Customer Relationship Management at

Capital One
Rishi Reejhsinghani
Rajat Vij
Anirudh Tiwari

Introduction

This case was prepared by Ulrike Wiehr, the Boston Consulting Group
Capital Ones leaders, Richard Fairbank and Nigel Morris,-Vision of
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 the right product to the right customer at the
right time, at the right price.
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$20 annual fee.
1988 - Signet Bank brought Fairbank and Morris concept and the
concept wasCredit cards are not banking, they are information its all
about collecting information on millions of people that youve 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.
Signet Bank used information based strategy
The case is designed to illustrate how the concept of customer
relationship management (CRM) can be translated into strategy,
organizational design, hiring, marketing processes, and IT
infrastructure of a company.

Revenue

Customers
Capital Ones
M&A department
has, as its main
functions
segmentation,
testing and
analyzing
customer data in
order to
elaborate the companys 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.

Targeting all types of risk profiles, offering different prices and

products.
Customer database distinguishes high-risk revolvers and low-risk
transactors.
The company uses segmentation strategies in its business
practices. This function divides the potential client base into high
risk and low risk categories.

The higher risk clients will pay a higher interest rate and the lower
risk clients will be rewarded for their low risk status by being
awarded a lower interest rate.
With high risk comes profits in the form of higher interest payments
and with low risk come lower interest payments but potentially a
high profit from the monthly interest payments that are practically
guaranteed from the low risk client.
The company tries to maintain its dormant customers through an
alert system.

Competitors

Barclaycard
Lloyds TSB
NatWest
HSBC
RBS
MBNA
Capital One
Egg
Tesco
Goldfish

Market Share
All (%)
24
16
11
10
5
7
7
4
4
3

Market Share
New*(%)
12
8
5
6
4
6
14
6
5
1

IBS for creating competitive advantage for Capital

One
IBS creates a competitive advantage by narrowing sectors for Capital
One to use in its marketing of its various credit card products.
The system is complex but also simple at the same time. IBS
assists Capital One on sending the right products to the right
consumers.

 The products and/or promotions are sent out and tracked.

The tracking allows the company to know which demographic is
responding and which demographic is not. This helps the business with
its competitive advantage.

CHALLENGES

Building a deeper Understanding of Customer Needs

Managing Costs
Co-coordinating Channels

Operations

Capital One aligns its operations with customers requirement.

Rather than taking the assembly line approach, the company
attempts to handle its customers in a personalized and flexible
way.
Low cost efficiency, high quality customer service, flexibility and
associate satisfaction are four measurements that are
cornerstone of a model known as the Big Yellow Square
(BYS) - The BYS indicates that Capital Ones view on operating a
call center differs from most other organizations particularly in
the way it weights" associate satisfaction, which is equal
important as service quality and cost efficiency
Many associates, who dont 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
Another important aspect of Capital ones strategy is the way it
uses customer profitability analysis. Profitability is calculated on
an individual basis to improve the product offer to each
customer.
The element that differentiate Capital Ones operations
department from others is its IT infrastructure

The operations department is divided in four

main areas
Operation Processing: - Handle all back-office operations,
Keying in credit card applications, scanning all incoming

corresponding into a document management system and

Managing vendors such as card embossers & statement printers
and payment from customers
Customer Relations: - Handles incoming calls, Associates use
the sales system SALSA 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, Customer
service associates, as well as sales associates work to an
incentive scheme that encourages sales and quality service.
Sales: Is divided into four units Inbound, Outbound, Retention, and
New Business. Capital ones 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
D.Collections:This department deals with customers who have fallen behind
with their payments. The department is split into three main
areas:
1. Payment Assistance: Associates work with customers who
can able to pay ,put their names in contact with a recruiting
agency or if the customer is ill ,payment may be temporarily
suspended. Offering revised terms, enabling them to make
smaller, regular payments.
2. Recoveries: Look for those customers whose debt has been
charged off and whose accounts are no longer open.
3. Fraud:
The team has two fundamental tasks: to help customers who
have been victims of fraud and to prevent fraud itself.

Conclusion
1. Illustrates successful implementation of a CRM strategy
2. Business model founded on the crucial premise that each
customer requires a different product and service from a credit
card provider
3. Adopted an Information Based Strategy (IBS), to collect
information on customers
4. Test & Learn tests customer related activity in a controlled
condition before it is introduced in the market

5. CRM is viewed as a key strategic process in Capital One; different

depts. work in an integrated fashion towards understanding and

satisfying customers.