The Stratery Research On China’s Banking Deposits Of Differential Pricing

While the interest rate liberalization since1980s delegated the right of pricing to western commercial banks, it also did narrower the deposit-loan rate margins and led to excessive competition for both deposit and lending market share; Increasing personalized service demand raised the request to bank to provide differentiated and customized product and service; Commercial banks find that they must jettison their traditional profitability model and develop a new one to success based on customer value. Can the Pricing and Revenue Optimization model proved to be the success one in other service industries (i.e. hotel and airline) be applied in commercial bank? How to further determine the customer market segmentation? How will segment population react when presented with special price offer? How to optimize the price for the given customer and then lead to commercial banks’revenue optimization.Firstly, the author started the theoretical researching and empirical evaluation in the deposit interest pricing and related service fee pricing context. Based on the analysis of deposit contract’s attributes, micro-structure,demand incentive and categories, and also by referring to the current deposit and related service pricing methods and theoretic studying achievements, the paper summarized out31factors which can impact to deposit and related service pricing, and built up the customized pricing and revenue optimization model to be applied in the deposit and related service pricing areas. Based on the market structure theory, concluded the logistic price react function for deposit and related services’ pricing purpose as well as find the solution to optimize the price in this area; Evaluated the general conditions to implement Pricing and revenue optimization model, proved that this implementation is adaptable; Analyzed the current customer market segmentation methods and practices, and then built up the customer segmentation model based on the statistic factor analysis method; Researched the tactics to apply price differentiation method indifferent customer segments and built up the corresponding strategic theory.Secondly, the paper has done the empirical evaluation of factor analysis using850bank customers’data, and extracted3principal components standing for customer value, cost to serve and customer loyalty separately as expected, and then calculated the Net Relationship Value by accumulate the3principle component as per different contribution weight in explaining the data. The paper has done the empirical evaluation of logistic price react function parameters separately to have customer segment or non customer segment. The result has shown the positive efficiency of this function in terms of prediction to pricing offers’acceptance ratio, with the assumption of non customer segment, the correct prediction ratio is more than90%evaluated by the predictive group data used; with the assumption of customer segment, the correct ratio is improved in further.Finally, the author gives suggestions on how to practice the pricing of commercial banks deposit product differentiation under China’s current conditions. It’s believed that pricing and revenue optimization, which were implemented in other service industries successfully, also can be applied in commercial bank product pricing areas and bring the change of profit models. People need to take more time to study on how to customize the method in commercial bank product pricing context.