® The Frontline Factor Develop Long-Term Customer Relationships in 3 Months February 9, 2005 ® Develop Long-Term David Klebba Customer Relationships Vice President Three Services in Financial Months Oracle Corporation February 9, 2005 The Front-line Factor Study Background • Banks have made enormous investments in relationship-based strategies in recent years, hoping to bolster profitable revenue growth through improved customer interaction • But major initiatives – such as customer relationship management, needs-based selling and segmentation – often fall victim to front-line execution in the branch, causing potentially huge opportunities to be lost • Fresh insights were needed so that customers, financial institutions and solutions providers can experience the maximum returns from relationship strategies Oracle teamed with BAI to launch The Front-line Factor to explore why the front-line implementation of relationship-based strategies have failed to yield anticipated results — and provide insights on how performance can be improved The Front-line Factor Study Highlight • From the time a new account is signed until that customer is secured for the long term, you basically have three months in today’s economy. • Today we’ll discuss – What metrics are contributing to improved customer satisfaction – What management techniques are making several banks’ front lines formidable – How to maintain a solid bottom line throughout the transformation of your team The Frontline Factor Our Panelists Paul D. McAdam, Managing Director, Strategic Research, BAI Robert Kottler, Senior Executive Vice President, Chief Sales Support Officer, Hibernia Corporation Paul J. Olivier, Group Executive Vice President, Frost National Bank The Frontline Factor examined banks’ current priorities and performance in a range of relationship management initiatives New account Customer Relationship Retention opening service expansion management Needs-based Differential service Book of business Problem resolution profiling at account & loyalty programs protocols Contact strategies opening Needs-based Attrition drivers & Utilization of cross- Welcome & switch assessments intervention sell & purchase kits Capitalizing on programs propensity leads Onboarding service requests to Salvage processes Proactive account program upgrade upgrades Account closing relationship protocols Problem resolution processes People: Skill sets, training/coaching, role clarity, incentives, turnover Process: goal setting, activity planning, measurement, capacity & coverage Technology: Branch automation, predictive modeling, lead management Source: BAI Best practice account opening and onboarding framework Onboarding timeline Process Set internal First day First 1-2 weeks First 2-3 months expectations Quality assurance Open account Orient / follow-up & up-sell Product Branch Branch or Branch or Management • Prioritize/triage Call Center Call Center • Simplified, treatments • Thank you letter • Quality check up Champion customer-focused • Needs-based • Follow-up calls (online banking, bill products sales/profiling • Additional data payment, etc.) • Clarified pricing • Right products for collection and • Problem resolution • Trained sales/ customers needs analysis • Activation & platform reps • Immediate fulfilment • Quality check up utilization incentives • Consistent ads, • Switch kits (check order, ATM • Additional needs collateral, • Purchase receipts card, etc.) fulfilment and promotions • Welcome gifts cross-sell Customer Strategy: objectives and prioritization of customer treatments Enablers People: organizational alignment with onboarding objectives Process: mechanisms that install and sustain onboarding practices Technology: customer contact management Technology: predictive modeling Source: BAI High-performing banks leverage onboarding to define immediate customer needs and future relationship treatments… Customer’s Preferred Mode of Interaction “Don’t sell to me” “Hold my hand” Reasons for Account Self-directed – “I’ll Advice-receptive – “I figure it out myself” want ideas and Opening Seeking information, guidance” potential options; not advice Willing to take time High Relationship Potential “Recently moved, I need to Trust builds over for consultative sales established a new banking time, based on approaches relationship” demonstrated — Immediate performance — Ongoing Employment change Life event (marriage, children, Limited customer potential limits justifiable efforts divorce, inheritance, etc.) at relationship-building potential Student checking Challenging population Low — Can absorb sales capacity Recent immigrant — Difficult to handicap, especially long-term potential Secondary checking account — Risk of “second-class servicing” syndrome Drawn to bank by a promotion Source: BAI …And define specific marketing programs for the first year of the relationship Data mining and lead management activities are accelerated to become actionable within the first 90 days of the relationship Data Mining Account Propensity Contact Marketing Opening Modeling Strategy Strategy Customer Next most Prioritization Segment- profiling likely product Contact specific information Transaction method messaging / Segment preference dialogue – Branch identification Channel Prioritization – Phone preference of benefits & – Internet features – Mail Source: BAI …And the need to marketing programs Banks recognizedefine specificimprove the profiling process, of profiling data the onboarding the storagefor the first year ofand relationship programs (a) Rate the importance of the following activities to developing strong relationships with new checking account customers. (b) Rate your institution’s Importance- weighted performance in these activities GAP* Customer profiling process is used 3.3 Phone calls are placed to new customers in the days 2.8 following account opening Front-line staff receives training to conduct profiling 2.8 Phone calls are placed a few weeks following account 2.9 opening Customer profiling data is stored in a database 4.0 New customers are provided a “welcome kit” 1.0 “Switching kits” are provided to new customers 2.6 Front-line staff receives the proper incentives to encourage profiling 2.2 1 2 3 4 Not Important / Low Importance / Moderate Importance / High Importance / No Activity Poor Performance Average Performance Good Performance Importance Performance Source: BAI The Frontline Factor Paul J. Olivier Group Executive Vice President Frost National Bank Robert M. Kottler Senior Executive Vice President Hibernia Corporation The first 