crm for the financial services sector

8/8/2019 Crm for the Financial Services Sector

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Service Excellence, Customer Delight

Financial Services & CRM in

the Experience Economy

Paul GreenbergPresident, The 56 Group, LLC

Chief Customer Officer, BPT Partners, LLC

Author: CRM at the Speed of Light


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Overview: The New CRM Definition

CRM is a philosophy and a business strategy, supported by a

system and a technology, designed to improve human

interactions in a business environment.

Paul Greenberg, CRM Magazine, Reality Check (February 2003)


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Overview: The New CRM Definition

Principle #1

Value & values are given & in return, value & values are received

Principle #2

Each of us is governed by self-interestPrinciple #3

For ideas to be truly exciting, they have to be real

Principle #4

Do unto othersyou know the rest


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Overview: The Business World has Changed

Pre 90s

Product/Demand drivencorporate ecosystem

Late 90s to nearly present Customer driven corporate

ecosystem

Present

Transition to customerecosystem Era of the Soc

ialCustomer


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Overview: The Business World Has Changed

People have changed more than the business organizations uponwhich they depend. The last 50 years have seen the rise of a newbreed of individuals, yet corporations continue to operate according toa logic invented at the time of their origin, a century ago. The chasm

that now separates individuals and organizations is marked byfrustration, mistrust, disappointment, and even rage. It also harborsthe possibility of a new capitalism and a new era of wealth creation. Dr. Shoshanna Zuboff, The Support Economy


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The New Business Model: Experience Economy Goes Mainstream

"Companies used to focus on making new, better, or cheaperproducts and services....Now the game is to create wonderful andemotional experiences for consumers around whatever is beingsold. Its the experience that counts, not the product."

Peoplewant capabilities and options, not uniform productsbusiness is there to provide the tools.

The Knowledge Economy is giving way to the CreativeEconomy... (Knowledge has become a commodity so thesolution is to) "focus on innovation and design as the newcorporate core competencies."

BUSINESSWEEK, DECEMBER 19, 2005


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The New Business Model: Experience Economy Goes Mainstream

2006 Davos World Economic Forum concentrated on theExperience Economy, creativity and innovation

6 Workshops for CEOs on this subject including

The Culture of Innovation

Prepping for the Creative Economy

Externalizing Innovation & Creativity


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Generation C Cross-generation (source:Springwise)

Focused on content, wired, creative, regardless of age

Baby boomers are getting set to retire many with disposableincome

Gen X is becoming a pre-eminent generation AND hasdisposable income

Gen Y is entering the workforce and accumulating somedisposable income

Characteristics of the Ecosystem The New Customer


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Phase 1 The customer and vita passiva

New definition of trusted source

Information available nearly instantaneously either structured or

unstructured via the web (Google, Yahoo, MSN) On Demand software as a service (salesforce.com, etc.)

Enterprise value chain supersedes siloed supply, demand &support chains

Link between lifestyle and business consumers adopt sexy

content



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Phase 2 The customer and vita activa Era of the Social Customer

Social networks as active participants in effecting change (blogosphere, podcasting)

Collaboration between company & customers to provide useful value for each

Customer value chain subsumes enterprise value chain

Ubiquitous technologies leading platform

The Live Web (Web 2.0) (MySpace, Facebook)

Customer begin to include business as feature of life choice, not a separate factor consumer createdcontent becomes part of business (salesforce.com AppExchange, John Fleuvog Shoes, BMW)



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Power of social networks

Linked In 9+ million members

MySpace 92 million members

Facebook 12 million members

ASmallWorld exclusive membership for those who have social networks

Social networks as capital



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Each customer wants a personalized experience

They couldnt care less if they are high value or low value customers

They dont know if they are high or low value to you But you have to care and yet, accommodate them to a degree

But how do you deal with it when you have millions of customers?

Understand the typical experience of a customer at every pointAnd what they want

Focus groups, in-depth interviews, surveys, etc. But provide the tools for the customer to manage their own experience

Information that allows them to make informed, empowering choices

Characteristics of the Ecosystem


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Growth of Internet banking services

Initially expected to be a cost driver lower costdelivery channelValue actually was increase in customer retention

because of potential for control of own experience withbanking institution and the requirement for social andself-expression by the new generations

Characteristics of the Ecosystem Case In Point

Often Surprising Results


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A NEW MODEL

The New Business Model Requirements


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The New Business Model Requirements

Differentiators are no longer products & services

Pretty much the same from company to company

Key differentiator is the customers experience with the company

Provides a business value for the experience with the products/services Comfort

Convenience

Simplicity

Ubiquity

Timeliness Contemporary technology use (e.g. mobile technologies, not Oracle)

Wow factor

Customer feels sense of importance, self-control, ownership


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300 brands

16 of those brands $1 billion and up (e.g. Charmin, Crest,Folgers, Downy, Pringles, Tide)

