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					                                                                  FPS   THE EXPERTS
                                                                        in Loyalty-Building
                                                                        Financial Communications

       Dismantle Organizational
       Silos to Build a Customer
           Focused Enterprise
                                   A banker's guide to creating
                           a comprehensive single view of each
                              commercial client relationship

A Financial Publishing Services White Paper

                             The customer pool for banks is shrink-         just the value the bank gets from the
                             ing, and each year most banks lose             customer. It also includes the value the
Before banks                 nearly as many customers as they               customer receives in return — for that is
can become                   acquire. In response, banks and other          what ultimately sustains the relationship.
                             financial institutions are taking the diffi-
customer-focused             cult step of tearing down the various          When seeking mutual value creation,
organizations, they          information silos that prevent customer        keep in mind the following points from
need to dismantle            intimacy. They are rebuilding their enter-     SAS Institute’s white paper,“Organic
                             prises from the top down with a cus-           Customer Growth for Financial
or transcend                 tomer-centric focus.                           Services Institutions”:
organizational silos.
— “Silo Busting: How to
                             Redefining Your ‘Value’ To Customers            • Customer retention doesn’t neces-
                             With business customers having more               sarily mean customer satisfaction. A
Execute on the Promise of    access to information, less sensitivity to        customer who holds a bank in low
Customer Focus,” May 2007,   traditional advertising and more sensi-           esteem but stays may be merely
by Ranjay Gulati
                             tivity to price, creating value for cus-          trapped, not loyal.
                             tomers is becoming harder to achieve.
                                                                             • Customer satisfaction is no guaran-
                             So, in the competition for customers,             tee of loyalty.“Satisfied” customers
                             how does your bank stand out from the             might still be lured away by com-
                             others in your customer’s mind?                   peting offers or the need to diversify.

                             Forrester Research says organizations           • Customer loyalty is the combination
                             need to dramatically improve the cus-             of satisfaction and behavior, but is
                             tomer experience they deliver, through            no guarantee of profitability.
                             what it terms Experienced-Based
                             Differentiation. EBD requires an enter-        Beginning the Process of Integration
                             prise-wide change in mind-set, organi-         Before banks can become customer-
                             zation and structure. In Forrester’s           focused organizations, they need to
                             research report,“Experience-Based              dismantle or transcend organizational
                             Differentiation: How to Build Loyalty with     silos. According to a recent article in
                             Every Interaction,” analyst Bruce Temkin       Harvard Business Review (“Silo Busting:
                             offers three imperatives:                      How to Execute on the Promise of
                                                                            Customer Focus,” May 2007, by Ranjay
                              1. Obsess about customer needs.               Gulati), some of the key factors in
                                                                            achieving this are:
                              2. Reinforce brand with every action.
                                                                             • Coordination. Sharing information
                              3. Make excellent customer service a             and coordinating activities across
                                 company-wide mission, not just a              all business units.
                                 consideration for those who inter-
                                 act with customers.                         • Cooperation. Through incentives,
                                                                               structures and allocations of power,
                             The new mind-set requires a redefinition          enabling all departments to work
                             of customer value. Customer value isn’t           together to satisfy customer needs.

