Customer Relationship and Sales Management
Customer Relationship and Sales Management tests the commercial side of banking as a governed activity: segmentation, needs-based advice and suitability, cross-sell without mis-selling, client profitability measurement, incentive design that does not reward bad conduct, and complaint handling that feeds back into process.
Segmentation and the advisory process
- Segment by revenue potential, product intensity, risk and channel preference; service model follows segment value rather than the reverse.
- Know-your-customer and suitability are preconditions of a sale: objectives, time horizon, risk tolerance, knowledge and experience, financial situation. Product risk rating must not exceed the client's assessed tolerance without documented override.
- Needs-based selling starts from a diagnosed gap (funding, hedging, liquidity, retirement) and ends with a documented recommendation and disclosure of fees and conflicts.
Measuring relationship value
- Revenue: net interest spread on deposits and loans, plus fees and FX margin.
- Deduct direct cost to serve, expected loss on credit exposure and a capital charge on allocated capital to reach economic profit.
- Wallet share and cross-sell ratio measure penetration; both must be read alongside attrition and complaint data.
Worked example
A corporate client holds 40m of deposits at a 1.25% spread (500k), 15m of loans at a 2.5% spread (375k) and generates 120k of fees, giving revenue of 995k. Direct cost to serve is 180k and expected loss 45k, so contribution is 770k. Allocated capital is 6m and the hurdle rate 12%, a capital charge of 720k. Economic profit is only 50k. Reasoning: the relationship is barely value-creating, and raising the deposit spread by 20bp (80k) does more for profit than adding 10% of fee volume with the same cost base.
Traps that cost marks
- Quoting revenue or AUM as if it were profit, ignoring cost, expected loss and capital.
- Incentive schemes that pay on volume alone and so reward mis-selling and churning.
- Skipping suitability refresh after a change in the client's circumstances.
- Treating complaints as a service cost rather than a conduct risk indicator.
- Ignoring concentration: a single RM owning an entire high-value portfolio is a key-person risk.