90 days represent a critical window of opportunity to control attrition Checking Account Attrition Customers attrite at double the 35% - 45% average rate in the early going ~ 2x – Placed into the wrong products, or into too many products, or they fail to 17% - 22% activate – Fulfillment errors – Negative surprises (fees) Annual Attrition First 3-6 Month Attrition Source: BAI A large portion of cross-sales take place in the early stages of new customer relationships Timing of cross-sales to new retail DDA relationships Same Day 43% of all cross- 0 - 4 Months sales that occur within the lifetime 4 - 12 Months of a DDA 1 - 2 Years relationship take 2 - 3 Years place on the same day of 3 - 4 Years account opening 4 - 5 Years through the first 5 - 6 Years 12 months of the relationship 6 - 7 Years 7 - 8 Years 8 - 9 Years 9 - 10 Years > 10 Years Source: BAI Onboarding should serve as the foundation of a relationship-based selling process Components Product-based Selling Relationship-based Selling Offer Product focused Customer-focused Present products Explore needs Reactive (order taking) Proactive probing for opportunities Probe Customer qualification for products Products owned, wallet size/allocation under discussion Behaviors and preferences Cross-sell Sequential and driven by supply-side Initially achieved through profiling, multi- objectives product packaging and customer Product-oriented mass marketing onboarding campaigns Ongoing: Through relationship management and event-driven triggers Employee Based on units sold Based on balances sold and retained Sales Lagged payouts to encourage account Incentives activation and retention Book of business Overall Straightforward, quick, easy to Time-consuming Process implement Skills-based Customer profiling Source: BAI The consumer research findings support the need for onboarding and other relationship-based approaches Most Important Gaps Priority Initiatives Onboarding provides the • Product Simplification Charges low fees • Packaging opportunity to better meet customers’ needs through: Provides superior returns • Relationship Pricing Setting expectations and Does not surprise me with fees • Onboarding educating customers about Staff empowered to decide fees • Onboarding products and fees Rewards amount of business • Onboarding Personalizing pricing based brought them • Product Packaging on relationship potential Has simple, easy to understand • Onboarding Highlight “value” delivered fees • Product Simplification by products and specific Executes my transactions • Onboarding benefits • Six Sigma Quality without any mistakes • Problem Resolution Provide opportunities to ask Employees authorized to resolve • Onboarding questions and clarify issues • Problem resolution information • Branch staffing A process that instills Has short lines in the branches • Customer recognition consistent execution and Knowledgeable, well trained • Onboarding employee confidence staff • Needs-based selling Source: BAI A number of frontline obstacles block banks’ implementation of relationship-based strategies Percent of bankers that rate these issues as significant to moderately significant challenges to their ability to implement relationship-based strategies Front-line lacks required sales skills 79% Inadequate front-line sales training and coaching 68% Difficult for mgmt. to track front-line activities/results 68% Front-line lacks required product knowledge 56% Performance goals are not clearly understood 56% Front-line focus on internal activities vs. serving customers 55% High front-line turnover 54% Inconsistent senior mgmt. communication of objectives 51% Incentive schemes do not drive right behaviors 49% Limited front-line access to customer information 44% Incentive schemes are difficult for staff to understand 36% 0% 25% 50% 75% 100% Source: BAI Many banks are planning relationship-oriented IT investments in the coming year Percent of banks that have plans for significant new investments in the following technologies in the next 12 months Sales tracking 56% Customer value/profitability 52% Customer segmentation 46% Campaign management 37% Data warehouse 36% Enterprise CRM 35% Branch staffing/capacity planning 35% Sales force automation 33% Lead generation and management 32% X-sell or attrition predictive modeling 29% Teller cash automation 20% 0% 25% 50% 75% Source: BAI Hibernia Bank Efforts to increase account retention WOO (windows of opportunity calls) Follow up branch calls Instant Issuance of debit card pilot Retention tracking Back to basics front line coaching Frost National Bank Created a roadmap to implement onboarding — A coordinated effort between marketing, consumer branch sales team, contact center and technology department Identified 24 distinct activities that enable a coordinated onboarding program. The 24 activities fall within the categories of: — Marketing communication - merchandising, direct mail and outbound calls — Managing the in-branch experience – a professional sales encounter — Data management – collecting and acting on data, and the metrics that measure success — Process improvement - fulfillment There’s a huge opportunity, but it will take a significant commitment to attain it The Challenges • Most banks remain product-focused organizations • No standardized customer acquisition process • Executives develop a “big picture” view of how the process “ought” to work, but front-line staff: – Remain task-oriented – Are often resistant to large, expensive process redesigns – Lack the proper tools, coaching and incentives The Opportunities • Coordinated account opening and onboarding process with a simple customer segmentation approach that front-line employees can understand and implement • Simplify products so customers can understand them and front-line employees can communicate the benefits • Deploy a needs-based selling approach that extends across the first 90 days of relationships – Targeted analyses of the triggers of fruitful cross-sales, and attrition behavior, during the first 90 days of new relationships – A prioritized list of critical customer events and contact strategies – Practical insights into how to dialogue with the customer at critical stages of the customer orientation process • An operational roadmap identifying the best circumstances for the deployment of relationship-intensive resources Source: BAI QUESTIONS ANSWERS Webcast and Whitepaper To access today’s webcast replay or to download the BAI Frontline Factor whitepaper, go to: oracle.com/industries/financial_services
"frontline consumer research group"