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Is CRM Improving in Retail Financial Services?

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30th Jul 2004
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In CIMTech’s newsletter on Customer Relationship Management in April 2004, I detected some optimism amidst the fall-out from the bad reports about CRM. Kevin Marsdon of BusinessBerkshire.co.uk said, "CRM has been around for a long time now, but stories of failures abound. This is often because there is a focus on a technical fix. But the operative word is ‘relationship’ and this can only happen if you start a dialogue with the customer." This begs the question: Have marketers and the vendors therefore forgotten what CRM is really about? It is about people and process, not simply about the implementation of a technology.

InsightExec's report – CRM spending has failed financial services organisations – suggests that nothing has really changed, although it reveals that 92 per cent of financial services’ executives believe that a major opportunities exists to improve customer loyalty. How? What they need to do is focus on the customers’ experience. Remember that uproar when the banks started pushing customers online, while closing their branches. The main driver wasn’t on improving the customers’ experiences - it was focused upon cost efficiencies.

At this year’s Technology for Marketing exhibition, the CRM debate was held as usual and reports came back to me that the story hadn’t changed from 2003, when I was invited to join the panel. The vendors, delegates told me, still blame their customers. CRM still fails to meet expectations and a couple of years ago that involved about 70 per cent of all CRM projects. Some reports, written a year or so ago, believe that the main cause for CRM failing in the financial sector will not succeed more because of poor data management. Nevertheless, are the vendors providing the clients/customer with the right knowledge and the right tools to make it a success story? The jury is still out there.

Meanwhile a Gartner Research report, ‘Predicts 2004: Financial Services’, believes that poor data quality will impede decision-making and as a result growth will be slow. It advises that data management and quality should be centralised; that widespread data controls must be implemented and data quality should be evaluated within the context of the enterprise architecture. In 2002 a similar Gartner report predicted that CRM would stumble while remaining important. It said, because of the bad experiences that most firms have had over CRM, most would retreat from using enterprise-wide investments.

Alan Woodward of Charteris plc, who I first interviewed in 2002, talks about the retail banking sector and stresses that CRM is truly about developing relationships:

“I think the retail banks are learning that diversification is probably key. It’s also about being brutal with marketing propositions; it’s about actually listening to your customers. Not with focus groups and like, but actually looking at what your customers buy and how they behave. You’ve got the data there to tell you that and to react accordingly. Don’t just keep offering them what you’ve always offered them, and telling them what they want. Actually, look at what they want because they are telling you by the way they behave. That’s the how the retailers succeed. They actually looked at what the customers did want. It’s nothing really to do with CRM; the technology now means that…particularly because of the new entrants who can be more responsive…people’s expectations are changing.”

Egg Plc features in a Forrester report, ‘CRM Best Practices: Egg’s Cutting-edge Play by Remus Bratt’. The article says that in spite of others fears about investing in CRM, it wishes – as Europe’s highest profile Internet bank with 2.9 million customers – wishes to get it right by bringing together business and IT. It reveals that Egg has three strands to its strategy: a real-time customer data warehouse, ‘powerful’ customer analytics and an improved cross-channel experience.’ In fact in September 2001 it spent £7 million in order to create a single view of its customers.

The bank believes that its strategy will accelerate its financial growth. It has reported won 340,000 customers and increased its operating profit by 300 per cent in the first half of 2003. Underpinning its success is its CRM strategy, which includes real-time credit scoring, optimisation and even triggers, and it intends to increase customer loyalty (although one could argue that customers don’t want to be loyal to any bank, the just want more choice and the best deals) through developing what it calls ‘value-plus moments.’ Egg believes it can increase its response rates sixfold, while cutting expenditure by 75 per cent. All of this sounds impressive, but I wonder what its customers think?

A couple of years ago the Abbey National began to run into some serious trouble. This led to a dramatic drop in its share price, and a major programme to re-organise and re-brand the firm as simply the Abbey began. This makes the latest in the saga of the company more interesting. The prospective takeover by Spain’s largest bank, Banco Santander Central Hispano, may lead to another re-structuring programme if the bid succeeds, which will no doubt involve changes in its CRM infrastructure, processes, and strategy. Beyond that not much has really changed in the sector, although online banking is set to become more and more popular. Still, the banks should focus more on their customers’ needs rather cost-cutting programmes.

