Improving Retail Profitability

Problem:  The client wanted to have a better understanding of the risk associated with the credit worthiness of customers and to apply this new knowledge to their credit limit policy for each credit card issued to a customer.

Goal: The client asked Fitzgerald Analytics to review long-standing credit limit policy to identify customers with additional profit potential and better manage its risk exposure.

Approach:

• Profitability Analysis: Our team conducted a thorough analysis on profitability by customer segment, educating the client staff in analytical tools to conduct such analysis periodically.
• New Credit Policy: Based on the analysis, FA recommended a new credit limit policy which was tested on a group of new cardholder accounts over a 6 month period. The positive results from the test group resulted in the client adopting FA’s proposal to use profit-maximization approach to each customer group.

Result:  Client credit card sales improved by 15%, year-over-year, which translates into more than $100 million in increased sales. Client has been using the analytical framework created by Fitzgerald Analytics to continue to assess profitability of new credit cards issued by the firm.