                                                                                               847.501.4120 | www.fpsc.com

                                 • Capability Development. Developing        customer interactions must be
                                   skills that empower employees to          recorded and made immediately
Asking customers,                  deliver customer-focused solutions.       available to all business lines in order to
“Would you                         This includes providing incentives—       present an accurate and current view
                                   attractive career paths, for exam-        of the customer. You can record attitu-
recommend us to a                  ple—for those who succeed in              dinal information about customers by
friend or colleague?”              busting through silos to deliver com-     conducting regular, impromptu surveys.
can unearth keen                   prehensive customer solutions.
                                                                             You can do this by integrating informal
insights into                   Information Sharing is Essential             surveys into routine customer contacts,
customer attitudes              Coordinating the efforts of multiple         whether they be via e-mail, in-person
and help predict                departments enables value creation           meetings or contacts by your call cen-
                                for customers that otherwise would not       ter. This need not be a tedious or
future behaviors.               be possible. A customer-centric culture      lengthy undertaking.
— Fredrick Reichheld, loyalty   facilitates a comprehensive view of the
expert and author of The
                                customer across all products. In con-        The Ultimate Question
                                trast, a product-centric culture provides    The answer to one simple question can
Ultimate Question for           only a partial glimpse of the customer       help direct your efforts to improve cus-
Unlocking the Door to Good      through a specific product lens. The lat-    tomer experience. Fredrick Reichheld,
Profits and True Growth
                                ter view provides no insight into the        loyalty expert and author of The
                                banks’ share of wallet with the cus-         Ultimate Question for Unlocking the Door
                                tomer. Furthermore, this single-product      to Good Profits and True Growth, found
                                view makes it difficult to spot and          that asking customers,“Would you rec-
                                respond to cross-sell opportunities.         ommend us to a friend or colleague?”
                                                                             can unearth keen insights into customer
                                Information formerly sequestered by          attitudes and help predict future behav-
                                department must be shared among all          iors. Going further to ask “why?” or “why
                                bank business lines. You can most easily     not?” can reveal underlying attitudes
                                achieve this by creating structural over-    and how your customers see you.
                                lays that transcend rather than obliter-
                                ate old systems.                             In his Harvard Business Review article,
                                                                             Gulati suggests that organizations move
                                For instance, senior executives for multi-   beyond structuring businesses into sepa-
                                ple bank business lines can share            rate units of specialization. Instead, he
                                accountability for customer retention.       suggests a model where employees use
                                Some experts suggest creating a new          their knowledge and skill sets to com-
                                C-level position in charge of the cus-       bine products and services from multiple
                                tomer experience. In fact, several for-      business lines to create a comprehen-
                                ward-thinking banks have already             sive solution to a customer’s needs.
                                created such positions.
                                                                             To foster cross-boundary sales effective-
                                Existing customer data silos need to be      ness, relationship managers need to
                                scrubbed, centralized and made               transcend their current sphere of knowl-
                                accessible to sales, marketing, product      edge and experience. They can do this
                                and senior management. All varieties of      by rotating among the various business

                                                                                                 847.501.4120 | www.fpsc.com

lines and getting training in each line. A   calls. As a result, you can make con-
bank can further cultivate cross-bound-      structive changes, resulting in happier
ary sales skills and experience by hav-      customers and reduced call volumes.
ing meetings where relationship
managers share their knowledge, expe-        Creating a Unified Customer
rience, challenges and success stories.      Data Bank
These client case studies, when docu-        Formatting the information with unified
mented in a centralized database, can        definitions and fields for interdepart-
be used by banks to fine-tune their          mental use is called master data man-
product development and used by              agement (MDM). Without MDM, silos will
calling team members in developing           persist, according to Gareth Herschel,
innovative business solutions to present     Gartner’s CRM Research Director.
to clients and prospects.                    Herschel outlines each step in the
                                             MDM process:
Marketing can communicate value to
customers across all business lines in a      • Assemble a cross-functional group
way that provides solutions regardless          that will own the initiative.
of business line. Product development
can use the information to go beyond          • Establish and define universal
simply designing features to engineer-          concepts, such as how you define
ing better customer experiences and             customer, location, revenue
learning why customers use offerings as         and product.
they do. They can also focus on what
might be frustrating customers and try        • Pull, migrate and consolidate data
to uncover and even anticipate client           into one customer integration hub.
needs that they may not have yet
identified or addressed.                      • Collect insight about customers to
                                                establish optimal segmentation
Aggregating Meaningful Data for a               parameters
Single View of the Customer, Where
to Begin?                                    Finally, the cross-functional team must
A good place to find the most valuable       translate the value proposition of the
customer information you already have        master data to the entire organization,
may be within the records of your call       as all must be continually involved in
center. Not only can this be the starting    keeping the data accurate throughout
place for your new customer data bank,       changes in the customers’ lifecycle.
but reacting to its content can dramati-
cally improve the customer experience.       Establishing Customer Segments
                                             It’s ironic that elevating the customer
By sharing and analyzing call center         experience requires more sharing of
interactions with marketing, sales, prod-    information among bank departments
uct development and even senior              and business lines while simultaneously
management, you can pinpoint the ser-        dividing customers and prospects into
vice bottlenecks and information gaps        separate groups. Customers want rele-
that most often generate customer            vance; to deliver it, you need to use