2 billion consumers affected w/6 billion as goal160 countries reached

One of 30 companies on the Dow Jones Industrial Average(DJIA)

Case Study: Big Companies Proctor &Gamble


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We have to create a great experience every time you

touch the brand, and the design is a really big part of

creating the experience and the emotion. We try to

make a customers experience better, but better in herterms. A.G. Lafley, CEO Proctor & Gamble

I think its value that rules the world. Theres an awful

lot of evidence across an awful lot of categories thatconsumers will pay more for better design, better

performance, better quality, better value and better

experiences.A.G. Lafley, CEO, Proctor & Gamble



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Focused around the co-creation of value and usercommunities

Sales/Marketing

Vocalpoint 600,000 moms

Tremor 225,000 teens

Research

Innovation Network 80,000 scientists

Technology entrepreneur networks

Benefits?

In 2001 20% of ideas, products, technologies external

In 2004 35% of ideas, products, technologies external

In 200X 50% of ideas, products, technologies external

Virtual design, 3D simulation



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Perhaps the most innovative company in the U.S. when itcomes to understanding of the benefits of customer ecosystem

They emphasize the desired consumer experience as their primary design

focusTaste, smell, feel of products not just utility

Connect & Develop programMoving technology and ideas between cross-functionally

Crest Whitestrips involved oral care unit (whitening teeth), corporate R &D (film technology), and fabric/home care (bleach experts)

Tie the effort to working with consumers too 50 technology entrepreneurs who scour for external resources including

customers Use of ethnographers to try to understand the activities of individuals in the

context of social anthropology



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Streamlined supply chain because of understanding of the enterprise value chainand its relationship to customers (2002)

Sixty percent of P&G sales due to events (organized experiences) can be promotions (e.g. Max theStack decoder cards for teens at theme parks or concerts)

Pull events meant pull supply chain i.e. produce only what the customers are buying cut outexcess inventory

Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor ischosen.

Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes

If you cant drive sales and deliver product at the point of

purchase, you lose. Jake Barr, GM, Supply Chain

Innovation



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Key Performance Indicators Out of stock rates Total supply chain response time from purchase at register to

purchase of raw materials to replace product Shelf level quality damaged or unappealing packages on store

shelves reduction to zero Pricing design from the shelf back what price is appealing to

customer and then reverse engineer to see if product can be producedto make that price point

Results?

7.6% out of stock rates rather than 16.3% from 2003 to 2004 Earnings growth went from 15% in 2002 to 20% in 2004 Annual savings between $50 and $100 million Increased sales from $40 billion in 2002 to $43.4 billion in 2003



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Custom T-Shirt Company

User Community-focused

300,000 members

User content creation

Community members design the t-shirts

Community members vote on their favorites

Threadless produces them 1000 limited edition for eachwinner

Threadless shares the revenue with the designers

Premium pricing

Case Study: Small Companies Threadless


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CRM & Financial Services: The Challenges

Investment in financial services- related CRM technology isexpected to be around US$6.8 billion in 2006 and increase at therate of roughly 14% per year for several years going forward

DOES THIS MEAN THAT THE FINANCIAL SERVICES

INDUSTRY FINALLY FIGURED OUT CRM?

The answer is: NOT PARTICULARLY


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Two Problems:

First

CRM isnt merely a technology, but the desire to automate problems away is

so deeply prevalent when it comes to CRM thinking that the spending on

technology could easily be mindless or dangerous or premature

Second

The issues that customers have arent technological for the most part: They

dont see financial services companies considering them important just

as objects of product sales


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Traditional financial services culture is product-centered

Advantage gained is seen as:

Price

Product variation and availability

Some targeted services to the high value customers of the moment

The success metrics that financial services CRM initiatives often use arebased on increased numbers of products per customer or segment

Thus, sale to 80 year old customer of a 10 year certificate of deposit isconsidered a new product sale i.e. a good result

Ignored is the emotional response of the family to this sale decreasedcustomer loyalty due to the obvious lack of concern for the individualcustomers personal welfare


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CRM & Financial Services The Challenges

Customers Dont Trustthe Commitment of the

Financial Services

Companies to Them

Source: Celent, Emerging Affluent Baby Boomers, Financial

Services, & The Web 2005; 467 respondents


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Results of this lack of trust by the customer and the product-

focus by the financial services industry

Results are characterized well by the 2005 Forrester Group Study

on Usability Flaws on Financial Services Sites

Rated on

Value

Navigation

Presentation

Trust A minimum passing score was 25

A superb score was 50

The financial services industry average was 5.7

The failure rate was 85%


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Retail banks lose half their customers every two years

(Economist, December 2004)

Walker Information Study on Executive Buyers (767

respondents/2278 observations, early 2004)

66% are not loyal or planning on maintaining relationship with institutions

But 75% indicated some level of customer satisfaction, even when notpleased with the relationship overall

