Electronic Billpay

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HARVARDBUSINESS SCHOOL9-602-103 REV: AUGUST 24, 2005FRANCES X. FREI DENNIS CAMPBELLPilgrim Bank (C): Electronic BillpayAlan Green returned to his office after having made an initial presentation of the customer retention data to his boss, Ravi Raman. Although pleased with Green’s analysis, Raman had posed a challenging question. Now that we know the impact of the online channel on retention we need to take it a step further. Does the use of the electronic bilay product have any incremental impact on performance? Is it true that when customers enter in all of their payee’s addresses and billing information that they are less likely to AMC the bank? That is certainly the prevailing assumption. Let’s see if we can add some analytical insight. Green thought about how the online channel and electronic billpay affected retention and wondered how to test it. He knew that his first step would be to continue the regression analysis he had performed with the use of the online channel. In the back of his mind, however, was a concern that regardless of the results. thesion analysis, he still would not know what he could conclude in terms of cause and effect.sd without understanding causal relationships, Green felt uncertain about what he could recommend to the management team in terms of pricing strategies surrounding the electronic billpay product. As he considered what to do after the regression analysis, Green found himself sketching out customer categories for 1999 and 2000. For 1999, these included customers who were offline, customers who were online but without electronic billpay, and customers who were online with electronic billpay. For 2000, he added an additional category of customers who had left the bank. To get a sense of how the online channel affected retention, he attempted to determine how many people had migrated from each state in 1999 to each state in 2000. (Exhibit 1 defines Green’s customer categories for 1999 and 2000; Exhibit 2 presents summary statistics from the additional data on electronic billpay.) Green wondered if these “transition probabilities” would help him understand the causal relationship between electronic billpay and customer retention.Professors Frances X. Frei and Dennis Campbell prepared this case. Some information and identities have been disguised. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.Copyright © 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.This document is authorized for use only by Maja Micevska Scharf at Webster University Leiden until December 2012. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860.

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