Many banks have implemented customer relationship management solutions, although objectives have been pursued through different approaches and with varying emphasis. For example, in centralizing customer information, many smaller banks focused on middle-market or homegrown tools for contact management functionality. Such front-line tools provided useful abilities but few were differentiating or leveraged data to draw out unique insights. These banks primarily relied on their personal relationships and community focus as their customer leverage.
Most larger banks, in contrast, deployed complex CRM solutions to centralize their customer information for grander objectives: systematic tracking of customer profiles, cross-selling initiatives, segmenting, prospecting, analyzing customer profitability and identifying the most suitable candidates for direct marketing programs. Technology and data led, rather than followed the understanding of customer expectations and the impact of these CRM programs on the end customer. And not surprisingly, the CRM promise of greater customer insight and increased loyalty was typically not achieved.
In recent months, however, the attention lavished on the end customer has increased significantly. While data and feature-rich tools are still part of their CRM strategy, many larger banks have recognized that customer intimacy and the overall customer experience are critically important elements toward building differentiation. This new focus will more directly challenge the customer leverage of smaller, community focused banks.
Smaller banks can meet this latest challenge by accentuating their historically deeper customer focus and avoiding the common CRM mistakes of their larger counterparts.
Mistakes from the recent past
So where did many financial institutions go wrong with CRM? A clue lies in the frequent use of phrases like "the war for consumers" to describe the CRM "battleground." This adversarial attitude puts the focus on the company implementing systems and processes and on its rivals - rather than on the customer relationship itself. It's an inside-out view that treats Ae processes, such as selling, as more important than the customer.
The good news for those who have made CRM investments is that the same technology that supports the inside-out perspective can just as well enable a more effective outside-in approach - one that puts the "C" for customer back into CRM. This better way starts with asking questions, not about marketing and sales independently, but about the customer's experiences. It's not the technology that counts, but rather a change-management type of thinking and customer-focused actions that the thinking inspires. Lacking the resources necessary to deliver the same complex CRM technology solutions as the bigger companies, smaller banks can still compete with good middle-market solutions that enable the superior eustomer business focus. Banks can also structure their contracts with third-party outsourcers and hosted systems to have a similar customer orientation focus.
Getting the 'C' back into CRM
Customer experiences to study and learn from should not be limited to the obvious and traditional ones, such as opening the first account or reporting the lost charge card. It's about all stages of the customer's awareness of, or interaction with, a company's brand, products and services.
In the case of payment cards, for example, one can point to six distinct stages constituting the customer life cycle: learning, acquiring, activating, using and managing, obtaining service and changing or canceling.
A main failing of conventional CRM is a typical focus on just one or two of these stages, further limited to a few internally important interactions and metrics. However, a bad customer experience at any of the other stages or interactions can just as easily doom a relationship and too many mediocre experiences can have the same effect in the face of more customercentric competition.
Banks should analyze the gaps between how they want their customers to experience their brand, products and services on the one hand, and what the customers actually experience. Eventually, banks will need to look at all the critical customer interactions throughout the customer life cycle and evaluate each one using the same attributes: consistency, availability, recognition, ease, sensory interaction, appropriateness and value.
Managing the gap in customer experience
To characterize the current state of customer experiences, a qualitative value should be assigned - ranging from "delighting" to "damaging" - to any process that may affect a customer's experience. Banks can then define the desired state - the set of experiences they want their customers to have - and illuminate the gaps between the current and desired states. This gap analysis should reveal where a company can focus process improvement efforts and allocate CRM resources and enhancements.
Ultimately, this gap analysis will reveal if the actual experiences of the customer consistently reflect the value proposition of the business.
Improving the customer experience also requires engaging the customer in a consistent, methodical and regular fashion. What that means in the real world is indicated by a set of best practices assembled from a number of leading companies. The recommendations:
* Develop a customer council - a panel of customers who are consulted regularly for their opinions and suggestions.
* Create feedback mechanisms (in multiple channels) that provide the opportunity for continuous, unprompted feedback.
* Talk directly with customers where they are - in branches or in call centers. Give a voice to the front-line people who are dealing with folks every day.
* Train employees in active listening.
* Make sure compensation and incentive structures reward the employee behaviors that support your customerfocused goals, creating internal support and true customer loyalty.
* Think about the customer experience as a journey that gets refined day by day and manage CRM efforts accordingly, including planning for flexibility.
As some large enterprises are proving out, the resulting loyalty and customers' willingness to buy more and recommend to others will drive increased retention, better margins and greater market share. Companies that succeed in this quest will have more to show than repeat customers for a particular product or service; they will have evangelists for their overall brands.
In reality: true differentiation
The last several years have seen an explosion in rewards programs on payment cards, all designed to win customer loyalty. While this proliferation of rewards programs has resulted in increased card usage, it does not necessarily mean long-term loyalty to the bank. This explains why card customer attrition and chum rates are still very high - ranging from 20 to 35 percent annually. Under many outsourced arrangements, smaller banks have also not retained visibility or access to their card customer interaction data, which makes it tougher to track the consistency of their brand promise and the overall impact to loyalty.
There is no great incentive to stay with one card when the same benefits are available with another, especially when many of these benefits are not relevant to most customers' daily lives. As our consumer in forums will complain, you can earn a lot of miles with a number of cards, but how often is it that customers are able to actually redeem those miles? Even as more "no blackout" cards enter the market, me consumer perception is that the reward itself has become cornmodi tized.
So how can card issuers and their associated smaller banks keep more of their existing customers in a market where every major company is offering competitive rates and rewards? It's not by inundating cardholders with direct mail or telemarketing calls, both of which have mainly resulted in raising the fatigue factor customers are now experiencing. The answer is that what the banks, with their third parties, do to meet customers' specific needs across the overall lifecycle, becomes the differentiator. In a world where products and pricing are becoming more competitive, customer loyalty is increasingly driven by the totality of experiences a customer has with a company.
All products and pricing being equal, the bank with the automated customer service hodine that forces the customer to repeat why he or she is calling three times will lose out to the one with live customer service representatives who not only require that information only once, but have the authority to deal with exceptions, follow up with callers about previous problems or ask how your new product is working out with them
That's a simple fix, but it's also the kind of thing customers notice. Likewise, they also notice when the only time they hear from their bank is when that entity is trying to sell them something. Cross-selling is a way of business, but a call or personalized letter thoughtfully sent at the appropriate time, asking the customer what other options, benefits or programs they want goes a long way toward making consumers more receptive to specific direct mail pieces and telemarketer calls pushing the new programs the bank and its third parties are trying to sell.
Delivering a positive customer experience is an end-to-end proposition, wherein the quality of each key discreet process, and their cumulative quality, determine the overall quality of that experience. Any disconnects along the key processes or in the life cycle can influence a customer's thoughts or feelings about whether or not to do business with your bank.
[Sidebar]
"Customer loyalty is increasingly driven by the totality of experiences a customer has with a company.''
[Author Affiliation]
Alex Sasieta is a global solutions leader responsible for customer preference and experience at MasterCard Advisors, the consulting division of MasterCard International.
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