By employing a customer centric business strategy that focuses on your customers’ needs and preferences, your organization can begin to move ahead of competitors facing the same pressures. Based on the experiences of real-world financial services customers, this business paper provides general guidelines to help other financial services companies navigate through all of the changes required to transform into a client-focused organization.
W H I T E P A P E R Drive Efficient Client Relationships: Using CRM To Focus on Clients and Generate Lasting Value Executive Summary In an industry with decreasing product differentiation and increasing client sophistication, financial services firms are facing an uphill battle to make themselves and their products stand apart from the competition. However, by employing a customer centric business strategy that focuses on your customers’ needs and preferences, your organization can begin to move ahead of competitors facing the same pressures. Customer Relationship Management (CRM) is the technology that will enable your employees to do just that. CRM is more than building contacts and managing address books: it's about build- ing relationships and understanding and growing customer value—a key goal for many financial services firms. In the six years that the Pivotal CRM team has been deploying CRM solutions across more than 120 financial services firms, we've seen our customers succeed through a combination of focus- ing on clients instead of products and services, adapting processes and technology to support this new focus, and making cultural changes in their organizations as a foundation from which to transform their businesses. Based on the experiences of real-world financial services customers, this business paper provides general guidelines to help other financial services companies navigate through all of the changes required to transform into a client-focused organization. While not an exhaustive discussion of how to succeed with CRM, this set of guidelines will provide you with a starting point to guide your research as you consider how to deal with similar challenges. Challenges Facing Financial Who's really winning here? And how much longer will clients tolerate multiple touch points within the same Services organization, inconsistent levels of service, and the need to provide redundant information during every interaction? Financial services firms—in private banking, commercial banking, investment banking, asset management, retail banking, and even insurance—face intensifying chal- Clients Are Becoming More lenges today that are causing a great deal of pain. Their Sophisticated markets are mature and continue to consolidate, translat- Not only are clients communicating with several channels, ing into an abundance of choice for banking clients. And they are also becoming more sophisticated in their finan- product differentiation is decreasing, leaving institutions cial knowledge. As more information becomes available to compete on price or find other value-added services to clients each year in books, on television, and over the offerings. Internet, clients are now willing and able to do their own All banks offer virtually the same products, and dif- research and, consequently, their expectations are rising. ferentiating these products any further is getting difficult, In addition, non-competitive rates, both on the lending despite niche marketing efforts. And with banks selling and investment sides of the business, have indirectly insurance, insurance companies selling mutual funds, trained clients to shop around. Without a deep relation- and planners selling anything, the landscape is becoming ship, even if clients are satisfied with your service, more and more confusing from a client's perspective; the they'll drop you in a heartbeat if they can get a better clients are left asking themselves "which product is really deal across the street. Looking for the best deal is now the best one for me?" In addition to market challenges, ingrained in both individual and commercial accounts; many banks are also experiencing internal challenges: lost they'll often compare offerings from two or three banks cross-selling opportunities, retention of corporate memory, and go with the best offer. lack of immediate visibility and tracking in business units, or easily identifying clients with large spheres of influence, just to name a few. The Solution: Focusing on Your Clients “ Switching from one provider to another is getting easier every day, so client retention Financial services firms like yours are fighting to attract new clients every day. Consider shifting the focus from attracting new clients to working with the clients you has become a serious issue for most financial already have. This will allow you to expand the depth of your interactions with them. One way to truly differentiate institutions. If you give clients what they want, your business from competitors is to build stronger, they'll be more likely to stay with you longer. But deeper relationships with your clients. By understanding these deep relationships within your current client base, first, you need to find out exactly what it is that you will not only sell more into them, but also grow your ” they want. customer base in the future. Competing on Price or Products is Not In addition, banks often sell in silos, meaning their clients Enough purchase a product or service from one department, and Competing on price, though tempting, isn't a long-term another product or service from a different department. solution. That's not to say that you don't need to offer competitive rates, but rather have them be just one part Multiple Silos Are Frustrating Clients of the offering. In private banking, for example, clients' main concerns are high levels of service and personal One institution often has multiple touch points with attention, whereas product and pricing are secondary. the same client—meeting with