Large banks with big in-house IT divisions are often caught in a dilemma -- whether to build or buy the applications they require, keeping in pace with the technological advancements and customer requirements. While in-house development of some generic banking applications -- mainly belonging to the processing side -- could become successful, the same does not work in the case of specialty applications. Hence, large banks sometimes fail to extract the best out of their specialty applications developed in-house! Relationship-based Pricing (RBP) is a classical example of such an application.

Banks around the globe are striving to find the exact balance between the two sides of a scale. On one side, they have to keep the interests of the customers alive by providing utmost convenience. On the other, they have to keep operational efficiency high, in order to ensure cost-effectiveness in operations.

The impact of the recession has been felt among the majority of consumers and, as a result, customers today have very different requirements as compared to what they had six months before. As price sensitivity increases, customers are looking to reduce spend, and they have become more aware of any changes in cost. Financial Institutions (FI) face the increased risk of customers moving their businesses to a competitor and concentrating their banking relationships in order to reduce the amount of fees they would have to pay.

The economic downturn has increased the importance of customer loyalty for service providers across transaction-based industries. In fact, these troubled times carry several opportunities along with the difficulties they bring in. In order to sustain profitability, organizations are leveraging various strategic initiatives that help them increase and maintain customer base, apart from increasing the customer wallet share. Effective customer loyalty programs are prominent among the strategies devised by service providers to help them keep their feet firmly on the ground, without falling into the drain.

Customer profitability is not a new concept; it is indeed elementary. Nonetheless, efficient execution of the endeavors to offer superior benefits to customers based on their total relationship value is certainly not a standard yet in the services industry. We do know that institutions, which prevail and focus on the appropriate processes and translate the outputs into strategies and initiatives for their sales forces, achieve as much as a 30% improvement in average relationship value. But the irony is that the very cost of this 'strategy' formulation and execution could be not worth as much!