frontline consumer research group by tdelight



    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
• 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
                 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
   – 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

        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

                     Set internal           First day                First 1-2 weeks       First 2-3 months

                                                                                           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

                       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

                     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”

                                            options; not advice         Willing to take time


                                                                                                               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

      Student checking                     Challenging population

                                            — Can absorb sales capacity
      Recent immigrant                      — Difficult to handicap, especially long-term
      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-
performance in these activities                                                                                                        GAP*

                          Customer profiling process is used                                                                           3.3

        Phone calls are placed to new customers in the days
                     following account opening

         Front-line staff receives training to conduct profiling                                                                       2.8

      Phone calls are placed a few weeks following account

              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

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
    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
— 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
 • 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
       – 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

Source: BAI
          Webcast and Whitepaper

To access today’s webcast replay or to
  download the BAI Frontline Factor
         whitepaper, go to:

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