advisors, transacting in Betting on transaction volume is also an uncertain game. branches, interacting with call centers, and interacting You may acquire new clients this way, but they'll be off over the web, just to name a few. One result of these again whenever they find a better offer. What about the multiple touch points is inconsistent and frustrating experi- ones you lose? How long can you keep this up? As for ences for the client if the information isn't consolidated products, do you really offer anything that is unique? If so, into one central source. A second result is that banks are how long will it be before the competition comes up with missing out on valuable cross-selling opportunities, and something similar? the potential to grow each client's lifetime value. Pivotal CRM | White Paper 1 A Relentless Focus on Clients is organization's reputation. In all lines of financial services, the results are missed opportunities and lost revenue. Imperative What is the competitive advantage now, especially in such Give your clients what they want, how they want it, when an intensely competitive market? The relationship and the they want it, and make it easy for them to deal with you. interactions you have with each client fast becomes the Become an expert on what matters most to them. key to your success. Financial services organizations can • Make it easy for clients to choose the channel that's and should focus on the client to drive top line revenue right for them—whether it's online, telephone, face-to- and bottom line results; this requires a company-wide face, or branch banking. shift in focus—to the client experience. • Compete based on service, not solely on offering When you really think about it, the relationships your products that are essentially the same as what your competitors are selling. Service is king, and service “ leads to long-term benefits for everyone. The only things within your control are the • Offer multiple products and services to each single relationships your organization builds with your client. That is, offer a solution: a selection of the right clients. No one can take these relationships away products and services designed to suit them. from you, unless you give them the opportunity. Relationships Are the Key to Creating At the end of each day, relationships between Creating a positive client experience also ties directly to people--your employees and your clients--are the perceived value of each interaction. By offering value to your customer and ensuring that they stay with your ” what keep you in business. organization will help to ensure maximized wallet share. This requires collaboration within the organization. But herein lays the challenge. organization builds with your clients are the only things within your control. No one can take these relationships From commercial banking to wealth management, away from you, unless you give them the opportunity. At each part of a financial services organization operates the end of each day, relationships between people—your somewhat independently. While this has a lot to do employees and your clients—are what keep you in busi- with regulatory constraints, banks can become more ness. Better client management is now essential. integrated by focusing on client experience and ensuring that each touch point is consistent. If you're easy to do What this means is that everything your organization business with and conduct business according to your does, from updating processes to implementing incentive clients' preferences, you'll attract more clients, retain them, programs needs to drive towards a positive customer and benefit from their increased loyalty. experience. Call center agents, in-branch representatives, account managers, and fund managers all need to focus Creating value for clients, rather than focusing solely on on meeting the customer's needs, instead of simply profit, is a process that lies at the core of all successful processing the next transaction. enterprises. As an effect, client loyalty reliably measures whether or not a company has delivered superior value: A strong client base is critical to business success, and clients either come back for more or they go elsewhere. doing business with people you trust and understand As a cause, loyalty initiates a series of economic effects is more predictable, efficient, and profitable than doing that flow through the business, such as: business with uncommitted strangers. Client loyalty drives • Revenues and market share grow as the best clients business success and can lead to referral business. For are attracted to the company, building repeat sales and example, capital market firms rely heavily on their reputa- referrals. tion and track record for referrals. Consistently high reten- tion can create tremendous competitive advantage, boost • Sustainable growth enables the company to attract and employee morale, and produce unexpected bonuses in retain the best employees, such as the top fund sales productivity and growth. management for asset management firms. • Long-term employees learn how to reduce costs and Conversely, persistent defection means that former improve quality, which further enriches the client value clients—people convinced your organization offers proposition and increases productivity. inferior value—will eventually outnumber your loyal clients and dominate the perception of your organization in the • Increasing productivity coupled with the increasing marketplace as a whole. When that moment arrives, no efficiency of dealing with loyal clients generates the kind amount of advertising, public relations, or ingenious mar- of cost advantage that is very difficult for competitors to keting will prop up pricing, new-client acquisitions, or your match. Pivotal CRM | White Paper 2 Before starting any initiative, from an organizational sales is trying to reduce costs and streamline their pro- perspective, it is imperative to understand how you