Customer Relationship Management at Capital One (UK

Customer Relationship management at Capital One (UK) (Condensed Version) Presented by:Rakesh Kumar Sharma Vinay Choudhary Sanjay Pandey  Ankit Sinha Sandeep Sahu

About 

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This

the case

case was prepared by Ulrike Wiehr, the Boston Consulting Group

Capital One¶s One¶s leaders, Richard Richard Fairbank and Nigel Morris,Morris,- Vision of creating creating an information-based company rather than a financial services company. Envisioned of Capital One that the strategy for credit card providers should be to deliver deliver µthe right product to the right customer at the right time, at the right price¶.

Continue.. 

1980- The

US credit card market was characterized by the fact that the financial institutions were offering very similar products across the whole spectrum of  their customer bases. Charging a standard 19.8% interest rate and a US$2 0 annual fee.

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1988-

Signet Bank Bank brought Fairbank Fairbank and Morris concept concept and the concept was ³Credit cards are not banking, they are information It¶s all about collecting information on millions of people that you¶ve never met, and on the basis of that information, making a series of critical decisions about lending money to them and hoping they back you.´

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Signet Bank used information based strategy

Note:- The market lacked a customisation of offers. The prevailing story was very much µONE SIZE FI TS ALL¶

About

Capital One

Incorporated

November  1994 in US

Chairman & Chief Executive Officer

Richard Fairbank

President & Chief Operating Officer

Nigel Morris

 1994-2000, the stock price of the company has increased by 1,000%  Company Company average annual rate of about about

40%

 2001 the company handled more than US$ 45 billion in loans and 43.8 customers worldwide, worldwide, serviced by more than 2 0,000 employees.  In 2002 company profitability reached top six credit card issuers.

Growth

of Capital One¶s Rev Revenues enues (Worldwide Operations)

Business 

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Model

Business model of Capital One is founded on the simple, premise that each customer requires a different product and service from its credit card provider. Each customer carries a specific and unique credit risk. The better the company can understand and assess a customer¶s specific risk, the better it can manage it. Risk is a crucial factor in the credit cr edit card business. According to Ian Cornelius ³We¶re in a risk-driven business where one bad debtor can easily wipe out the benefits from 2 0 average customers- thus it¶s vital to manage manage them carefully. It is one of  our competitive advantages to understand and manage these different levels of risk.

Information-Based

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Strategy ( IBS)

The

company uses information technology to accumulate and manage large amounts of data on its customers. This data contain customer demography and behavioral information.

Company executes ³ Test and Learn´ strategy. It is a scientific, hypothesis-driven hypothesis-driven approach to test any customer related activity in a controlled condition on a sample of customers before rolling it out on a large scale. On the basis of this data marketing team develop ideas, design products, and select target customers. On the basis of this information company develop products and the key products are  

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Credit cards with different conditions and designs. Products directly related to the credit card such as card protection plans and p ayment protection insurance (cross selling) Other financial services such as travel insurance.

Customer Relationship Management Practices at Capital One (UK) 

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Managing its relationships with with customers is at the heart of  Capital One¶s strategy. In which the various corporate function are interlinked.  As Capital One managers usually say ³All departments work in an integrated fashion and there are no sites within the company´. Internally the company is grouped in four key activities. Marketing and Analysis (M&A) Operation Information Technology (IT) Human Resources (HR)    

Marketing & Analysis (M&A) 

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Capital One¶s M&A department has, as its main functions segmentation , testing t esting and analyzing customer data in order to elaborate the company¶s marketing strategy, and development of new products and services. In order to segment customer Capital One analytical techniques and tests to identify groups of customers and to cluster them into segments according their  risk profile and behavior. 

Segmentation strategy 

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Capital One targets all types of risk profiles, offering them different products and price accordingly. The company¶s database has many type of customers. Two type of customer  1) transistors´ 2) revolvers

Retention Strategy 

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To

attract ³low risk revolvers´, Capital One may offer them a card with an introductory low rate and no annual fee. Low risk revolvers are price sensitive customers tend to reduce their debt or leave Capital One. With out notifying the company or closing their account.

Operations 

Capi Capita tall On One e align its operations with customers requirement. require ment.

Rather than taking the assembly line approach, the company attempts to handle its customers in a personalized and flexible way. 

Low Low cost cost effici efficienc ency, y, high high qualit quality y custo customer mer servic service, e, flexib flexibilit ility y and assoc associat iate e satisfaction are four measurements that are cornerstone of a model known as the Big Yellow Square (BYS). 

The BYS indicates that Capital Ones view on operating a call centre differs from from most most othe otherr orga organi niza zati tion onss part partic icula ularly rly in the the way way it weig weight hts" s" asso associ ciate ate satisfaction, which is equal important as service quality and cost efficiency. 

Many associates who dont work with operations ,are trained in one or more disciplines. 

When volumes exceed expectations in a particular area, managers take the decision to ask associates to temporarily move jobs to cope with the peaks. 

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Anoth nother er

impo import rtan antt aspe aspect ct of Capi Capita tall One Oness stra strate tegy gy is the the way way it uses uses customer profitability analysis.

Profitability is calculated on an individual basis to improve the product offer to each customer. The element that differentiate Capital Ones operations department from others is its IT infrastructure. IT is used to route calls and provide necessary information to best handle specific calls. The system are updated directly by the call center associates. Once the call is completed, associate enter information in an encoded form into system which will be available for the next contact with the customer. The operations department is divided in four main areas: A.

Operat Operation ion Process Processing:ing:1.

Handle all back-office operations.

2.

Keying in credit card applications.

3.

4.

