March 7, 2009

CIBC De-dazzling Customers

A few days ago I received a notification from CIBC in Toronto that the interest rate on my personal line of credit (PLC) was being increased by 1% point. The reason they cited: ‘This change is a result of global credit market conditions that have increased costs associated with lending products.’

This is a great example of what NOT to do! First of all, I suspect that this notification went out to all individuals with PLC’s with no consideration given to the value of the targeted client. In my case, I have been with CIBC for a very long time and have purchased a variety of their financial products including mortages, mortgage insurance, investment services and more than one PLC. I have always made my payments on time and have generated interest revenue for them in the six figure range. The lifetime value of Roy, to CIBC, is very high, and In this particular case I am being branded as a client who is causing ‘increased costs associated with lending products’.

What a crock! High value clients actually provide a disproportionate recovery of CIBC costs due to the level of interest revenue they produce, the continuity of that interest revenue stream over time, and the solid accounts receivable performance the company realizes. We are NOT the cost causers and should NOT be the ones paying the increased costs!

Bottom line: they don’t know who their high value clients are or they don’t have a BE DiFFERENT strategy to treat us differently than their other client groups. In light of their behavior, I am forced to conclude that this is simply a blatant money grab for CIBC intended to help offset the operating cost challenges dealt to them in the economic downturn.

Now is not the time to take action that will annoy clients (particularly high value ones) and force them to consider competitive alternatives. Now is the time for businesses to invest in preserving client relationships and building loyalty. Now is the time for selective relationship investments in client groups that create margins that will sustain extra loyalty building treatment.

CIBC is dreaming in the shade if they believe the PLC rate hike will produce positive benefits for them in the long run; short term irrational pricing decisions rarely do. Lets hope they come to their senses and back off the loyalty destroying path they are on. I have made my opinions known to them. Stay tuned for their reply. Cheers, Roy Osing

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Posted 3.7.09 at 09:27 am by Roy Osing | Read Comments (0) | Leave a Comment