want cesses, how will this impact the way clients are serviced? your firm to work with, service, and sell to your current Is their a gap between what these two units are trying to clients. CRM is simply the tool that enables and supports achieve? business initiatives and processes. Set Your Corporate Objectives Consider the needs of a discount brokerage firm. The business is built around cost-effective trading for the firm's Think about where you would like your organization to be. clients; the business requirement is to build processes If what you see in the mirror isn't quite what you had in that support serving clients in the most cost effective mind, take the leap and imagine a best case scenario. manner possible. Now compare that to a financial planner, dealing with high net-worth individuals, who Imagine understanding which clients are your most profit- needs to serve their clients in a completely different able and ensuring that you maximize the value of these manner. top-tier clients. Or imagine having your lenders access one central location for client information, rather than “ scanning through multiple systems before every sales call. A critical factor in shifting to a client focus Brainstorm to see what might be possible. over the long term is changing the culture Set CRM Goals throughout your organization to support it—no Once you've done your research, the next step in prepar- easy task. This type of transformation begins ing for a successful CRM implementation is to determine with a commitment to change the way your your goals. Aim for goals that will support a long-term vision. Rather than planning one or two years in advance, ” organization functions as a business. broaden the scope and look further to ensure that your short-term goals and your long-term goals line up. Our customers have found that looking three years, five years, Like any project that is both strategic and ambitious, a even ten years into the future has helped them explain to CRM project can seem overwhelming at first. Thorough their leadership the impact they expect their CRM projects research precedes each and every successful CRM to have. implementation. Our customers have found that breaking down CRM projects into several small, achievable steps Once those longer term goals are set, the best approach makes the projects more manageable. is to take incremental steps with CRM that will get you there. Rather than having a singular, ultimate CRM Do Your Research success goal, satisfy the short-term milestones that ensure your longer term vision is met. Identify Your Strengths Although your CRM goals will be unique to your business, By taking a good look at your organization from inside here are some goals set by several of our financial out and from outside in, you will begin to develop a clear services customers prior to their CRM implementations, to picture of it. Put yourself in your customers' shoes: what jump starting your thinking. They set out to: does service from your organization look like? Would you be happy with the current processes? Consider how • Deepen Client Relationships. Your ultimate goal could you are serving existing customers and attracting new be to deepen the relationships you have with all your customers. Are your advisors missing opportunities by not clients by getting to know them, their needs, their pursuing them? wants, their preferences, their spheres of influence, and so on—the basics of effective relationship building in Identify The Gaps private banking, for example. What is common sense, however, is not always common practice. Don't hesitate Compare where your organization is today and where to put what appears to be an obvious goal on your you'd like it to be in the future. Most likely there are gaps. list. The day may come when you and your colleagues What do you need to do to move forward? It is important need a gentle reminder. to first understand what is ultimately driving the need for change. What is the overall business strategy? What are • Learn From Your Clients. Although it's important to the drivers that will direct any changes to processes and provide your clients with all the information they need, requirements? your clients also represent a wealth of information useful to your organization. If you design a feedback The strategies of different groups within your organization loop into your CRM system to capture what's working need to be in line so that changes to one do not adversely and what's not from your clients' perspectives, you'll impact the other. For example, in financial services, if Pivotal CRM | White Paper 3 have a head start in determining how to continue to return on capital by 3% is the main goal, for example, serve them better. every process change needs to map back to that goal. • Create a Distinctive, Competitive Image. In an industry with little product differentiation, what sets you apart Re-engineer Your Processes from your competitors is the relationships you have Once you have determined how your employees interact with your clients, employees, and partners. One of your with your clients and what makes the best client experi- goals in commercial banking could be to create a dis- ence, the processes that support each interaction need to be examined. Simply put, reengineer customer facing “ For financial services organizations, there are three basic levels of impact of CRM that can be processes before implementing CRM. Transforming the way you do business so that you're focused on client needs will run wide and deep, and it will take time. Look at every business practice to make sure it is in line with your measured. At the first level, which can be felt new focus. almost immediately, companies will experience Use best practices in everything you do. If another an operational impact in the form of improved company in another industry has figured out how to do quality and efficiency of their interactions. The something effectively, borrow from