Most senior executives of financial services companies think customers are dissatisfied with their service, a study suggests.

Nearly 63% of those executives polled by Computer Sciences Corp.'s consulting unit said they think customers are not content with their companies' service capabilities, according to the study. And nearly 93% said excellent customer service will help differentiate their companies from competitors. Such attitudes are leading institutions to make tremendous investments in technology, said Peter Hay, a partner in CSC Financial Services of Waltham, Mass.

"A lot of companies are intending to differentiate themselves by investing millions of dollars, and are expecting a payback in terms of loyalty, retention, and prospecting," Mr. Hay said. Consequently, standards are rising fast, he said.

Incremental change will only preserve parity among competitors, Mr. Hay said. "Radical change is required if banks want to offer better customer service."

Results of the CSC survey, which involved executives at 51 banking, investment management, and insurance companies, were released last week.

Seventy percent of the respondents said their companies are not ahead of the competition in customer relationship management. And only 30% said investments in CRM technology had yielded returns. (Forty percent said they had seen no returns, and 30% did not answer the question.)

Some of those who did not report a payback said it was too early to tell, or that they had not come up with a way to evaluate the benefits. An Ernst & Young survey found similar uncertainty. Banks boosted spending on customer relationship management technology by 44% in 1998, according to the firm's annual survey of bank technology spending, but 63% of Ernst's respondents said they did not know whether the effort had improved customer profitability.

The conventional wisdom is that budget constraints and technological complexity stand in the way of improving service. But only 28% of the respondents to the CSC survey cited technology as a barrier to achieving service goals; 50% cited organizational issues.

Because the structure of many banks makes it hard for business units to share information, consistency across product and delivery channels is lacking, Mr. Hay said. "If the bank is investing in that 'siloed' manner, it is not optimizing the investment in CRM with customers in mind," he said.

To overcome that problem, banks should reorganize at the top, Mr. Hay said. "Banks have a chief executive officer when what they need is a chief customer officer," he said.

Another important step is to divide customers into groups according to profitability and long-term value to the company, and then launch initiatives to meet their needs, Mr. Hay said. In the CSC survey, 59% of respondents said they do not segment their customer data base using customer profitability profiles to provide different levels of service.

Laura Starita, a senior research analyst with Stamford, Conn.-based GartnerGroup, said, "Knowing customers through sound customer information management systems is one of the most important first steps." Too many banks focus on expanding their product portfolios at the expense of managing customer relationships, she said. "Banks need to better understand the importance of being customer-centric."

Ms. Starita warned that expectations for customer relationship management systems, like hopes for on-line banking, are often too high. Bankers should not expect to see results immediately, she said.

Customer relationship management "involves a lot of complicated technology and complicated business culture shifts that could take a good couple of years to prove a return on investment," she said.

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