was launched in the second quarter of 2012, the operational and analytical capabilities of Akbank's sales force had matured to a level where it had obtained a single view of its customers and their portfolios across a full range of channels. However, the manual and unstructured approach the bank had historically used to price products such as deposits and loans, "was diagnosed to be a main problem in the sales force's daily routine," says Attila Bayrak, senior vice president of CRM at Akbank. That's because previous efforts to price products was time-consuming and didn't focus on unique customer needs.

Akbank launched an initiative in mid 2012 to rebuild pricing processes with the aid of pricing analytics. Customer-centric pricing models were developed using SAS' Enteprise Miner data mining tool and the SAS Enterprise Guide analytics tool. Customer-centric pricing user interfaces were designed using Java and integrated into the workstations used by the bank's sales people. The project team took an iterative approach and started with deposit pricing as its first priority.

Prior to this stage of the initiative, Akbank struggled with a few challenges regarding deposit pricing at its branches. For starters, the bank lacked a well-defined pricing methodology to calculate and create offers for customers quickly and effectively. Sales people spent too much time waiting for approval from headquarters. Delays in interest rate offers to customers impacted customer satisfaction.

Know thy customer

Akbank recognized that its sales force needed to be keenly aware of its customers' needs and expectations. Prior to these efforts, Akbank's sales people would negotiate with customers on prices for its deposit products and then reach out to headquarters for final approval. However, salespeople lacked deep insights into each customer's needs and expectations. The project team addressed these challenges, in part, by empowering salespeople to negotiate offers with customers under a more simplified set of processes along with the use of analytics to craft more precise price offers.

The use of analytics and the new pricing processes have enabled Akbank's sales team to personalize and craft price offers on time deposit accounts (aka certificate of deposit) to its customers based on a number of factors. These include price sensitivity, the deposit amount, and the number of renewals of the time deposit account (CDs).

"With the new analytics and processes, the granularity of price differentiation is expanded and relatively higher interest rates are offered to customers residing at high-competition locations, newcomers, first-ever deposit account holders, and loyal customers," Bayrak says. Loyalty plays an important role in price differentiation, he adds.

Each of Akbank's customers (deposit and non-deposit) receives a price sensitivity and loyalty score monthly based on their segment, demographics, product usage, transactions, and propensities. Key performance indicators (KPIs) established included average cost per deposit, total deposit amount, deposit loyalty, and customer profitability.

Akbank's customer-centric approach to product pricing has generated multiple business benefits. With the increase in customer loyalty the bank has experienced along with a decrease in the time it now takes to open a deposit, the average cost per deposit has decreased. In addition, total deposits increased significantly in 2013 compared to 2012. Meanwhile, customer profitability and the cross-sell ratios of deposit customers both rose substantially while customer satisfaction has also improved.

Says Bayrak, "Creating better customer-centric processes and pricing strategies improves customer satisfaction and loyalty while achieving profitable sales to the customer base."