them. Why recreate existing solutions from scratch? second level of impact is client-based, when a Address sales, marketing, and services processes early to more seamless experience improves retention. ensure that they will flow seamlessly. For consistency, you The third level of impact is the most profound: can standardize and share effective processes throughout your entire organization; consistent processes are also companies are able to make smarter business easier to measure. decisions based on a new, deeper insight into the client and market trends that shape Enable Processes With Technology ” profitability. CRM technology is one of the most effective tools you can use to make the transformation to becoming a client-focused organization. While any organization can tinctive brand that helps your clients readily recognize benefit from CRM, financial services firms are particularly who you are, what benefits you offer, and what kind of suited to reaping the rewards of CRM because their experience they'll likely have when dealing with you for multiple, complex layers of client interactions contain the all their commercial needs. potential to develop and nurture lifetime value out of client relationships. • Maximize Marketing ROI. Traditionally, the marketing net in financial services has been cast widely. By Armed with the knowledge of how best to service your profiling your clients, campaigns to targeted groups clients and what processes are needed to do so, you can who are likely to hold the greatest profit potential can be now start to prepare your organization as much as you executed for any offer. The result? Highly targeted offers can. This will help your organization figure out what they reach the right people and organizations ensuring your really need from their CRM solution, and minimize the gap marketing dollars are spent in the best way. between business strategies and IT strategies. Too many • Establish a Foundation for Growth. A final goal could companies buy first and learn later that they should have be to use CRM, and all of the above goals, to set the waited to determine what they really needed. foundation for the sustainable and high quality growth of your organization. This is probably already one of That isn't to say that changes cannot be made later. By your goals. Think of it from a new angle by including it implementing a CRM system with a flexible and scaleable in your CRM project. architecture, you can ensure that as your business needs grow, your CRM system will continue to perform. Ensure that the breadth and depth of the system is consistent Business Strategy & Drivers with your needs. Apply the underlying technology that will One of the biggest obstacles facing CRM projects is help you accomplish your unique goals. getting a clear understanding of the underlying business strategy. Examining what the organization's business strat- • Data accuracy is crucial. Do whatever it takes to scrub egies are and what drives them should direct any change your data in advance of a CRM implementation. As you within the business. By knowing that an increase to the can imagine, this will take a lot of time and effort for your IT staff, but it's well worth the effort. Pivotal CRM | White Paper 4 • Bring together all of your client data into one compre- sufficient and accurate client information. Even though, hensive database; this will require connecting disparate, from a regulatory perspective, all information cannot legacy databases throughout your organization. While be accessed across business units, it is important to this is a huge undertaking, the results far outweigh the understand that a client does business elsewhere in effort. Having all client information accessible over time your organization. Metrics can be added to indicate to is the whole point of CRM; the value created will greatly other business units that a particular client is ranked as exceed the efforts you put into making it happen. top tier. • Link your CRM system to all the other systems that • Integrate front-office information—the interactions your your employees use regularly, employees have with your clients—with back-office such as e-mail and scheduling systems and transactional data. Your employees will be Customer Relationship applications. This way, your able to see both the transactions and the interactions Management : What is it? employees will be more likely associated with a particular client simultaneously. to incorporate CRM into their • Finally, segment, or profile, your client base, so you Customer Relationship Management, day-to-day activities. You can begin to understand the potential of each client's or 'CRM', is a category of software applications used by companies to can't expect anyone to open lifetime value. That way, you can provide the right level connect data, people, and processes one application for e-mail, of service based on the segment they represent. Your across the customer-facing front-office open another application for marketing efforts can now be targeted to ensure that (sales, marketing, service, and partner their calendar, and open a management). The simplest essence of these highest value one-to-one touches are directed to third application to access the right clients. Relationships aren't all equal. With the CRM's mission is to help companies know client data. It is imperative to how their customers like to do business, right information, your employees will be able to see a so that customers keep coming back to connect all your organization's client's potential immediately without having to dig for it, buy more. data and make it as acces- or—worse—give up trying. sible as possible. Not all CRM is equal—when qualifying vendors, make sure the suite of software • Take into consider- Put Your People First applications has good breadth of ation the internal governance capabilities across all customer-facing procedures, and understand Building and managing all of the long-term