Relative Income per Customer Type

Retail Banking - Financial Dashboard

What Does It Mean?

This is an KPI used in Retail Banking to identify which types of customers bring in the most money to the organization. Like revenue per customer, or customer profitability, the idea is to figure out which category of customer is most valuable to the bank.

Why Does It Matter?

In order to stay competitive, retail banks need to know where they should focus their efforts. If they devote a significant proportion of their budget to attracting customers that ultimately do not bring the most value to the bank, this is bad news for their profits and pricing – and it also suggests there could be a mismatch between the products they offer and the needs of their best customers. This means it’s extremely important for retail banks to figure out which types of customers are making the most use of their offering, and which bring the most revenue, in order to adapt accordingly.

Revenue Per Customer
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How Do You Measure the KPI?

You can work out how much each type of customer spends relative to each other by adding up the sales revenue brought in by all customers in a particular category, and then calculating this as a percentage of total revenue.

What Data Sources Would You Use to Measure the KPI?

Detailed sales data is essential here, as you need to know not only how much you have sold, but also the demographics or status of the customer making the purchase. This could be drawn from your CRM, or a sales management platform.

Give Me an Example…

Your marketing department is looking to plan out its budget for the next year, and the team wants to know which types of customer it should target, from a financial perspective. Using your Relative Income Per Customer Type KPI, you would be able to offer insights on whether the customer group they planned to focus on are really the most desirable to the bank, or whether they would be better off adapting their strategy to attract more customers from a category that typically brings in more revenue.

What Benchmark / Indicators Should I Use?

While it’s great to increase revenues for each customer type, with this KPI, it’s more important to increase the number of customers that belong to the highest-income bracket. This helps you to maximize revenues per customer, even if you attract fewer new customers overall.