                                                                847.501.4120 | www.fpsc.com

segmentation to treat different                 likely to defect. Combined with an
customers differently.                          overlay of customer profitability scores,
                                                you may decide to migrate less desir-
An effective segmentation model iden-           able customers to less costly channels,
tifies distinct groupings of customers with     or deter them with higher service fees.
similar characteristics. Initially, your seg-   All of this enables you to lower opera-
mentation process will start with what-         tional costs for higher returns over the
ever information you already have in            long run.
your database. But with consistent effort
you can quickly build on your customer          Strategies for Dismantling Silos
profiles to where you begin to identify          1. Start from the top and work down
present and future client lifecycles.
                                                Effective implementation of an inte-
According to Omniture, a provider of            grated, customer-focused enterprise
Web analytics solutions, the larger             requires changes that originate at the
“buckets” of customer data might                top of a financial institution’s organiza-
include information on demographic,             tion. In fact, in its 2007 white paper,
psychographic and behavior.                     Forrester Research suggests that reor-
Demographics tell us who; psycho-               ganizing to create a more customer-
graphics tell us what they think and            based focus should be a priority
feel; and behaviors reveal the actions          initiative. Forrester warns that in order
customers take as a result. This knowl-         for such changes to succeed, it
edge empowers marketing to create               requires a multi-year commitment and
more relevant messaging and enables             buy-in from the CEO on down.
sales to better bundle services. In addi-
tion, it gives product development              Fortunately, getting buy-in from the top
insights that enable them to anticipate         may be getting easier. According to a
and address client needs.                       May 2007 webinar presented by
                                                SourceMedia and the IBM Institute for
By understanding which products and             Business Value, 65% of bank CEOs say
services customers are using currently,         they realize that extensive change is
you can predict what they’re most               necessary to keep their organizations
likely to need or value in the future.          competitive. (These same bank CEOs
                                                also admit that most past attempts to
By charting behaviors, you can                  reorganize around the customer have
develop customer models and extract             failed because of banks’ inability to
“propensity to buy” scores. You might           generate collaboration across multiple
offer high-value customers open                 business lines.)
access to specialists in the contact
center, or 800 numbers and access to             2. Obtain bank-wide buy-in
advanced service features on the
bank’s Web site.                                Harvard Business Review concurs. In a
                                                June 2007 article in the Harvard Business
Conversely, these customer models also          Review (“The New Deal at the Top”),
can uncover profiles of customers most          Yves L. Doz and Mikko Kosonen describe

                                                                    847.501.4120 | www.fpsc.com

how the role of CEO needs to evolve to        • Developing metrics that reflect cus-
keep companies competitive.                     tomer value and tie incentives to
Responsibility for corporate performance        those metrics.
needs to be collective, rather than by
individual business unit, they argue. They    • Initiating scorecards that measure
also suggest that companies implement           customer satisfaction, churn
the following practices and tools:              and loyalty.