relationships functions of your company. It should be how this will impact your connected to your business will become even more rel- capable of delivering everything from schedule. evant in the future than it has been in the past. Improving cash management flagging, ROE visibility, relationships is about creating partnerships in which and portfolio allocation planners to • Most importantly, stakeholders—clients, employees, partners, investors— relationship modelers, influence trackers, align your IT and internal trading portals, research distribution share in the value they help to create. auditing side with the business engines, and event and expense tracking side of your organization—not In service-based businesses today, the learning curve modules. the other way around. Many of individual employees has a profound effect on both All these applications should work companies believe they revenues and costs. It grows out of the cumulative together seamlessly. They should also be can fit their processes to a decision-making experience an employee builds over time available to deploy in modular phases, starting with only the components that technology solution after the through relationships with clients, partners, and fellow address your most important business fact. Unfortunately, there are employees. objectives. Even if you initially deploy one CRM vendors who believe function (i.e. sales force automation), it is this as well. In our experience, The relevant driver of an organization's learning potential crucial that you have room to grow your and in our customers' experi- is how long individual employees have interacted with solution, plugging in new functionality ences, business needs to specific customers, vendors, and fellow employees. (i.e., marketing automation) as you Companies don't learn; individuals do, and their learning take priority. Determine what measure ROI. your business needs are first, takes time. and then choose the solution • Determine what information your employees need that is most closely aligned to to work smarter. Train them well and often, and you those needs. will recognize the difference. Plan for both initial and continual education for all employees. Don't just teach Integrate Client Information them how to use the CRM system, teach them to work In order to truly know your clients, give all employees the in teams and support one another; teach them client same, holistic view of the client. If everyone has the same service skills and professional selling techniques. 360 degree view, they'll become aware of the current • Encourage innovation, collaboration, and input from issues, needs, and successes clients have had. employees and capture their feedback. When you introduce a new system, people will immediately come • Share appropriate information across business units. up with ways to improve it. Capture these ideas as they Consolidate your client information in one central place, arise, and work together with your staff to help evolve so employees can focus on managing the relation- the system. ships with clients instead of having to fight the lack of Pivotal CRM | White Paper 5 • Determine the needs of your clients, starting with doing Measure Results Continuously your best to understand all segments of your client base. What will make them more successful? When you implement new solutions, you need to track their effectiveness precisely, using accurate rates of • Identify how focused you are on client care and the client flow and turnover. As you've probably heard before, improvements you would like to make at the individual you can't manage what you can't measure. Determine and business account level; provide a forum for client what you want to measure in advance, so you'll have the feedback. information you need in place. • Create specialized teams to help serve each client, rather than having a linear or one-to-one relationship The only practical way to shift your business to a client with clients. Teams that are connected to each other focus is to carefully define and track defection rates, and have access to the right information when they and then make sure your organization has the tools and need it are able to anticipate what a client needs and training it needs to analyze failures and improve results— when. continuously. One thing to keep in mind as you measure is to always Make Cultural Changes revisit the strategy. Has it shifted? When the business A critical factor in shifting to a client focus over the long strategy and business drivers start to change, the term is changing the culture throughout your organization processes in place need to support that change, which to support it—no easy task. This type of transformation will impact results measurement. By implementing a begins with a commitment to change the way your fluid system that allows you to make changes as your organization functions as a business. processes and requirements evolve, you can ensure continuous results. • Start to recognize the value inherent in each of your clients and in each group of clients, and what this value means to your organization. Succeeding with CRM • Motivate and compensate your employees to find solu- Let's assume that you've done your research, set your tions for your clients, as opposed to merely processing goals, and identified strategies that will help you before, transactions for them. Compensation, for example, during, and after the implementation of your CRM system. is one area that has been used successfully alone or Many of the steps you've taken will indeed translate to in conjunction with new processes and systems to your success. Is there anything else you can do? Yes. support change. What follows here are some additional guidelines— inde- • Help your employees to become accountable for client pendent of technology—that have emerged from the satisfaction and loyalty. Accountability is difficult to successful CRM implementations of our financial services