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Surviving challenging market

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How financial services firms can use customer-centric strategies and CRM tools to maximize the value and loyalty of their client base. …

How financial services firms can use customer-centric strategies and CRM tools to maximize the value and loyalty of their client base.


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  • 1. How to Survive—and Thrive—in aChallenging MarketHow customer-centric strategies can help financial services firmsweather market volatility and economic uncertainty.In these uncertain economic times, many financial services firms are Abstractfeeling the pinch from massive write-downs, high market volatility Volatility often presentsand reduced staff and budgets. But even in a time of uncertainty and opportunities. In this guide,contraction, smart financial firms can find opportunity and growth. The we outline strategies yousecret lies in the invaluable assets financial services firms already have: can implement to avoid thetheir customers. negative effects of marketIn this white paper, learn how financial services firms across the industry volatility and find new ways ofand around the globe can use customer-centric strategies and CRM tools generating revenue from yourto maximize the value and loyalty of their client base, gain insight into single greatest asset, yournew areas of opportunity, and do more with less, not only surviving, but current clients.thriving, in a time of market volatility and economic uncertainty. About the Author Jason Rushforth is President of Front Office Solutions–overseeing sales and marketing for CDC Software’s CRM and complaint management solutions. He is known for his keynote speaking engagements for such events as the Wealth Management Forum and webcasts with Wall Street & Technology and TowerGroup, and he frequently contributes to industry articles in publications such as CRM Magazine.CDC Software | The Customer-Driven Company™ CRM White Paper | 1
  • 2. Introduction: Tough Times Call for Strategic Moves Few will deny that financial markets in developed countries worldwide have taken a lashing in recent years with financial services institutions (FSIs) taking the brunt of it. The numbers say it all: Around the world, FSIs have written down billions of dollars of securitized assets—and the fallout continues. Whatever you label it or how soon you think it will end, there’s no question that FSIs are grappling with a very challenging time and a difficult road to recovery. If any word best characterizes current market conditions, “uncertainty” may be it. FSIs may not be pessimistic, per se, but at a minimum they are cautious, as uncertainties abound: regarding consumer spending, commodity prices, construction costs, interest rate changes, GDP growth, inflation, and more. The sub-prime mortgage crisis has resulted in increased trading volumes and an upsurge in volatility, such that unpredictability has become a dominant theme in both financial markets and the financial services industry. How are FSIs dealing with the uncomfortable combination of losses, volatility, and widespread uncertainty? First, job cuts have become a necessity for many firmsIn addition to as they try to reduce costs: it’s no secret that tens of thousands of jobs have beenjob and budget lost across the industry. Accompanying these job cuts, many FSIs are engaged in belt-tightening almost across the board, trying to cut expenditures as they attempt tocuts, a wave of recover and brace for whatever. A wave of consolidation and downsizing has passedconsolidation and through the financial services industry, which poses additional challenges for FSIs attempting to find their feet following a tough series of quarters. The ripple effects aredownsizing is stretching across lines of business and around the globe, and everyone’s feeling thepassing through the pinch.industry. Unfortunately, internal problems are just the tip of the iceberg. Market volatility, economic uncertainty, and negative headlines have made clients skittish—about their finances, and about their financial services providers. Consumers, businesses, investors, and institutions alike are rethinking their financial strategies and partners, concerned about the hit their own finances have taken or could take as a result of the current economic situation. As they do so, the knowledge that their financial service providers are snowed under by issues and losses arising from the credit crunch may lead some clients to question whether their best interests are really top of mind for their FSIs at the moment. A lack of client trust and loyalty is the inevitable result—and one with the potential to have a more lingering effect than short-term write-downs and losses. Erosion of their client base and client confidence could present serious long-term problems for FSIs. As a result, it’s imperative that FSIs give clients the increased attention they need in these times of uncertainty—in spite of reduced staff and budgets and a multitude of other issues and distractions arising from current conditions. Financial services firms that take their focus off of customer satisfaction at this time risk more than losses: they miss out on a compelling opportunity. The fact is that existing clients are the secret to weathering the current storm for FSIs. With new client acquisition costs far exceeding retention costs and difficulty attracting new clients in an uncertain and volatile market, it does not require advanced calculation to understand why FSIs should be looking to their client base as a cost-effective source of revenues. Similarly, with the economic volatility and the reduced availability of private equity funding, most FSIs will need to look internally, rather than externally, for additional sources of revenue, focusing on organic growth. To survive and thrive in volatile markets and an uncertain economy, financial services firms need to pair their downturn investment strategy with a thoughtful and strategic approach to building, extending, and unlocking the value in FSIs’ client relationships. The tools to implement these strategies are client relationship management (CRM) solutions. CDC Software | The Customer-Driven Company™ CRM White Paper | 2