 • Require interdependent unit heads          • Allocating resources according
   to integrate a single corporate strat-       to customer groups rather than
   egy across all units.                        product groups. For example, rather
                                                than viewing marketing dollars as
 • Establish transparent performance            an expense, instead consider them
   metrics developed by top-level               an investment requiring a good
   management. Such metrics specifi-            return. And the approval process for
   cally should not be left to be devel-        all funding decisions should require
   oped by heads of individual bank             an explanation of how the pro-
   business units.                              posed spending will elevate the
                                                customer experience.
 • Transition to a customer service
   model requiring overlapping experi-       While it’s hard to dispute the wisdom of
   ence and responsibility rather than       harnessing collaborative thinking and
   unit-specific expertise.                  action, CEOs will likely find it difficult to
                                             accept open challenges to their think-
 • Require measurements of optimal           ing and the subsequent loss of individ-
   outcomes that are value-oriented          ual power. But it can be done.
   rather than results-oriented.
                                             At the 7th CRM Summit in February 2006,
 3. Execute strategies to reorganize         in Braselton, GA, Kevin Riley, Executive
    around the customer                      Vice President at KeyBank, described
                                             how his bank successfully reorganized
In Managing Customers as Investments,        around the customer by enlisting the
Gupta and Lehmann suggest several            CEO’s sponsorship to drive the change.
additional practices and tools in the
effort to become more of a customer-         Other top executives can also play an
focused organization:                        important role in enhancing an organi-
                                             zation’s customer focus.
 • Creating more direct customer
   interaction for the CEO, including         4. Define CFO’s role in a customer-
   spending time on the phones in the            centric bank
   call center.
                                             Loyalty experts suggest that the chief
 • Recognizing customers in terms of         financial officer (CFO) should be
   their long-term potential and treat-      responsible for measuring customers’
   ing them as assets.                       lifetime value in dollar terms and using

                                                                  847.501.4120 | www.fpsc.com

                           that value as a lens through which all        tomer-centric. With its appointment of
                           expenses are viewed.                          Kevin Riley as the bank’s Client
While it’s hard to         Lifetime value figures provide an alter-      Information and Relationship Officer,
dispute the wisdom         nate way to forecast future cash flow         KeyBank has become one of a number
                           and the overall value of the client rela-     of banks creating senior level positions
of harnessing              tionship. Interestingly, an article by        having authority and accountability for
collaborative              Joseph McCafferty in the May 2007             enhancing the customer experience.
thinking and               edition of CFO magazine discusses the
                           merits of this long-term, return on invest-   Reorganizing around the customer is a
action, CEOs will          ment over time approach.                      major undertaking for most financial
likely find it difficult                                                 institutions, requiring a complete about-
to accept open             McCaffrey notes how business groups           face from “business as usual.” But for
                           and financial experts are exposing the        those who make the commitment to
challenges to their        long-term damage done to organiza-            achieve a truly customer-focused orga-
thinking and the           tions by short-term thinking.                 nization, the financial rewards are signif-
subsequent loss of                                                       icant and enduring.
                            5. Clarify the role of the chief
individual power.              marketing officer                         Visit us at www.fpsc.com, e-mail us at
                                                                         info@fpsc.com, or call 847.501.4120 for
                           Chief marketing officers (CMOs) have          more information. •
                           some of the most difficult work in helping
                           their companies become customer-cen-
                           tric. To attain the required intimacy with
                           customers, all departments and persons
                           involved in client contact need to work
                           together. This shift in strategy represents
                           nothing less than a revolution in most
                           commercial banks where a culture of
                           compartmentalization dominates.

                           Marketing benchmarks need to ele-
                           vate beyond the traditional four Ps of
                           product, place, promotion and price to
                           also include calculations of return-on-
                           investment that measure marketing
                           spending’s impact on customer acqui-
                           sition, retention and loyalty—gaining a
                           greater share of a customer’s wallet.