Scanning all incoming corresponding into a document management system. Managing vendors such as card embossers & statement printers and payment from customers.

Contd« B.

Custom Customer er Relati Relations ons 1.

2.

3.

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A

Handles incoming calls. Associates use the sales system S ALSA when attempting to cross-sell. This allows them to identify suitable products to the customers who is calling and to avoid offering the same products twice. Cust Custom omer er serv servic ice e assoc associa iate tes, s, as well well as sales sales asso associ ciat ates es work to an incentive scheme that encourages sales and quality service. a.

vera ragi ging ng ha hand ndli ling ng ti time me of th the e ca call ll. Ave

b.

ales es po poin intt pe perr co cont ntac actt Sal

c.

uality Q uality

review of their performance is received r eceived weekly.

Feed back is given by the senior management and awards are given to best performing teams or individuals and their pictures are are disp displa laye yed d on inte intern rnal al noti notice ce boar boards ds or appe appear ar in in-h in-hou ouse se publications.

C. Sales:- Divided into four units. 1.

2. 3. 4.

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Inbound Outbound Retention New Bus Busine iness ss

Capital Ones cross-selling system determines the likelihood of customers to buy certain products based on the projected NPV of a product to a customer, and suggest different products to different customers

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Sales system (SALSA) enables targeting cross-sell offers to specific customers interested in particular products.

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Uses accumulated data on customers to suggest how to react to specific customer requests.

D. Collections:- This department deals with customers who have fallen behind with their payments. The department is split into three main areas: 1.

2.

3.

Payment Assistance: Associates work with customers who can able to pay ,put their names in contact with a recruiting agency or if  the the custo ustom mer is ill ill ,pa ,paymen ymentt may be tem empo pora rari rilly sus suspend pended ed.. Offe Offere red d revi revise sed d term terms, s, enab enabli ling ng them them to make make small maller er,, regu regula larr payments. Recoveries: Look for those customers whose debt has been charged off and whose accounts are no longer open. Fraud: The team has two fundamental tasks: to help customers who have been victims of fraud and to prevent pr event fraud itself.

Contd

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The team closes down the old account, writes off any fraudulent charges and transfer genuine transactions into a new account.

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Customers need a higher level of support.

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The fraud team is trained well to treat each case with sensitivity.

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A

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wide range of systems is in place to help prevent fraud, including real time transaction models and account behavior pattern systems.

The fraud customer service team call customers to let them know about fraud. Yet another selling point fro Capital One from CRM perspective.

Co-operation betwe tween M&A and and oper operat atio ions ns  

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Work together when new product introduced. M&A desi design gn the the prod produc uct, t, devel develop op mark market etin ing g mate materi rial al and and follo follow w up customer responses, operations collect regular feedback from customers and make improvement suggestions. To revie review w the the risk risk pers perspe pect ctive ive of pres presen entt as well well as futu future re stra strate tegi gies es enabled through IT.

INFORMATION TECHNOLOGY IT interacts with the company in the foloowing domains: Prospect Prospect Pool and and Solicatio Solication n Manage Management. ment.  Accou Account nt Acquis Acquisitio ition. n.  Account Account servicing servicing and call-ce call-centre ntre techno technologie logies. s.  Core Core sy system stems. s.

Test

and Learn Strategy

HUMAN RESOURCES 1.

ASSOCIATES TRAINING  Hiring & Training  Evaluation  Compensation 2. COMPANY CULTURE  Housing  Culture of Involvement  Continuous Improvement

FUTURE CHALLENGES  Build Buildin ing g a dee deepe perr Unde Unders rsta tand ndin ing g of  Customer Needs  Managing Costs  Co-o Co-ord rdin inat atin ing g Chan Channe nels ls

Customer Complaints  I hav have e been been tryi trying ng to to close close my acco account unt with with Capita Capitall One One with with no success. I have a 500.00 credt limit with a bal of 459.00 and was told that they will close it after I pay it off.  This is outrageous. This is the second time I tried to close my account. Is this legal?

Phyllis of Portsmouth, VA Nov. 12, 2010 

Cont«  I had a $500 credit limit on my capital one. I was clearly under the limit at one point because I had made regular recurring payments monthly and have not charged on the account. Months later (from May to November) I received calls from company. They retorted that I was $274 over my credit limit and my account was now in their  collections office.  I asked asked the rep why all of of a sudd sudden en my acco account unt was over over the the credi creditt as I have made payments and have not made any charges since May. They retorted that my payment for May had bounced and thus a late charge was incurred thus allowing it to go over the limit. Every month it was over the limit they charged me $ 39. When I asked to speak to customer relations, the rep said I had to clear the $274 over the limit fee first.  I was was outr outrage aged d as as I asked asked to spea speak k to someon someone e who would would be able to help--a supervisor was placed on the line and continued to convince me to pay $274.

 She could could do do nothin nothing g to to remov remove e charg charges. es. I felt felt goug gouged ed and and hurt hurt and and ask for a stop payment until I can get a debt relief company to help.But, she said she would send a stop payment form and it will take 2 months (2 business cycles) before it stops. I felt very bad at this point, because they could not honor my request even though I have been diigently allowing recurring minimum minim um payments monthly. monthly.  Capita Capitall One One and and other other credit creditors ors like them them shoul should d be discipli disciplined ned because of their practices. This once was an America where we could freely trust our banks to protect us and our investments. Now they are the monsters that destroy our people and our nation.  The main war on terror is not the Middle East, it's within the boundaries of USA. oberta R oberta

of Mililani, HI Nov. 10, 2010 

http://www.consumeraffairs.com/credit_cards/capital_one.htm

Capital one: Systems Infrastructures

Use of Data