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The Road to Customer-centricity: Driving Success in Tomorrow’s Banking Business

Customer Focus in Today’s Banking Market

Banks are pushing hard for an increasing share of customers' wallets to drive their organic growth, and many banks are focusing their strategies (and technology investments) on “raising the bar” in their delivery channel and distribution capabilities. However, many believe that banking products are easily copied commodities with marginal differentiation in the hearts and minds of customers.

Today, banks are able to interact with their customers more efficiently and easily. Banks can – if they choose to – learn more about their customers and discover what they want. They can even tailor products and services to specific customers and/ or segments.

Most large banks are highly adept at dividing customers into segments and creating products – or value propositions – for each one. Many of these banks have created a deep, analytical understanding of how customers in these segments prefer to interact to transact their banking business. Additionally, the more progressive banks assess not only the relative profitability of customers and segments but their potential lifetime profitability. Most banks believe they deliver great service. But, how many are truly customer-centric?

A customer-centric bank uses business strategies across the company to best serve customers – it is a bank that revolves around its customers and what is best for them. The culture of a customer-centric bank is focused around the overall customer experience, not sales.

What Do Customer-centric Companies Do?

Successful customer-centric companies typically have the following modus operandi:

• They strive to please (or “delight”) their customers again and again
• They design the right product offerings for the right customers
• They build their organizations around cross-functional teams (not “silos”)
• They make decisions that resonate with customers
• They seek to create memorable, positive experiences for their customers

Strategies for Customer-Centricity

As a framework for designing a customer-centric bank, it is important to embed the following principles or strategies into the business plan:

Focus on the customer relationship

• Create business processes (and deploy supporting technologies) that allow the bank to have a holistic view of each customer relationship beyond balance and transactional data.
• Consider customer rewards and incentives built around the entire banking relationship and not necessarily individual products.
• Communicate with customers meaningfully, relevantly, and frequently.

Create valuable (and memorable) customer interactions

• Build a culture focused on treating customers “the right way” every time, and hire talented associates who are also customer advocates. Being customer-centric involves more than simply training associates how to treat customers. It also means giving them the tools and authority to decide what is best for the customer in a given situation.
• As an extension of the previous point, it is important that core, accurate and consistent customer information is available to associates at all customer touch points.
• Simplify the customer process of dealing with your bank and optimize your bank’s efficiency by using automation tools and self-serve features. For example, allow customers and associates to use pre-filled application forms (based on existing customer knowledge data) as the basis for applying for and processing new product applications.
• Implement an integrated delivery and distribution channel strategy that offers customers the access, convenience and functionality they require to transact their financial business easily and efficiently.

Utilize data analytics and data mining techniques

• Analyze transactional data as well as demographic and psychographic information in order to design successful sales and service actions.
• Apply segmentation and data mining techniques.

Design flexible products

• Consider product packaging and relationship-based pricing to win more of a customer’s business (companies such as Barclays Bank in the UK, Envision Financial in Canada, and Pacific Trust Bank in the U.S. have developed successful product propositions that take a more holistic view of the customer relationship).
• Allow customer-defined product features and options, particularly at the account-opening stage and when using delivery channels such as online banking.

The Road to Customer Centricity

Whether these strategies represent a paradigm shift or simply a greater emphasis on the strategies they were pursuing already, many banks proclaim that being “customer-centric” will be the epicenter of their ongoing business practices and ultimately the determinant of their success. Figure 1, below, provides a snapshot of customer-centric business practices or initiatives for consideration based on best practices.

Customer-centricity – the New CRM?

The concept of Customer Relationship Management (CRM) is well-established in the banking industry. However, past surveys on the topic reveal that CRM “implementations” in many cases have failed to produce the desired financial results and customer loyalty improvements. There are many reasons for this: most commonly, the difficulty in changing the “corporate culture” or breaking down “fiefdoms” or silos that tend to focus more on discrete products rather than on the overall customer relationship.

Being customer-centric is very different from implementing a new CRM system, as is evident from this White Paper. However, the four-step process that has been at the core of CRM (its raison d’être) since its inception remains very meaningful to a de novo bank seeking to become customer-centric:

• First, identify your customers.
• Second, differentiate them in terms of both their needs and their value to your bank.
• Third, interact with them in ways that create a positive, memorable experience but also optimize efficiency for your bank.
• Fourth, customize your interactions with them. Treat your customers differently based on what you know and what you have learned about them. Consider specific product offerings or incentives that reflect your knowledge of the customer.

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