Highlights from Best Practices in RETAIL FINANCIAL SERVICES Symposium
Financial institutions are at a cross road where cutting cost is no longer an option. In light of that reality, the themes that resonated most at the 16th annual conference centered on customer centricity, customer loyalty and the phenomenon of social media.
Is customer centricity a cliché?
“Customer Centricity” is a phrase that is slowly becoming a cliché since there is much more talk about it than action. The concept is not a new one and has been around since the decade-long attempts at implementing CRM systems. So what has changed? Why is it different this time? And why must it be successful? The fundamental difference is the regulatory environment post the collapse of Lehman Brothers in 2008 and the fall-out from bank closures. Terms like “Dodd – Frank” and “Durbin” make all bankers cringe. The impact of such legislation could cost the industry upward of $37 billion in lost revenue according to one presenter. One bank highlighted that the ‘Durbin’ legislation would render 80% of its deposit customers unprofitable.
Filling the large revenue gap is critical and can only be achieved by focusing on existing customers and deepening penetration through a level intimacy not yet exhibited. Technology and Analytics play a big part in achieving customer centricity in the following ways:
-Implement a 360 degree view of your customer
-Visualize your portfolio and key performance measures
-Operationalize your “next-best-action” and “segmentation” strategies
-Deploy a multi-channel and multi-product real-time decision support solution
-Deploy real-time decision support solutions that integrate with your existing enterprise systems
Legislation will make banks think about customers with which they want to deepen relationships (many banks at the conference cited ‘mass affluent’ as a key target segment) and those that they are happy to let attrite.
Brand is critical for customers when choosing to buy, stay or leave
Customer loyalty, critical to business strategy, is largely being driven by changes in the regulatory and economic climates and is being empowered by the advent of social media. The motivation for this shift is the reality that deeper share of wallet can only be achieved through customer loyalty.
The challenge for banks is moving their respective sales organization, which has historically focused on being the best sales organization, to one that is the best customer-centric organization. This is not to say that you should ignore sales altogether, but rather to have a balanced approach that focuses on the customer’s needs.
Think of each customer as a brand ambassador. Positive brand recognition creates brand affinity which in turn generates customer referrals. One bank cited that 30% of new accounts are through referrals. Conversely, each lost customer is an ambassador of bad news that can negatively impact your brand. Research has found that an upset customer tells on average eleven people about an unhappy experience and those eleven people tell five others(source: Customer Win-back, Griffin-Lowenstein).
Technology plays an interesting role in customer loyalty. Customers are intrigued by technology given the explosion of broadband and mobile technologies. The more a bank can enable their services through technology, the greater pull they are going to have in driving customer loyalty.
The innovation engine that is social media
Social media keeps getting more and more attention, but the challenge is “should you decide to monetize it?” and, if so, “how?” Many banks are leveraging social media to stay engaged with their customers, address complaints and enhance their brand. On the other hand, introducing a product or a sales approach through social media could have an adverse effect and the active feedback gained helping customer loyalty and product design might start to disappear. The benefits of a vehicle that can serve as an innovation engine driving differentiated products start to get sparse.
Statistics below highlight the engagement opportunity of social media for financial institutions
61% of online adults participate in social media1
23% of adult online time is now spent on social networks2
36% of online adults with $100k+ annual income read or subscribe to financial blogs3
19% of online adults have become a fan, friend or follower of a financial institution3
30% of small business decision makers have used social media to research banking providers in the past year4
Retail banks are at an inflection point. Headwinds caused by the regulatory climate are causing banks to rethink the way they make money and opportunities lie in creating deeper more profitable customer relationships.
1 Emarketer, 2010;
2 Neilsen NetView June 2010;
3Synergistic Research, American Banker;
4EMI Small Business Survey, November 2010
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