The Evaluation On Customer Lifetime Value & Rebuilding Of Business Management System For Commercial Retail-Banking

In the banking sector, retail services will be the basis for future expansion and market dynamism. Locally, as the world economy grows, retail services will be in demand by individuals and families who are accumulating financial assets. Worldwide, the retail sector is being forced towards economic integration and liberalization. Internationalization of trade is pushing commercial banking in the direction of service deregulation, industry consolidation, full service offerings, and international expansion. At the same time trends like the changing technological landscape, especially the widespread use of information technology are changing the way commercial banks manage small balance accounts, manage account scale, standardize accounts, and customize retail service offerings. Retail banking services operate in a strategic market that must respond to all of these trends. The services that respond to these new forces will be the backbone for improving brand recognition, improving market core competitiveness. They will be the starting point for building service depth and breadth, for achieving market scale, and for developing new profit sources.China' s commercial retail banking business is relatively immature. And now with China a member of the WTO it will shortly be exposed to not only strong competitive pressures, but will also be forced to operate in an atmosphere of greater uncertainty. China' s commercial banks must build up a long-term retail development strategy centered not on traditional product offerings but rather on current customer needs. Looking in from the outside, corporate resources have to be strategically reoriented to distinguish its operations and services. Looking from the inside customer interaction has to be reoriented to focus on the consumer. The basis for both of these reorientations is a data based understanding of the customer' s behavior and the relative importance of his business. This understanding is also the core for a sure-footed management system, for monitoring and improving customer service, and for providing modern, high quality financial services.This report extends previous research on customer evaluation and management systems in the commercial banking arena. Based on current definitions of retail banking customer lifetime value, it gives recommendations for developing systems to evaluate customer lifetime value. Based on an understanding of customer lifetime based management, it gives recommendations for changing the current state of China' s retail banking system to improve customer value discrimination, customer follow up, and nurturing; it gives recommendations to improve management capability, and corporate competitiveness.The first section introduces the background of our research topic and our research approach. It proposes that understanding customer lifetime value andorienting management towards customer lifetime management is the only way to compete in a fast paced competitive market environment. This section also describes the limits of the concepts that will be dealt with in the dissertation.The second and third sections of this report consider the development of the commercial retail-banking sector and summarize the current state of customer lifetime management. The second section introduces the retail banking business in developed countries, its historical development and their customers. It compares the foreign experience to the current state of retail banking in China and shows that further development will hinge on understanding customer lifetime value and developing business systems that orient themselves towards customer lifetime value. The third section provides a summary of customer lifetime value and management systems based on it. This section further analyses current research on lifetime customer value in China and the current shortcomings of our lifetime value management practices.On the foundations of the first three sections, the fourth and fifth sections build a conceptual and an operational model of customer lifetime value. The fourth section emphasizes that full understanding of customer lifetime value is synthesized from the customers manifest value, latent value, and growing value. Additionally, from qualitative individual factors, microenvironment factors, and macro-societal factors this section shows which factors influence the customer' s perception of customer lifetime value policies. On this foundation we build a conceptual model. The factors, which influence the customer' s latent value and growing value, are most numerous but their individual effects have different magnitudes. In this section we detail the effect of each factor on customer value. The fifth section uses data mining technology to build an operational model, which can predict customer lifetime value. This model is built up from quantitative data on lifetime customer value. Its purpose is to give a full, scientific evaluation of retail commercial banking customer lifetime value. In this section we choose two dimensions, customer latent value and customer growing value, to show how different customers respond to different operational strategies. Further in a large-scale retail-banking environment it shows how to pinpoint which customers have a high latent value and which customers have a high growing value. It shows how to develop a loyal, stable relationship with the customer, how to increase the customers trust in his banking service provider, how to provide the customer with perceived value, how to protect and increase the customer assets, and in all, how to increase the value of the relationship on both sides.Commercial banks, which wish to expand retail services or improve their competitiveness, must manage and understand the problems inherent in these activities. Both the management and understanding the problems should be based on customer lifetime value along with the special circumstances of the internal and external environment in which the bank operates. Because of this need the sixthsection discusses management system related to lifetime customer value. This section tries to answer the question of how to strengthen service management through standardization and systematization and what practices improve the competitive posture of the company. A management system directed towards developing customer lifetime value not only makes the customer its main focus, it also displays this customer orientation in tangible ways - in the development of its management philosophy and in the management of the customer relationship through its lifetime.The research in this dissertation is a notable addition to previous research in the following ways:First, this research is a complete analysis of customer lifetime value. The systematic and overall approach here considers three essential factors of lifetime customer value: manifest value, latent value, and growing value. It then delineates the factors that have influence on these values. It then relates these values to both conceptual and operational models of customer lifetime value. Concentrating on the manifest value and the latent customer value its possible to discriminate those customers with the highest current value to the company. Through an analysis of the growing value its possible to discriminate the customers with the highest future value to the bank.Second, the methodologies used in this dissertation have wide applicability. The methods here use data mining technology to build up a model of latent and growing customer lifetime value. Further the analysis methods tools used here are far superior to the simple tools and methods that have traditionally been used. In fact, for the research on predicting lifetime customer value in the retail-banking sector are significant in both their systematic and methodical nature.Third, this dissertation provides a basis for management system of the commercial retail-banking. The commercial retail-banking sector already has a well-established management structure and this structure has proven it effectiveness in practice. However, in an atmosphere of increasing competitiveness and unpredictability, it is starting to show its weaknesses. This dissertation discusses how a philosophy centered on customer lifetime value can be instrumental in developing a customer management theory and practice that is dynamic, predictable, and operable. Through this understanding of the customer lifetime value it is possible to organize customer management, direct work in retail offerings, improve business management, and elevate competitiveness. It provides a blueprint and point of departure for management reorganization and improvement in the Chinese commercial retail-banking sector.