Business: Scientific Method and Pilgrim Bank

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REV: APRIL 3, 2008

TEACHING NOTE

Pilgrim Bank (A): Customer Profitability
Case Synopsis
Pilgrim Bank (A) is the first in a three-case series that analyzes customer profitability in a retail banking setting. The case puts students in the position of a recently hired analyst who has data on a sample of customers and who must make recommendations about whether the bank should charge fees or offer rebates for use of the online channel. The data consist of customer-level information on demographics, online channel use, and profitability. The Pilgrim case series is taught over three sessions of an optional module on data analysis in the second-year elective on managing service operations. The cases are tailored to teach how specific analytic techniques can be used to address widely varying managerial challenges. While there is a separate teaching note for each of the three Pilgrim Bank cases, it is useful here to summarize the collective objectives of the entire case series and then, within each teaching note, to identify its scope of inquiry.

Suggested Assignment Questions
Pilgrim Bank is a three-case series which explores those aspects of managerial decision making that can be critically informed by data analysis. The class session focus on the managerial discussion but knowing which type of analysis to perform under which circumstances will be essential to managing in the presence of customer data. 1. 2. Based on the sample of customer data for 1999, what can Green conclude about average customer profitability for Pilgrim Bank's entire customer population? Is the difference in average profitability between online and offline customers in the sample indicative of a meaningful difference in profitability across these groups for Pilgrim Bank's entire customer population? What role do customer demographics play in analyzing customer profitability for online and offline customers?

3.

________________________________________________________________________________________________________________ Professors Frances X. Frei and Dennis Campbell wrote the original version of this note, “Pilgrim Bank (A): Customer Profitability,” HBS No. 602131, which is being replaced by this version prepared by the same authors. This note was prepared for the sole purpose of aiding classroom instructors in the use of “Pilgrim Bank (A): Customer Profitability,” HBS No. 602-104. It provides analysis and questions that are intended to present alternative approaches to deepening students’ comprehension of business issues and energizing classroom discussion. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Teaching Note—Pilgrim Bank (A): Customer Profitability

4.

How do retail banks make money from their customers? How much variation is there in profit across customers? Based on this, what do you recommend the bank do in terms of matching service levels to customer profit levels? In your experience, how well have financial services leveraged technology to create exceptional customer experiences (as described in “Best Face Forward”)?

5.

Suggested Reading
• Rayport and Jaworski, “Best Face Forward”, Harvard Business Review, December 2004. This article discusses the argument that the way to improve service quality is to organize customer interfaces into a coordinated...
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