Don't lurk.... we welcome your comments. Make them below or email me at edi[email protected]

By Graham Jarvis
[email protected]
15th July 2004

Recommended Further Reading

  1. CRM in the Finance Industry - Xer Publishing - chargeable
  2. CRM: Evaluating what it is doing for Financial Service Institutions - chargeable
  3. Call and Contact Centers in Retail Banking - chargeable
  4. Retail banking services in the UK - chargeable
  5. Retail banking services in France - chargeable
  6. Retail banking services in the USA - chargeable
  7. Direct Marketing in the Financial Services Arena: The Bottom Line on CRM - Quadstone - free
  8. Creating Value through CRM Techniques in Retail Financial Services - Richard Forsyth - free
  9. Customer Relationship Management in the Financial Services Industry – Peoplesoft - free
  10. CRM spending has failed financial services organisations - free
  11. CRM – Is it working in Retail Financial Services? - free

Replies (3)

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Graham Jarvis MA
By Graham Jarvis
12th Aug 2004 23:06

CRM, like most database technologies, can help companies to cope with the mass of data required to at least attempt to create the desired single view. Yet the key to CRM is more along the non-technological lines; that of building relationships with customers.

CRM, arguably, existed before technology even arrived. CRM is multi-faceted and causes many types of realignments within a firm or organisation, so it simply can't be viewed as a good piece of technology that will deliver once it's off-the-shelf.

True CRM is more holistic and much of it is intangible and therefore hard to measure. Therefore many of the traditional aspects of marketing still apply.

People and processes are at the core of any successful CRM implementation. Without people, customers, there is no relationship to develop.

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Graham Jarvis MA
By Graham Jarvis
12th Aug 2004 23:06

CRM, like most database technologies, can help companies to cope with the mass of data required to at least attempt to create the desired single view. Yet the key to CRM is more along the non-technological lines; that of building relationships with customers.

CRM, arguably, existed before technology even arrived. CRM is multi-faceted and causes many types of realignments within a firm or organisation, so it simply can't be viewed as a good piece of technology that will deliver once it's off-the-shelf.

True CRM is more holistic and much of it is intangible and therefore hard to measure. Therefore many of the traditional aspects of marketing still apply.

People and processes are at the core of any successful CRM implementation. Without people, customers, there is no relationship to develop.

Thanks (0)
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By SASteam
12th Aug 2004 09:18

In response to the opinion piece, Is CRM improving in retail financial services? I found it interesting to see that the failure of CRM is still being generalised rather than being specific about which component of CRM is typically the root cause – namely operational CRM.

Over the past 10 years, financial institutions have made major investment in operational CRM systems such as call-centres, websites and sales force automation solutions. Although an essential part of the CRM mix, these technologies allow you to interact more efficiently with customers, not more intelligently. It is analytical CRM - predictive analytics, data mining, text mining, web analytics, segmentation, profiling etc- that is the key to ensuring that customer interactions, both outbound and inbound, are based on intelligence.

The results of a recent SAS loyalty survey agree with the theory that CRM spending has failed financial services organisations. The research found that overall, consumers are more loyal to their mobile operator than their bank or supermarket. What are the banks doing wrong? With ‘customer service’ declared the key driver for loyalty, more than two thirds of customers believe that banks still don’t understand what satisfies them as a customer and 81% believe that their financial service providers don’t work hard to keep their business (something I’m sure the banks themselves would disagree with!). What these results show is that financial institutions still have a way to go before getting CRM right.

However, despite Mr Jarvis' pointing the finger at technology not being the answer, it has in fact been demonstrated as playing a vital role in turning the massive volumes of data into actionable intelligence. How else would you know that the over 50’s market are the least likely to have changed banks in the last 10 years, that men are hardest to please in this arena and that those living in Scotland are they happiest with the bank service they are getting? Only by understanding the different types of customer you have, their preferences and behavioural traits is it possible to deliver value-add to both the customer and service provider.

Customer intelligence has grown up, and its time for the banks to accept new technology for the maturity it is showing, not the mistakes of the past.

Jason Goodwin
Head of Customer Intelligence Solutions
SAS UK

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