The CRM Journey

As the retail banking industry becomes ever more commoditised, customer service increases its significance as a differentiator. The Brooking Institute believe that as much as 85% of a company’s market value is related to intangible assets such as brand, customer loyalty and customer satisfaction. No wonder that so much attention is being paid to these intangible assets. However it is just this intangibility that has lead to the demise of so many big investments in the CRM area.

Financial Institutions across Europe still rate Customer Relationship Management as a high priority item for investment and improvement. A change of attitude towards CRM has taken place – a realisation that previous investments in simply implementing a CRM package will not fix the problem. Package vendors promised more than their solutions could deliver – expectations have not been met.

The problem is that there is no silver bullet for CRM – it is a long hard slog that impacts every part of the business – not just service and sales. CRM is not a package but a strategic approach. It is also not a programme that has a finite end it is a continuous programme of improvement and evolution. True, there should be interim deliverables and returns on investment, in fact it is an essential factor in the planning process to identify benefits and track the delivery of these benefits, but the CRM Journey has no end.

So what are the stages on this Journey and how will the Journey evolve?

Stage 1 Product Centric

As the name implies this is an approach that gives relatively less attention to customer relationships. It is suited to mass-market products with relatively low value – FMCG, credit cards, general insurance. Customer loyalty may be low and mass marketing techniques are used to spread the word to as many customers as possible. There will be very little differentiation in product offering, but brand and product recognition are important. Because of the lack of product differentiators, customer service is important. Profit derives from volume and operational efficiency. Customer information in this area is used more to assess risk than for creating targeted offers

Stage 2 Customer Centric

With this approach contact with customers is more targeted. Fairly broad segments of customers are identified and sales, service and treatment strategies are created to interact appropriately with the target group. Some institutions make this segmentation their strategy. For example Private Banks deal only with a niche segment of clients. Retail Banks with a multitude of customer segments have more of a problem. Brand is still important and there may be limited tailoring of products to the needs of a segment. For example first time home buyers or the mass affluent segment. In general customer information is used to determine to which segment a customer belongs, but customer information may also be used to trigger individual sales campaigns. This is where most retail banks are today.

Stage 3 Relationship Banking

In relationship banking much more use is made of customer information. What is more an attempt will be made to understand a customer’s needs. Of course there will be more investment in order to understand these needs and this investment decision will be based on the predicted lifetime value of the customer. This enhanced customer information is used to recommend products most suited to an individual’s needs. In addition products may be tailored to suit these needs – mass customisation. This customisation of products encourages the customer to share more information and hence there is a win win. An important factor here is that the boundaries between sales and service begin to blur – there may be unsolicited passing of information from either party. A dialogue is created.

Stage 4 The Symbiotic Relationship

As the relationship deepens then the institution is more and more able to be pro-active in catering for the needs of the customer. Likewise the customer regards the institution as a highly valued and trusted aide and is prepared to offer detailed and valuable information because value is returned by the institution through tailored products and information. The customer welcomes unsolicited interactions because value is being shared. This can be compared with the sort of relationship we have with a doctor. We are prepared to share our most intimate information because of trust and the knowledge that the information we provide is used for our best interests.

In both of these last two styles of relationship we have evolved from a transactional style of interaction to a service based interaction. An interaction based on “conversations”.

Although described here as stages it is not meant to suggest that every organisation should progress through these stages. It may well be that a product centric approach is absolutely the right approach for a particular organisation. However an organisation wanting to create long term high value relationships will need a different strategy. It all depends on the products and services being sold.

In any approach customer service will continue to be an important facet that underpins brand and loyalty

Roy Bunyan
Roy Bunyan is a Principal Consultant for Fujitsu Consulting’s Financial Services Practice

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