establish—you'll need both time and patience as you customers. Not all of these guidelines will necessarily be nurture a culture of accountability throughout your relevant to your organization (and many are quite difficult organization. The results, however, can be tremendous. to accomplish), but they're compelling recommendations nonetheless. Here are many of our customers' guiding Manage Costs Early and Often principles: Address budgets early and often, both in advance of • Focus on what you do best. Many of our customers and during the implementation, so you can plan for and claim that success in CRM comes down to focusing on achieve zero cost overruns. There's nothing worse than what you're good at, and making sure you're the best having to find more money during an incomplete project. at it. Before you create any new products to survive an Our customers typically plan well ahead for the resources increasingly competitive market, take an honest look they'll need, whereas other organizations experience at how you can be the best with the few products you cost overruns of over 10 to 25 per cent, due to lack of already know your clients want to buy from you. Don't planning. try to be everything to everybody. Also keep in mind that if you choose the right solution, • Become a solutions provider. If you want your clients implementation does not have to cost more than the to trust you and choose you, you have to understand software itself. You may have heard of companies them. To create long-term relationships, it's necessary spending two to three to six times the cost of software to move beyond being a transaction seller to becoming for the implementation. This is the result of both selecting a solutions provider. software and making decisions prematurely. • Recognize that CRM is a company strategy. Recognize that this shift to becoming a relationship business is a company strategy, not an IT strategy. To deepen relationships, you have to delve into the way your Pivotal CRM | White Paper 6 organization functions and interacts with clients to make significant, long-term changes. The Last Word • Establish a CRM culture. If you think of people first, Wherever you are in the Financial Services industry, the before technology, you will be able to create an messages in this paper are ones that you've likely heard environment where your employees want to change, before. Obvious as these messages may seem, however, where they expect and want tools that will help them to it's still a challenge for asset management firms to make understand and work with clients more effectively. Be life easier for their high value advisors. It's still a challenge inclusive by giving everyone across your entire organi- for private and commercial banks to know what they need zation access to the CRM system. And don't forget to to know about their clients and when; it's still a challenge honestly assess your employees' readiness for change. for investment banks to manage their book of business most efficiently. Even more, much of the business world • Get commitment from leadership and front line still ignores these messages with increasing frequency employees. Changing a culture is an evolution, so it won't happen overnight. But you can get started right The tendency to regard short-term profit as the primary away by encouraging commitment from your leadership business objective often overrides the ability of companies and from the front lines. Both top-down and bottom-up to create long-term value for customers. An emphasis on commitment, which takes time to build, is crucial to growth by means of slick marketing and massive new- your success. customer acquisition has become the norm for many. But while the ideas are not new, the principles on which “ If you want your clients to trust you and choose you, you have to understand them. To create successful financial services companies—those with long- term, loyal clients—base their success make more than common sense. They make money—more money—in the long run than the opportunistic short-term strategies we long-term relationships, it's necessary to move see everyday. beyond being a transaction seller to becoming By focusing on clients and concentrating on creating ” a solutions provider. value and partnership with all of their stakeholders, our financial services customers have learned through experience that partnership builds incentive, which builds • Implement in phases. Implement your CRM project value and loyalty. Their clients, employees, and partners in phases. Don't try to do everything at once or you'll continue to generate profit, growth, and lasting value, overwhelm everyone involved. Phases help you keep while their competition lags further behind. an eye on your costs, and they give your employees time to adjust to the changes incrementally. If you stick Our customers have demonstrated that CRM can be to clearly-defined phases, you'll be able to avoid the successful. If they can do it, you can too. scope creep common in so many projects, and stay focused on your goals and resources. • Launch with pizzazz. Launch your CRM project with style. Give it a theme, generate anticipation, get people involved, and—most importantly—make it visible to your employees. If you demonstrate how your new system fits into the big picture of where your business is headed and what the benefits are, your employees will be more likely to embrace that forward movement. • Celebrate your successes. Be sure to show your employees how important a client focus is to your organization by celebrating your ongoing successes. Keep them informed of all the benefits of CRM as your organization experiences them, such as how you're improving relationship depth, increasing your understanding of clients, creating more cross-selling opportunities, increasing productivity per employee, increasing your top and bottom line, and increasing client loyalty. 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