Survey the major financial institutions and almost none will admit that they do not have a customer relationship management program.
Even if they are simply using their Marketing Customer Information File to pick customers for cross-sales offers and then tracking responses 60 or 90 days later, this is considered CRM. The term has gotten so watered down that it has become hard to tell who really understands CRM and actually has a performing program.
Where CRM Is Today
At its core, CRM is understanding each customer and providing service accordingly. It is the department store salesperson who calls you when your favorite clothing line goes on sale; the pharmacist who delivers your prescription when you forget to pick it up; the bank manager who covers your check because she knows you get paid on Friday and the deposit is coming.
Banks that have millions of customers and thousands of employees cannot really deliver this type of familiar service, but they have been sold on the idea that with enough technology and enough terabytes of data, they can provide something a lot like it and that it will make them quite profitable.
A CRM programs main goal is improved profitability, right above improved customer satisfaction. Most banks keep plowing money into CRM, but few of them have a good idea what these investments are returning. Some analyst say that in a down economy, it is easier to sell smart marketing solutions. No one seems to notice yet that it is only smart marketing if it gets good results.
Prices vary, and a bare-bones project could run a small bank $250,000. For a conglomerate megabank, however, the cost can be as much as $50 million, and some have invested more than $100 million.
The majority of these efforts are in retail, but corporate customer relationship management is heating up. Its harder to implement on the commercial side, but companies including Huntington Bancshares Inc. and Bank of America Corp. are well on their way to developing the databases to do it.
The trick will be in managing the cultural shift internally. Many corporate banks are showing an interest in the technology, and this segment of the CRM industry is expected to generate $2.25 billion by 2005.
Applying Data
The appetite for managing customer information and supporting sales and revenue through technology is only going to sharpen. There is some disillusionment with CRMs track record, but banks will not abandon it; what they have to do is use it better.
Technology alone is certainly not the answer. The bigger and more elusive needs are better profitability measurement and better processes. Banks have the data to study customer relationships, but theyre still searching for a clearer assessment of what those relationships are worth.
Mr. Foster is the president of BenchMark Consulting International, Marietta, Ga.
