Many banks have recognised the importance of customer management and implemented some form of customer relationship management (CRM) system. However, many have not yet realised CRM's full potential, as they have yet to shift from a product-centric to a customer-centric operating model. This shift requires an integrated CRM framework where captured customer data is part of a closed loop decision support mechanism. The data is used to establish customers' lifetime analytics, which changes the marketing mix of price, product, place (or distribution) and promotion from static to dynamic.
The 'always on' capabilities of modern distribution channels allow institutions to receive instant feedback on their marketing programmes and change their marketing mix quickly to meet customer expectations. Tools like data mining and predictive modeling will find increased usage. Meeting customer expectations successfully involves several key areas.
Learn from customers: A customer-centric bank adopts a closed loop learning cycle to maintain on-going learning relationships with customers, capturing customer-specific data early in the process, then building and expanding customer profiles with each contact and event. The bank matches prospect and customer profiles with established buying patterns, proactively selling the customer what the bank expects the customer is willing to pay for. The relationship with the customer evolves over time to near exclusive status.
Integrate channels: Customers expect their banks to take a single, unified view of their relationship with them. They are often disillusioned to learn that call centre employees and relationship managers are not aware of their most recent online transactions. Customers want consistent responses to their questions and they demand the same level of service across all the bank's functions. Banks must implement real-time technology to guarantee that employees are made immediately aware of all customers' transactions and queries.
Current technology and infrastructure must be fully integrated with new CRM technology to allow the proper capture and management of crucial customer data for targeted marketing and enhancing the customer experience.
Managing customer interaction across various channels is critical, employing middleware, the storage of customer data and contact management capabilities. Because customers like to use different channels at different times, banks will have to sell multiple products and services via multiple channels.
Many banks are constructing gateways to control real-time, multi-channel customer information and intelligence. Many Internet-only banks overlooked the vital importance of this strategy and failed largely because of it. Too many banks have until now viewed the Internet merely as a stand-alone channel and have not pursued the necessary organisational or process change in order to best use e-banking as a customer enabler. Banks must use each channel for each of its own most effective purpose (eg, using the Internet for self-service transactions) and incentivise the customers to use them accordingly.
Segment customers: Banks need to know who and where their customers are. Many banks still use traditional life stage segmentation models, suited for the 'average' customer. However, the digital age enables marketing to move from targeting and developing value propositions for 'average' customer segments to delivering individual value propositions through mass customisation. Aligning customer-centric strategies, channels and infrastructure with increasingly discrete segments ensures long-term profitable growth.
A customer-centric bank focuses on customer segments that have the most long-term profitability potential, instead of focusing on one-off sales. Profitable value propositions and their corresponding service levels will be tiered to different customer segments based on relative value.
Acquire and manage customers: This starts with targeting the right segments. Segments must be specifically chosen on the basis of acquisition, management, cross sales, retention and overall profitability. Marketing, tracking, sales fulfillment and sales processes must be fully aligned with both current and prospective customer expectations.
Individual stochastic tools or complex decision engines are used to segment, attribute, select and model both current customers and prospects. As banks get to know their customers better and the relationships with profitable customers become deeper, information will become a weapon in establishing 'one to one' relationships.
Market intelligence: Banks need to put in place a technology infrastructure to enable the closed loop process. The infrastructure integrates the delivery channels with the front office systems (which support the sales, marketing and customer service functions) and back office product systems using enterprise application integration technologies and datamarts. This infrastructure, which PricewaterhouseCoopers terms Market Intelligence Enterprise SM, provides a single integrated view of the customer.
The architecture supports CRM analytics such as customer profitability, target marketing, channel analysis, customer retention and re-acquisition, promotion, and pricing and loyalty programmes. This total, closed loop architecture contributes greatly to increased profitability and more satisfied, and therefore loyal, customers.
Organisational change: A financial institution's organisation and structure must change with the overall business transformation as well. Traditional marketing, risk and technology functions will all collapse into an information-driven culture. Optimising customer acquisition and management across multiple products, segments and channels requires advanced knowledge and data management capabilities.
Too often, banks take a short-term approach by implementing a technological solution, such as a CRM system implementation, without thinking through how to maximise its potential. There are also banks which think up seemingly great strategies that are difficult to implement. In between these two extremes lies the correct approach of transforming a bank's means of financial distribution through a journey, not a sprint.
It is a journey best taken in measured stages, with the necessary learning and refinements along the way. Those banks that get it right will set the industry standard and enjoy profitable relationships with their most highly valued customers for many years to come.
Liew Nam Soon is a financial services director with PricewaterhouseCoopers' management consulting practice in Singapore.