Ask a senior retail banking executive at a top 20 U.S. bank how he or she plans to increase revenue in the next 12 to 18 months, and you are likely to get a consistent answer: Keep the customers I have and sell them more.
Ask how they plan to accomplish this goal, and the answers may be all over the lot.
The strategies for managing customer relationships you might hear would range from better teller training and incentives through spending millions on service delivery channel software to building a centralized customer database.
Why the inconsistency?
For the most part, it is because no road map for successful customer relationship management exists in the U.S. banking industry. Unfortunately, the situation is quite the opposite. With a 70% failure rate for CRM initiatives, almost any banker can share some horror story. However, there are pockets of success we can learn from - even if from outside of banking. And evidence is growing that investments in some CRM initiatives are paying dividends to well-run companies.
So what are some of the lessons? Though the following is by no means a comprehensive list, it offers food for thought to those about to embark on a CRM journey.
Technology really is a key to success. Measurable economic benefits from CRM efforts require more than courteous service. CRM is about understanding the needs of each individual and offering service accordingly.
Having courteous tellers and customer support representatives is helpful, but when you are dealing with tens of millions of customers, it is impossible - without the proper technology infrastructure - to consistently offer service to each customer that is appropriate to the point and time of contact.
Customer data integration is the foundation of an effective CRM infrastructure. Research shows that the No. 1 reason CRM projects fail is that customer data are ignored.
For example, several large U.S. consumer products and services companies have tackled the CRM challenge by investing huge sums in service delivery channel application software. These are excellent tools for automating transactions, tracking customer contacts, and scripting cross-sales, but the systems in themselves are incapable of producing tangible CRM results.
Before you can take the appropriate action at the customer touch point, you must know what is appropriate. And in order to comprehend this, you must know the person who has contacted you. Customer data integration gathers the information you have on a customer and combines it with outside intelligence sources to give an accurate picture. From this foundation you can do analytics to decide how best to serve the customer. Then you can push that information to the point of contact.
Do not build an "intergalactic superstation" for CRM. Contrary to popular wisdom, CRM success does not require a $150 million investment. Most large U.S. banks already have the major components in place. They need to systematically integrate these components.
Tools are available that enable large companies to integrate customer data from multiple legacy systems, combine the data with outside sources and internal analytic data marts, and transport the information to the customer touch point in real time. These tools can be installed within a reasonable period without the need for big capital expenditures on hardware or software.
Start small. Reengineering the entire enterprise around the customer is a monolithic undertaking and unlikely to deliver tangible shareholder value within a reasonable period. Let's face it, for a number of legitimate reasons, the U.S. banking industry has a product-centric culture ingrained. And frankly, in today's show-me-quarterly-results environment, most senior executives who try to reengineer the enterprise to customer-centric specifications probably will not survive long enough to see the effort bear fruit.
Find a specific business problem and build your CRM project around solving it. However, make certain that the solution you build is scalable so that it can be widely adopted as you realize success.
For example, a consumer finance company with 35 million retail customers first tackled a specific customer retention problem. Once the project began to show economic benefits (within weeks of adoption) it was used to foster cross-selling.
Success breeds support. You can show success and take steps toward an enterprisewide metamorphosis without adversely affecting existing successful business models.
First, install a system to measure the customer's value (which already exists in most large banks). Next, measure the success of your CRM initiative in maximizing the customer's value. Then correlate customer value with shareholder value.
For example, a University of Michigan Business School study concluded that a 1% increase in customer satisfaction yields a 3% increase in shareholder value. Furthermore, given the retail banking group's escalating contribution to overall profit at large U.S. banks, what CEO would not be interested in reducing consumer attrition and increasing products sold per household?
Retail banking is a commodity business. Most retail banking executives intuitively know that to win at it, they must compete at the individual relationship level, which requires a customer-centric approach. But before anyone will venture to overturn the time-tested, product-centric applecart, they will want convincing examples of success.
The concept of competitive differentiation by managing relationships at the individual level is as old as banking. The challenge is for the multi-billion-dollar enterprise - with millions of retail customers, tens of thousands of employees, hundreds of disparate data systems, and more than 10 service delivery channels - to know each customer meaningfully. Differentiation will be in the CRM execution.