  • 3. Using Customer-Centric Strategies to Survive and Thrive FSIs need strategic responses to current market conditions that innovate on all three fronts: process, culture, and technology. The concept of “customer-centricity” has been steadily gaining traction inside and outside of the financial services industry. More than just a feel-good concept, when taken seriously, customer-centricity is a model that can profoundly impact a business’ processes, culture, and technology. Customer-centric strategies dictate that the customer be considered as the focal point around which a business structures its way of doing business. The goal is to not only deliver a more satisfying customer experience, but provide greater customer insight and value to the firm, thereby improving profitability. Given that retaining customers, finding new avenues for organic revenue growth, and improving performance despite cuts are among financial services firms’ most urgent needs under current economic conditions, customer-centric strategies offer compelling advantages to the industry, now more than ever. So how can customer-centric strategies help FSIs survive and thrive under tougher economic conditions? As the concept suggests, it all centers on the client. Get Closer to Your Clients As clients react to negative headlines, economic uncertainty, and market volatility, FSIs cannot afford to keep them at a distance. In fact, they need to get closer to their clients than ever before. Customer-centric strategies are predicated on the establishment and ongoingTrue client value is enrichment of customer knowledge and the need to collect and apply this knowledge intelligently at every stage of interaction. This means not only getting to know yournot always direct or clients better, but having the tools to help you take advantage of this knowledgeobvious from basic where and when it offers the most value. To accomplish this, FSIs need to use CRM systems to their true potential: not just as data systems, but as the technologicalaccount data. enablers of customer-centric business strategies. Building up this customer knowledge begins long before an individual or organization becomes a client, from the moment they are identified as a prospect. Using CRM marketing tools, FSIs can build out prospect profiles that combine market data and publicly available information with behavioral responses and information provided by the prospect through each marketing or sales interaction. Using this information, the FSI can more effectively segment its audience and target its marketing activities, engaging the prospective client with high personalization and relevance from the earliest stages of the relationship. When a prospect becomes a defined business opportunity, this rich CRM profile ensures no FSI employee need ever walk into an opportunity blind. With comprehensive information about the prospect, past interactions, and the lead source, FSI personnel have the background they need to position their products and services more effectively and win the business. When a prospect becomes a client, the real relationship management begins. FSIs need to implement consistent and reliable processes to ensure that the drive to acquire customer knowledge does not drop off at the point that the business is won, but instead intensifies. During and after client on-boarding, FSIs need to use CRM workflows to build out deeper client knowledge and strengthen the relationship, using a CRM-defined relationship plan to ensure regular touch-points and continually refresh and add to their client intelligence. Under tougher market conditions, this holistic view of the client and regularity of contact becomes invaluable. Not only does the firm have a complete and current view of the client, but also an established relationship to leverage. This provides opportunity to the firm on multiple levels. CDC Software | The Customer-Driven Company™ CRM White Paper | 3
  • 4. First, FSIs with a 360-degree view of clients provided by rich CRM data can more accurately assess actual and potential client value. This value is not always direct or obvious from basic account data. For example, a client that represents modest business to a wealth management firm might be part of a household that overall represents major profits to the firm, or a client associated with a minor institutional asset management account might have influence over several other accounts. A client firm might represent significant revenues to a mutual fund wholesaling firm, but it could be that only a few branches or individual broker-dealers are the true sources of this value. The same client might be a “tier 5” asset to one area of an FSI but a “tier 1” customer to another of the firm’s lines of business. Furthermore, a client might have a moderate direct impact on revenues but could be bringing in exponential value by referring other clients to the firm. With the proper application of CRM technology and strategy, all of these different facets of client value can be made clearly and easily discernible within the system. Applying this knowledge, the FSI can ensure that it keeps its focus on clients withThe same CRM an understanding of their true overall value to the firm, making it clear exactly which clients are most critical to the firm’s bottom line. As economic conditions impacttools that help their customer base, this can also help FSIs take a longer-term and better-informedFSIs increase the approach to navigating the downturn. For example, a commercial