Keeping your Customers in a Competitive Age

Many companies have made strides in optimizing their internal processes by applying the techniques of enterprise resource planning and supply chain management. However, as efficient as these companies have become, they have typically made no improvements in the way that they serve their customers. They have instead become 'introverted', focusing on internal operations rather than asking themselves what their customers want. The result is that these companies are losing their customers at a rate of 50% every 5 years.

For today's busy consumer, convenience competes with price and quality as the key purchasing motivator. A company's ability to provide the right information, the first time via the right channel can make the difference between keeping or losing a customer. The channels of choice are the telephone and the Internet, and the time of choice is any time at all. Contacts must be followed up by the right action, every time.

A single indifferent experience can cause a customer to take one of the other choices with which they are bombarded. Nowhere is this more relevant that in financial services, where the traditional sources are being disintermediated in favor of competitors with whom it is easier to do business.

Too many institutions are focused on signing up new customers and not on retaining the ones they already have. Yet it costs up to ten times more to attract a new customer than it does to retain one. By increasing customer retention by only 5% a company can double its profits. The key is to consistently provide service at a level that makes competitive temptations unattractive.

Institutions must also strive to increase the commitment of a customer by expanding the number of products used, creating a barrier to leaving. Bill payment is a good example of this.

Convenience now works in your favor: its simply too much work to move the relationship somewhere else. However, not all customers are created equal. Financial institutions have stated for years that they want to increase their sales abilities, yet 50% of all cross-sales are unprofitable. A financial institution must "know" its customers. It must understand for every customer, on an individual basis, the profitability, the products they have, those that they might need, their preferences as far as how they interact with the bank. And it must take advantage of this information every time the individual contacts the bank.

Customer relationship management is "a business strategy aimed at understanding and anticipating the needs of an enterprise's current and potential customers." The enabling technology is available today, but it must be applied with care. Speeding up a bad process is not necessarily effective. Neither is the current trend of putting a graphical user interface on yesterday's application. Sales force automations is helpful but is limited because it is not integrated with the rest of the business processes.

A customer relationship management solution begins with a unified representation of the complete customer relationship, with drill down into the specifics of each account, regardless of which system it resides on. Second, whatever fulfillment is required by the contact should be electronically integrated into the system, to strengthen business processes and enhance traceability. Third, all contact and fulfillment information should be stored, to support reference during future contacts, and subsequent data-mining. Fourth, there should be no deterioration of the service outside of normal working hours. And finally the presentation should be personalized for the individual. This personalization provides perhaps the greatest challenge. Based on all we know about this customer (demographic, account history, products used) how are we going to deal with him? Are we going to promote a new product, and if so which one? These decisions can be made based on information in a data warehouse or mart, combined with real time factors, such as his immediate interest based on why he just contacted us.

Typically, such solutions are extremely challenging both technically and organizationally. They are also expensive and slow to implement. However, newer solutions can provide many of the same benefits without the massive overhead. These integrated and open solutions can save many headaches during deployment and thereafter.

This is the challenge of the next decade. The institutions that recognize and embrace the challenge will be those that emerge stronger. There are enormous opportunities for institutions able to harness the technology to demonstrate tangible value to their customers.