31% of the buyers were high risk low intentions of continuing

33% felt trapped, unhappy but having to continue for now

Only 34% were truly loyal


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Verbal terrorists are rising to new levels of activity

Conventional, oft quoted research from companies like TARP say:Advocates will speak to between 5 and 9 people about what they loveVerbal terrorists will speak to between 9-16 people

Current reality is that a verbal terrorist can reach tens of thousands ofpeople through user communities and blogs.2005 Dell Hell from The Buzzmachine - Study entitled Measuring the

Influence of Bloggers on Corporate Reputations (2005, Market Sentinel,Onalytica, ImmediateFuture.com) found that

Bloggers as a group were the second most influential group about Dellservice after Dell itself and had more impact than Dell on negativecustomer service rather than positive customer service

The Buzzmachine buzz penetrated the mainstream press. Second most frequent references to Dell Hell story after Buzzmachine

was the NY Times.

Advocacy v. Verbal Terrorism


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Early successes built around accumulation of customer data

Reorganization around customer segments;

Metrics that measure customer value;Recognition of the difference between high value and low value customers

Differences in treatment and resource expenditure Marketing and service programs that were coordinated and increasingly

better targeted; and

Technology solutions that enabled somewhat more relevant andincreasingly efficient interactions


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But this is not what the new generations require nor the laurels the

financial services sector can rest on

New generations of customers are younger with less assets now but notnecessarily in the future

Mindset must change at the banks toward a view of providing personalizedand meaningful services to individual customers

Great customer experiences are essential and, probably as much as awedding, a family/households finances are an emotional matter, more thanjust a purchase.How do you deal with that?

Metrics cannot be based on the number of products purchased or portfolioinvestments

Nor can the concern be just around just efficient processes


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Sadly, these challenges are borne out even further by recent

results

Forrester study in 2006 of 60,000 bank customers shows that, ingeneral retail banks have sub par customer advocacy scoresCitibank and JP Morgan Chase have 20 percentHighest is Wachovia at 40 percent, not great but there is a reason they do

relatively better



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Wachovia Bank Success Story

13 million customers

Focuses on lifetime customer equity, not just LTV which is just an average.Developing value profile for each household

The effect on the customer of a sale of a specific new product or service overtime is examined before the discussion begins about the product with thecustomer

They also examine how it will affect other future products/services for thatspecific customer

The data is also used to optimize the approach to the individual customer andtheir household

CRM & Financial Services: Competitive Advantage


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Could there be business value in treating a

low value customer with high value services

and experiences?

Yes, when customer data is used for

insight, not just portfolio managementand product sales per se


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Example: Telecommunications of Customer Insight & Planning

Chief Technology Officers are found to be users of the

residential service

Colombian Orbitel S.A. ESP

NOT YET

They are automatically treated as a high value

customer with all the attendant quality of services

Even if he spends no money on residential service and

doesnt have a commercial account


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Sometimes success comes at an apparent (and actual price)

E-Loan discloses all fees upfront guarantees no change during theprocess

Vanguard sliding scale for fees from investment advice to brokerage

commissionsBased on assets and length of time customer has been investor

Multiple banks open a money market account, no fees of any kind ING will reward you with $10 if you tell a friend of this no-fee feature

Tough to do since non-interest revenue streams that are affected are of

all operating income generated by U.S. commercial banks But these are the kinds of things that generate trust and confidence



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Competitive advantage is gained by customer-centered culture

And KPIs, compensation programs, etc. that support the levels of service excellence and thinking thatdrive employee and business partner behavior

Because the new generations of investors both local and international are technologically savvy,empowered and demanding, the financial tools to determine their own destiny are important to them

Personalized service for family based or socially based portfolio development including corollaryservices (help them find support in other areas e.g. retirement planning services)

Improvements in the customers experience with the institution

Think of customer for life through generations, not objects of sale at the moment

All business processes should be focused around customer value

That means that operational success cant trump customer value

Increase in customers sense of security

Im not talking about actual increases in security measures though that too, of course We care about your future not just your money


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More institutions beginning to take advantage of social tools that are out there to

attract newer generations of future high value customers or are used by customers to

make decisions about financial services

TVNZ in New Zealand launched the first free podcast in New Zealand ASB Business run byASB which is a NZ bank

UMB Financial in Kansas City launched a podcast at the end of 2005 to offer listeners a chanceto learn how best to manage their money at their convenience.

About.com has a user community to discuss money and finances and even banking

UK and Switzerland has several banking blogs that are discussing the current instruments andprograms available through banks and will rate (emotionally) bank services (see BritBlogs)



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THANK YOU FOR THE OPPORTUNITY

For more information please feel free to email me

at: [email protected] or read my blog

at http://www.the56group.typepad.com
mailto:[email protected]://www.the56group.typepad.com/http://www.the56group.typepad.com/mailto:[email protected]

crm for the financial services sector

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