bank may want to be particularly flexible with certain business customers, renegotiating their lendingvalue of their client terms with a view to keeping the bank’s most valuable clients for the long term,relationships can rather than losing them to short-term market swings. Furthermore, as they look to increase revenues from their existing client base,also help them FSIs that have rich client profiles are also better positioned to identify new revenueserve clients more opportunities by up-selling and cross-selling products and services. Given the significantly lower cost of selling to existing clients versus acquiring new ones,cost-effectively. this can prove a very cost-effective approach to revenue growth. With useful fields indicating information such as the percentage of client’s available assets held with the FSI and deep information about client attributes and interests, FSIs can apply strategic plans to expand and deepen their share of wallet with the client, up-selling and cross-selling the most relevant products and services. Regular touch-points established through a CRM relationship plan provide the perfect venue for exploring client interest and introducing new offerings. The items discussed and client reaction can be clearly noted within the CRM system to ensure clients are not offered the same products and services by different parties or at successive meetings unless appropriate. Similarly, a good relationship plan and comprehensive client profile are of tremendous value in identifying clients at risk in a time of uncertainty. Regular touch-points give the FSI the opportunity to gauge client sentiment and address any concerns proactively. Thorough profiles that aggregate data across different areas of the firm are also essential to distinguishing true risk from false alarms. For example, a client withdrawing from one type of investment product may be keeping the funds within the same financial institution and merely moving to a different kind of product or strategy in response to market volatility—or they may be in the process of switching to a competing financial services provider. The ability to differentiate between the two scenarios and react accordingly is a function of having a true 360-degree view of client interactions across all areas. As these customer-centric approaches suggest, client intelligence is an FSI’s true goldmine in tougher times. It should come as no surprise, then, that TowerGroup has noted that FSIs have been “advancing strategies involving holistic integration of data and function, client-centric approaches, and a continuing quest for revenue growth,” indicating the close connection between these three concepts. Technology plays a fundamental role in CDC Software | The Customer-Driven Company™ CRM White Paper | 4
  • 5. facilitating these approaches: the analyst group goes on to note that client and business intelligence solutions fulfill multiple purposes, putting them at the top of FSIs’ technology initiatives. Getting closer to clients is the smart way to grow revenues in a time of economic contraction: as you increase your value to them, you increase their value to you. Do More with Less As FSIs deal with the cut-backs that are the inevitable result of massive write-downs and volatile markets, they are increasingly faced with the challenge of trying to do more with less due to lower budgets and fewer staff. At the same time, expectations remain demanding: clients and stakeholders alike demand that FSIs find ways to perform despite these constraints. Providing high-quality client experiences is understand-ably challenging when trying to operate with reduced resources. Yet as previously noted, the risk of losing clients in a time of uncertainty and skittishness is very real, and failure to keep focus on customer needs and sentiments could significantly worsen the long-term impact for FSIs of what should otherwise only be a temporary economic set-back. Hard-earned customer relationships could be quickly lost if FSIs provide inferior service due to cut-backs. How can FSIs improve customer service while cutting costs? The reassuring answer is that the same CRM tools that help FSIs increase the value of their client relationships can have an indispensable side benefit here: they can also help FSIs serve clients more cost-effectively. Some cost-saving insights that can be uncovered through CRM have already beenDeep CRM data hinted at in this paper. When FSIs understand client interests and attributes, for example, they can focus their efforts more strategically, reducing wasted expenditures on poorlyis a treasure trove targeted marketing campaigns and sales efforts. CRM data can be used to morethat can be mined effectively segment clients and prospects to improve the relevance and success of sales and marketing activities. In the same vein, CRM systems that provide users with anto uncover new instant understanding true client value can be helpful in determining the level of serviceproduct or service appropriate for an account. This need not mean providing inferior service to any client; nonetheless, it is important for an FSI to understand when the cost of serving a client isideas and revenue out of alignment with the value of the client to the firm, so that it can assess whether astreams. better solution or more appropriate fee structure could be offered to the client to keep them profitable to the FSI. Such insights can help FSIs prioritize their expenditures and focus reduced budgets on the most effective activities. Some of the greatest cost savings from CRM, however, come from the automation and process streamlining achievable with CRM tools. To really look at how customer-centric strategies can be embedded within their organizations, FSIs need to drill down to the level of client-facing processes. Greater speed, consistency, and efficiency in these processes benefits the client as much as it does the firm, so