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Retail and consumer companies are rife with stories about highly fastidious founders. A colleague recounted how he witnessed the head of a major chain of hotels getting on his hands and knees to personally check if the drip pans under the refrigerators were clean. Similarly, Sam Walton was famous for flying a prop-plane from store to store, and along the way, touching down wherever he saw a promising empty lot for a new store.
Today, leaders need to look beyond physical sites, store managers, and DCs and apply that same discipline to other aspects of their business. The foundation for good decision-making is data.
In today’s volatile environment, managers are adjusting their business in near real-time, and most initiatives require the cooperation of multiple groups and departments. Operating a retail business without consistent, up-to-date, integrated data is challenging and error-prone. Here are the details to focus on: (more…)
Last week, the Wall Street Journal shared that Bank of America is considering changes to its checking account fees. The fees being considered are steep and range from $9 to $25 a month, though customers could avoid fees through actions like maintaining a minimum balance or adding a mortgage.
In this latest step, Bank of America announced that it will pilot these programs in Arizona, Georgia, and Massachusetts. In recent years, many banks have quickly rolled out new programs that ended up not working and hurting performance. For example, Bank of America tried introducing $5 monthly debit card fees but experienced significant backlash and had to roll the fees back.
We are glad to see BofA testing before a broad rollout this time around. This approach will significantly reduce losses from programs that do not work. However, there is more opportunity to understand how to market these types of initiatives. (more…)
APT VP Marek Polonski discusses how testing can help grocers enhance their loss prevention efforts in “Caught in the Act,” an article for Grocery Headquarters.
Banking Strategies featured an article recently describing how banks need to move away from fixed overdraft limits and develop a more nuanced approach. Many are still using the same overdraft limit for all customers. As a result, the limit is too high for some customers making them more likely to default while the limit is too low to properly serve other customers.
Smart credit card providers have become adept at finding the right limit for each type of customer. They test different limits with thousands of prospective customers and compare against random control offers. By measuring the impact of different limits and segmenting the result by criteria like credit scores, they can determine the right limit for each type of customer to maximize revenue and minimize default.
Finding the right overdraft limit is a tougher problem. Banks do not have the luxury of sending offers to tens of thousands of random prospects, and there is risk of losing customers by not getting the limit right. Banks also have a wealth of information about each customer, and it is challenging to know what is important in setting overdraft limits. Is prior balance fluctuation the most important indicator or do factors like tenure or demographics matter more?
To find the optimal dynamic overdraft strategy, banks need to find a way to try different approaches with a limited number of customers. It will be important to both measure the impact of each strategy and to also identify which factors matter most in setting the overdraft limit for a customer. With overdraft revenue squeezed by regulation, banks need to be innovative and rigorous in their approach to maximize revenue and minimize default.