FirstBank of Rock Creek recently spent $400,000 to develop and implement a customer profitability Customer Profitability analysis system that calculates the monthly profitability of each of its 40,000 customers.'° This system

(LO I, 2,3) also maintains extensive customer-level information about banking and demographic history. FirstBank offers the following services to its customers. (Note: Many customers use multiple services.)

Average Annual Profit Service per Account EMSCKING ACCOURIE Ae ere eee ae eta ee $ 50 SAVINGSIACCOUNT aa. mere ee meert ee re eeee certs ces cc eeeeneeeeeeee 40 SSE LCANVAIG [eO LOL C gee nant manatee wrthemace taactnaie eerie it bn scans 20 Centificate ondeposit account. ter teetne a 300 COnSUIME RF O eI eter suerte Merc ea rM nse cts ee her ne ne 400 OME SGUILVAIMELO nC (CO| Ueeweeetr esetatne tateeeeee teeneeeeee ain 500 FirstBank plans to use its customer profitability information to identify opportunities to market and cross-sell other services, such as home equity lines of credit, to checking and savings account customers.

In small groups, prepare a report or presentation that answers the requirements.

Required

a. Explain what information you want from the customer profitability analysis system to identify checking and savings account customers most likely to be interested in other banking services.

b. Consider the following two checking-account customers with nearly equal and above average profitability. Does selling a home equity loan to each have equal expected profitability? Explain