fine-tuning and standardizing client-facing processes is a natural part of implementing a customer-centric strategy. Using a flexible CRM system, FSIs can build these optimized marketing, sales, and client services processes right into the system, automating formerly manual tasks and streamlining the flow from one step to the next. Workflow tools define exactly what needs to be done as part of each process, eliminating confusion. For complex processes involving multiple stakeholders, steps can be automatically assigned and can run concurrently or in succession, as appropriate, allowing for smoother collaboration and time savings. Multiple individuals can serve a client as part of the same process in a coordinated manner, because every person is kept fully informed through the CRM system’s centralized point of reference. At any time, team members or executives can check the CRM system to see exactly what stage a deal or process is at, allowing for better coordination of personnel and resources, as CDC Software | The Customer-Driven Company™ CRM White Paper | 5
  • 6. well as more accurate and hassle-free revenue forecasting. This allows for greater efficiency and productivity,effectively allowing firms to do more with less.Recent analyst opinion supports the contention that automation, process reengineering, and streamlining arekey to responding strategically to the current economic conditions. TowerGroup, in their report, The TowerGroup Top 10: Business Drivers, Strategic responses, IT Initiatives in Financial Services, noted that “a spate ofdownsizing and consolidation” would be the result of “recent losses and persisting uncertainty”:Savvy FSIs will reduce their expense base more effectively by fundamentally reengineering their businessprocesses…. Streamlining to gain cost efficiencies and agility is essential. However, downsizing alone cannotlead FSIs to greatness. As the industry evolves with electronic transaction flows, automation, interconnectivity,and online service capabilities have become a necessity.As this passage suggests, both process and technology are critical to survival. Downsizing withoutaccompanying efforts to refine processes and use automation and interconnectivity to offset cuts will leave FSIsunable to operate resiliently. This could explain why, in spite of budget cut-backs in other areas, many FSIs areincreasing their technology budgets: it seems clear that technology is essential to enabling FSIs to succeedin spite of the cut-backs. As FSIs examine where they can focus their technology budgets to give them thegreatest advantage under current economic conditions, a CRM system’s ability to support both cost efficienciesand new revenue opportunities make it worthy of serious consideration.Find Creative Revenue OpportunitiesCost-cutting is critical to weathering a downturn. But is it enough to help FSIs thrive in the long term? As FSIsseek new ways to grow organically, not only in response to the credit crunch, but also to competitive andgeneral market pressures, they are increasingly under pressure to find these “creative” new streams of revenue.Luckily, this is another area in which good client intelligence can provide immense value.In addition to helping pinpoint opportunities with individual clients and position relevant products and services toincrease up-selling and cross-selling success as described above, deep CRM data is a treasure trove that canbe mined to uncover new product or service ideas and potential revenue streams. As FSI personnel engage inregular interactions with clients according to the relationship plan managed within the CRM system, they haveregular opportunities to listen to client concerns or feedback that can help identify product or service gaps andgenerate ideas for new offerings. Similarly, if an FSI is considering a new offering but wants to test the ideabefore investing in it, close client relationships and regular planned interactions provide greater opportunity tosolicit input and gauge interest—potentially creating a built-in market for the offering before it even launches.Similarly, FSIs that focus on strategically building up client intelligence have the perfect information withintheir CRM systems to perform advanced analysis to spot trends and identify important correlations that canhelp them gain insight into potential opportunities. For example, looking at the common attributes of their mostvaluable clients could help FSIs focus on new offerings for these clients; it could also provide insight into howthey might replicate their success with these clients in other accounts. Analyzing trends around revenue sourcesand customer retention rates can help FSIs see exactly the ways in which market volatility and economicuncertainty are hitting their firm—and their clients—and react more strategically, stopping negative trends intheir tracks before it’s too late and spotting positive trends they can take advantage of before the competition.With the client data to uncover new ideas and the client relationships to help test and validate them, FSIs canidentify more creative revenue opportunities and pursue them with lower risk.CDC Software | The Customer-Driven Company™ CRM White Paper | 6
