Banks are increasingly targeting the large and profitable small- and medium-business (SMB) market but struggle to attract, retain, and serve SMB customers due to a lack of understanding of their needs. Accenture helps banks gain insights into SMB customers through analytics to reduce costs and risks associated with growing their SMB business. Accenture pairs analytics capabilities with technologies to create a rich 360-degree view of each SMB customer and tailor interactions accordingly to drive profitable growth.

1. Banks in search of growth increasingly are
targeting the small- and medium-business
(SMB) market, an extremely large segment
offering tremendous profit and growth
potential. However, as many banks have
discovered, SMB customers also are more
difficult to attract, retain and serve. In
our experience, many banks typically have
struggled to grow their SMB business
due to a lack of sufficient insights on the
needs and value contribution of this highly
diverse market.
Accenture can help banks make the most
of their SMB opportunities. We pair our
analytics capabilities and assets, extensive
banking experience, and industry-leading
practices with advanced analytics
software to reduce the time, cost and
risk associated with cultivating a highly
profitable SMB customer base.
Through the combined power of
Accenture Analytics and market-leading
technologies, banks can create and
sustain a rich 360-degree view of SMB
customers, understand the true value of
each customer and customer segment,
and tailor interactions accordingly to drive
profitable growth.
Determining
Customer Profitability
How Analytics Can Help Banks
Profitably Serve Small and
Medium-Size Businesses

2. 1
The SMB Market:
Significant Promise as
Well as Pitfalls
The SMB market is a study in contradiction.
On the one hand, it offers tantalizing promise
for banks. The SMB market accounts for
more than 90 percent of businesses in most
countries and, after some contraction during
the recession, is growing once again.1
In
the United States alone, there are 8 million
small businesses (those with sales between
$100,000 and $10 million) and 160,000
medium-sized business (those with sales
between $10 million and $500 million).2
The SMB market also can be very lucrative:
Small businesses can use up to seven banking
products; medium-size businesses can use
up to 113
. Furthermore, research has shown
that in banking, a 1 percent increase in
SMB market share is worth $580 million
annually.4
For these reasons, the SMB market
is widely seen as offering significant growth
opportunities for banks seeking to expand
their sales and revenues.
Yet with that promise come challenges and
risks. One of the most significant is attrition,
which is common among SMB customers. For
instance, almost 20 percent of SMBs are at
risk of changing their primary bank in the next
year and, even more concerning, 48 percent of
small businesses and 42 percent of medium-
size businesses report they will likely use
another bank for their next banking product
purchase.5
SMB customers also tend to be more costly to
serve, as they are frequent users of higher-cost
channels−especially the branch. And despite
many banks’ tendencies to treat all SMB
customers as basically the same, the market is
actually highly diverse and customers behave
quite differently across products and channels
(as illustrated in Figure 1).
Annual Profitability
Estimate*
Avg. Liability
(Credit/Loan Balances)
Avg. AUM
(Deposits/Investments)
Avg. Annual Fees
No plan to change primary
bank in next 12 months
Very likely use primary
bank for next purchase
Avg. Monthly Contacts
(for the last 12 months)
$8,719
$12,974
$368k
$117k
$300k
$865
60%
85%
28%
64%
18
21
27%
28%
90%
80%
40%
23%
$1,230
$626k
Future State Value Profile
Cost Profile
Current State Value Profile
% Account officers users
% Branch Users
% Call Center Users
*This is an estimate based on self-reported assets and deposit balances combined with
consistently-applied industry averages for net spreads, transactions and maintenance costs.
Barlow Research - National Business Banking Study, 2012
Dissatisfied Personal Bankers Full Service High Value Bankers
Figure 1: Selected Attitudes, Needs and Behaviors across SMB segments

