The marketing cube: DIMENSION 1: PROFIT

Many financial organisations either have calculated, or are beginning to calculate profit for each of their customers. This definition of profit, beyond the scope of this paper, involves isolating revenues and costs. Similar to an accountant’s income statement, costs are subtracted from revenues and profitability is recorded. While not an easy exercise, the actual calculation is crucial in understanding one’s customers and in defining where to allocate marketing resources.

Many marketers confuse profitability with long-term value. They are different. Profit is a fact based on previous behaviours. While not all managers will agree with the particular components that are incorporated into profit, all agree it is a definition, not a prediction.

Long-term value, however, is a prediction. It begins where profit ends. Add future revenue and costs to current profit and a long-term value score is computed. It is a forecast, not a fact.

On the surface, and correctly so, the profitable customer needs to be retained. However, is that all there is? Is it not possible that a group of customers exists, that while not currently profitable, could be? How about the individual who does some business with Bank X, but does significantly more with Bank Y? Can Bank X mine its own customer file to locate this potentially profitable individual?

American households that own more than one mutual fund typically have relationships with more than one firm. They spread their business among a variety of companies, as they diversify to minimise risk. This provides investment firms that have a variety of funds offering a significant opportunity to capture additional business. And there is no reason to go looking for prospects. After all, these are current customers. The job is to find them, and this in no easy feat. How can this segment that may have considerable profit opportunity be located?

 

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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