Now that the frenzy over customer relationship management technology is dying down, many adopters are asking why they have not seen the returns they anticipated.
In many cases they still blame the technology, and often their software vendor. In contrast, those actually achieving a return on their investment are looking into their organization and developing a more customer-oriented approach to their operations.
This is different from the "people side" of CRM, which addresses training, adoption, and project design. The companies that will reap benefits from their CRM systems are those willing to take a hard look at their organizational, cultural, and technical DNA.
Historically, banks were designed to process transactions quickly and cheaply. When the industry grew beyond the local community banker who knew every customer by name, the design became based on scale and efficiency. That infrastructure is still in place - in the way departments are organized, in how technology is built, and in the performance metrics used for governance and reporting.
What will make banks successful with CRM is their understanding that those legacy structures can go only so far in supporting a competitive strategy that puts the customer experience at the center. Many companies have installed the systems, but most of the returns have been in lower distribution costs.
Now that banks have moved beyond CRM as "the next big thing," those that want to compete on the strength of customer loyalty are taking a more thoughtful approach. Here are some of the CRM-related initiatives getting attention in 2003.
Customer-Centered
To become more customer-oriented, financial services institutions are looking into their organizational alignment and performance management.In the early days of CRM, banks and brokerage firms concentrated on technology and service-level training. But merely installing processes will not create the desired outcome. If customer loyalty is identified as a strategic advantage, companies must look at how employees are deployed, rewarded, and recognized in ways that change the operating model.
For example, if a retail bank wants to focus on customer retention, front-line distribution staff must have pricing latitude to prevent defections. Providing that pricing authority to branch managers and supporting their decisions, even with governance guidelines, is foreign to most retail bankers. It requires willing participation from risk and compliance officers.
Accountability for cross-sell and up-sell should not be with product or channel management, and the organizational model should clearly dictate accountability for the customer experience. That requires redesigned performance metrics for channel and product managers.
Sales, marketing, and brand development should be put on an equal footing with risk and compliance in strategic planning, and evolve beyond advertising and sales.
Changing Role
Governance has traditionally involved fiscal oversight, risk management, and compliance. However, a move to a customer-centered model requires that banks refocus on broader measurements.
Most bank chief executives know the previous quarter's return on assets. They also can cite traditional fiscal metrics such as return on equity, efficiency, and assets in reserve. But try asking for the net numbers of customers added or lost or the average profitability by household. They probably will not know the answer and in many cases will not even know where to obtain it.
Many companies still do not track their performance in this manner. If an organization is deployed around products or channels, no one is accountable for the customer experience, and therefore no one is measuring it.
A bank that wants to compete on the strength of customer loyalty needs a broader governance process, which means collecting information and using it with fiscal reporting to run the business.
The data needed to put customer (or even segment) performance on the executive dashboard is more readily available at banks that have been through a tactical CRM initiative.
As a result, those that want to strengthen their competitive strategy for customer loyalty are using analysis. They are beginning to govern - not just manage - with customer and financial metrics, which requires a different approach to information architecture and technology investment.
Bananarama
Several years ago Tim Jones, the managing director for the retail bank at NatWest, spent a lot of time and energy convincing analysts that he was perfectly serious about one of his key strategies, which he called Bananarama.He was referring to a song by the pop group titled "It Ain't What You Do (It's the Way that You Do It)."
Now that many banks are either moving into secondary phases of CRM or finding a need for technical upgrades, that idea represents an even more significant opportunity to generate real returns from these investments.
Initial CRM initiatives in financial services were generally IT-intensive and tactical, despite the customer-centered vision evangelized by vendors. In short, the technology was sold on a value proposition that required much more than the technology to realize. As a result, even as the technology matured the market was often disappointed with returns.
In a second phase or technical upgrade, institutions that are more attentive to change management, including business process and strategy work, will get better results. The heavy technical lifting must fit within a larger framework, one in tune with both business and customer outcomes.
There is still considerable short-term use of CRM technology to reduce sales- and service-related expenses, but banks that take the customer experience as an important differentiation see the effect - with more sales and profits.
Quick Diagnostics
Here are a few quick ways to check your institution's customer-centered maturity.Select a business process that is critical to customer profitability and crosses many organizational lines. New customer acquisition or internal cross-sell campaigns are good examples. Map that process end-to-end. Annotate the process map with clear boundaries between departments or roles that contribute to the workflow.
Look at the performance metrics of each person who touches the process (and therefore the customer). Are they aligned throughout? What impact do reward systems and organizational charters have on the customer?
Can you identify clearly the executive accountable for the customer experience? Is that person the senior executive in marketing and distribution? What range of control or accountability does this individual have? (Hint: If the executive with CRM accountability is in IT, or if you cannot identify the one with customer-level accountability, you may want to revisit CRM's importance to your institution.)
Inventory the regular reports that go to the operating and executive committees and the decisions made based on those reports.
Classify the summary values based on the information that they provide by dividing them into groups for fiscal, operational, internal, risk and customer categories. Now plot the decisions taken at committee meetings against those metrics. Are the customer metrics used in parity with others to govern and manage the business?
Beware
With large banks moving from enterprise initiatives to point solutions, 2003 may also be the year we see the abuse of CRM technology run rampant. Like surgical tools, the component software for automating customer interactions can be used to great benefit or to great harm. Cost pressures will extend the trend of using CRM to boost channels' productivity - and banks will end up killing the proverbial goose in the hope of finding a golden egg.