3. 2
Banks Continue to
Struggle to Realize the
SMB Market’s Potential
Given the promise and pitfalls associated
with SMB customers, banks pursuing this
market must be able to not only deeply
understand what these customers want and
need from their banking provider, but also
to determine the value or profitability of
each customer. Doing so is instrumental to
increasing the revenue banks can generate
from the market while minimizing the costs
and risks associated with SMB customers.
Banks continue to struggle to realize the
SMB market’s potential because of several
significant internal challenges.
Organizational challenges: Banks’ “siloed”
organization structures, featuring multiple
profit centers, makes it difficult, if not
impossible, to calculate SMB customers’
profitability and overall value to the bank.
Technology and talent challenges: Banks
often have trouble giving the right people
access to the most relevant, up-to-date cost
information and lack a strong processing
capability to make sense of that information.
Operational Deployment challenges:
Even if a customer’s profitability can be
determined with some accuracy, most banks
do not routinely use those insights to drive
tailored treatments for individual customers
throughout the bank.
Definitional challenges: In many banks,
customer profitability is based only on
customers’ current profitability and does
not include customers’ lifetime value. Both
dimensions are critical.
Accenture Helps Enable
Leading Practices in
Determining SMB
Customer Profitability
To successfully—and profitably—penetrate
the SMB market, banks must overcome
the challenges that impede their ability
to more meaningfully segment their SMB
customers and more accurately determine the
profitability of those segments. Accenture
pairs its deep banking and analytics
experience with market-leading technologies
to create a customer profitability calculation
and reporting capability that enables banks to
more effectively “run the SMB business.” This
capability forms the foundation of five leading
practices−identified through Accenture
research and client engagements−that
drive a greater understanding of customer
profitability and more effective use of that
understanding in customer treatments.
1. Collecting the right data
Often, critical data needed for profitability
analysis resides in many different legacy
applications and product data base silos
across the enterprise. We help banks to
identify, cleanse and aggregate all relevant
data in a centralized environment. Then, we
make the data available for analysis through
a Customer Analytic Record (CAR). Often
developed in a matter of weeks, a CAR enables
banks to create a 360-degree view of a single
customer for use in subsequent analytics
and modeling, and provides a framework to
standardize and automate analytics processes.
2. Determining the
right revenue and cost
methodologies
With the right data cleansed and aggregated,
Accenture works with banks to determine the
proper revenue and cost methodologies to
calculate the profitability of each customer
or segment. Our approach considers related
interest income, fees, transactions, and
expenses. We then identify the appropriate
formulas for calculating net interest income,
and attributing variable and fixed costs at the
individual account level for all retail products.
Several Accenture accelerators help streamline
this process, including comprehensive leading
practice methodologies for Revenue Sharing,
Funds Transfer Pricing, Economic Capital and
sample activity-based unit costing models and
cost transfer/allocation designs.
3. Calculating the profitability
Once the right data is collected in the CAR
database and the cost structures of various
SMB customer segments are determined,
Accenture rapidly calculates profitability
along various dimensions—such as product,
pricing relationship, customer, household,
segment, branch, district, region, and retail
bank, or time period. A multidimensional view
of profitability is critical to identifying the
most appropriate treatment strategies for
each type of customer and customer segment.
4. Using analytics to model
scenarios
Customer profitability is not static. It can
change in response to a variety of factors
or stimuli. Accenture can help banks create
propensity models that explore how potential
changes to factors including interest rates,
pricing, and cost allocations could affect
customer profitability, as well as how a
customer’s lifetime value could change over
time due to changes in customer behavior or
other important factors.
5. Communicating profitability
information and treatment
recommendations to the
organization
Data-driven insights are insignificant if an
organization cannot capitalize on them.
That’s why Accenture helps banks turn an
understanding of customer profitability into
appropriate actions. We leverage leading
business intelligence and data visualization
technologies to feed the output of the
profitability and propensity models directly
to the bank’s customer-facing functions.
Doing so enables bank employees to create
more compelling offers for SMB customers
and determine an interaction approach that is
consistent with each customer’s profitability
profile and value to the bank.
Working with Accenture, banks can quickly
gain a more accurate, deeper understanding of
SMB customer profitability and make it easy
for the enterprise at large to access and act
on customer profitability insights to create
tailored customer interactions. The result can
be a substantial increase in SMB market share
and revenue, as well as more profitable long-
term SMB customer relationships overall.

4. For more information
To find out more about how Accenture can
help banks tap into the significant potential
of the SMB market, or to discuss your business
needs further, please contact:
Tony LoFrumento
Managing Director – Accenture Analytics
Financial Services North America, Enterprise
Analytics lead
anthony.lofrumento@accenture.com
Marianne Seiler, Ph.D.
Senior Manager – Accenture Analytics
marianne.seiler@accenture.com
Reference
1-6 Barlow Research - National Business
Banking Study, 2012.
About Accenture
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with approximately 261,000 people serving
clients in more than 120 countries. Combining
unparalleled experience, comprehensive
capabilities across all industries and business
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collaborates with clients to help them
become high-performance businesses and
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ended Aug. 31, 2012. Its home page is
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