                            6. Define the role of the customer
                               relationship officer

                           New titles like Customer Relationship
                           Officer (CRO) are emerging in response
                           to banks trying to become more cus-

                                                                                             847.501.4120 | www.fpsc.com

                         As your bank abandons the silo mental-         Optimal pricing structure increases
                         ity and begins sharing information             both the customer’s value to the bank
DRP offers               among business lines, you can more             as well as the bank’s value to the cus-
                         accurately measure the overall prof-           tomer. Gartner Research has coined
bundled, personalized
                         itability of each corporate client rela-       the term Dynamic Relationship Pricing
solutions priced to      tionship. You can do this by aggregating       (DRP) to describe a pricing strategy
reflect the customer’s   the profitability of all the different busi-   that achieves this win-win scenario.
                         ness line relationships the client main-
current and predicted
                         tains with your bank. Knowing the              Driven by the Total Customer
relationship value       aggregate profitability of each client,        Relationship
with the bank.           your bank is far better equipped to offer      In its 2005 report,“Dynamic Relationship
                         incentive pricing—pricing that encour-         Pricing to Be Banking’s Next CRM
                         ages your most profitable clients to           Strategy,” Gartner describes DRP as
                         expand their relationships while minimiz-      “pricing that is both dynamic and driven
                         ing or eliminating relationships with          by the total customer relationship.”
                         clients that are marginally profitable.
                                                                        While banks have been using dynamic
                         The following story on Dynamic                 pricing for some time—adjusting rates
                         Relationship Pricing discusses this            according to changing market condi-
                         strategy in some detail.                       tions—Dynamic Relationship Pricing
                                                                        goes a step farther. It factors relation-
                         Cross-Boundary Integration Enables             ship profitability into pricing and
                         Dynamic Relationship Pricing                   enables adjustments to ensure that
                                                                        pricing and rewards are aligned.
                         While research suggests that customers
                         are more sensitive than ever to price,         DRP offers bundled, personalized solu-
                         discounting is not necessarily the path        tions priced to reflect the customer’s
                         to profitability.                              current and predicted relationship
                                                                        value with the bank. It also can take
                         A 1% price cut must generate an                the form of fee waivers or other con-
                         increase in sales volume of at least           cessions based on the breadth and
                         3.6% to be profitable. So, in most             depth of the customer relationship.
                         cases—according to Sunil Gupta and
                         Donald Lehmann, authors of the 2005            In order to structure pricing in this way,
                         book Managing Customers as                     customer relationship knowledge from
                         Investments: The Strategic Value of            the CRM system or other customer
                         Customers in the Long Run — there is           database must be linked to profitability
                         no bottom-line benefit to cutting price.       and costing analytics. More impor-
                                                                        tantly, sales, marketing and product
                         Over the long term, a culture of dis-          must understand how this information
                         counting can erode your brand and              translates into value for the client
                         increase customer price sensitivity.           across business lines. For this reason,
                         While lower prices provide higher value        DRP can only be achieved by breaking
                         to the customer, they decrease the             down traditional informational and
                         value of the customer to the bank.             departmental barriers.

                                                                                           847.501.4120 | www.fpsc.com

Gartner finds DRP pricing structure to
be particularly beneficial to corporate    About the Publisher
clients: “Corporate and wealth clients
will value the shared benefit of           Financial Publishing Services helps
dynamic relationship pricing and will      bank marketers strengthen client
welcome the ability to control the cost    relationships, enhance brand loy-
of services by aggregating more busi-      alty and facilitate cross-selling
ness with one bank,” its report says.      opportunities in their corporate
                                           client communications.
Aggregating the right customer data is
essential to carrying out these kinds of   Our professional writing team
cross-boundary initiatives successfully.   helps banks create customized
Gartner cites three major challenges to    newsletters, case studies, white
implementing such initiatives:             papers and bylined articles in
                                           trade publications. Our technol-
 1. Collecting meaningful                  ogy team maximizes the effec-
    customer data                          tiveness of bank
                                           e-communications, resulting in
 2. Centralizing and formatting            open and click-through rates
    the data                               double the industry average.

 3. Establishing customer groups           Visit us at www.fpsc.com, e-mail
    by using segmentation                  us at info@fpsc.com, or call
                                           847.501.4120 for more information.

                                                           847.501.4120 | www.fpsc.com

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