  • 7. Benefit from GlobalizationToday, many FSIs operate on a global basis. For most, the process of becoming a global business has hadits growing pains. Many firms have struggled with the challenges of growing through mergers and acquisitions,trying to combine disparate systems, processes, and cultures; others have faced similar challenges whenexpanding organically into new markets with new regulations and considerations. For a lot of FSIs, achievingtheir vision of operating as an effective global business is still a work in progress.Challenges aside, the current economic situation offers a perfect illustration of why “going global” can offer greatbenefits to FSIs. As interconnected as world economies are, events that work to the detriment of one country’seconomy often bolster another. While some countries are bracing for another couple of uncertain and volatileyears economically, others are seeing continued growth.What this means is that a diversified global FSI with the resources and infrastructure to support strategic pursuitof worldwide opportunities is in a perfect position to mitigate the effects of the sub-prime collapse. This iswhere the rubber meets the road for global FSIs: do they have the systems in place to take advantage of theseconditions? Those that do can place their focus on regions of growth and significantly offset the impact of thedownturn.Used in tandem, global strategies and customer-centric strategies may just offer FSIs the greatest advantageyet. Naturally, regardless of their region of operation, FSIs can use the aforementioned customer-centricstrategies to deepen their customer relationships, maximize the value and opportunities from their client base,and cut costs through process optimization and automation. But when taken to the global level, the opportunitiesmade possible through this scenario expand dramatically.For today’s FSI, a true “360-degree” client view is a global 360-degree client view: one that reveals worldwidevalue, opportunities, and connections. Using this view, an FSI’s operations in India or Russia can see whichbusinesses and individuals the FSI has relationships with in other regions and use this information andrelationship to help build new business in their region. The simple fact is that just as FSIs have gone global,so have their clients—opening up a wealth of new opportunity. For example, a manufacturing firm that is theclient of an FSI’s commercial banking unit in the U.S. may well have plants in India or China. Using its globalCRM view, the FSI’s commercial banking units in those regions could use the U.S. relationship to approach theoverseas operations about equipment finance or lending opportunities, with the existing relationship as theirfoot in the door and competitive advantage. In this way, FSIs can build their relationships with clients globally,expanding the relationship on a whole new level and taking it to new heights of loyalty and profitability.As FSIs look for creative ways to grow under current economic conditions, the smart ones will think beyondthe confines of their region. By taking customer-centric strategies to a global level, FSIs stand to benefit in anunprecedented manner from the efforts and investments they have made both in international expansion and intheir client relationships.Conclusion: The Time to Act Is NowWhile FSIs are bound to take different approaches to weathering current economic challenges, what seemsindisputable is that they will have to take decisive action of some kind to effectively survive them.In this white paper, we have presented numerous different ways in which customer-centric strategies can helpFSIs grow revenues and cut costs to help counteract the negative effects of this volatility and uncertainty:by deriving greater value from their client base, by increasing productivity and streamlining processes, byfinding creative revenue sources, and by taking advantage of existing relationships to exploit global pockets ofCDC Software | The Customer-Driven Company™ CRM White Paper | 7
  • 8. opportunity. We contend that by using CRM to implement these customer-centric strategies, FSIs can not onlysurvive a downturn, but thrive in it.While it is critical that they act immediately to embrace customer-centric strategies, FSIs can rest assured thatsuch a move is neither a quick fix nor a short-term solution. By introducing tools and strategies that providemore client focus and insight, FSIs are taking part in a seismic shift in the industry away from product-focusedoperations toward customer-centric ones. Even if steps taken now are in aid of an immediate need arising fromcurrent market conditions, FSIs should not be short-sighted: they should take care to reengineer processes tobe effective over the long term as well, and choose flexible, powerful supporting solutions that will evolve withtheir customer-centric strategies. In doing so, they will not only empower their employees to derive value andgrowth that will help weather the downturn, but create a resilient platform for ongoing insight and returns fromtheir customer-centric strategies.Pivotal CRM for Financial ServicesPivotal CRM for Financial Services offers comprehensive, integrated, industry-specific capabilities that increaseinsight into operational performance, streamline processes across the firm, and improve responsiveness toclient demands. With discrete CRM offerings for institutional asset management, mutual fund wholesaling,capital markets, private banking/wealth management, and commercial banking, Pivotal CRM for FinancialServices puts critical relationships at the core of organizational strategy in a way that fits the unique businessprocesses of financial services firms.With financial services firms around the world using Pivotal CRM solutions, CDC Software has proven timeand time again its ability to meet the needs of the industry. The Pivotal CRM approach ensures a fasterimplementation with a lower total cost of ownership by delivering financial services solutions on the scalableand flexible Microsoft® platform, which supports easy customization, integration, and deployment. Financialservices firms can rapidly and cost-effectively adapt Pivotal CRM to meet changing compliance and operationaldemands and grow with their business—meeting their business needs today, tomorrow, and in the future. Want to learn more? Resource Library Reach Out www.cdcsoftware.com/crmresources Email: info@cdcsoftware.com CDC Pivotal CRM Global Office Locations www.cdcsoftware.com/crm www.cdcsoftware.com/offices See How We Fit Your Industry Stay Connected With CDC Software www.cdcsoftware.com/FinancialServices http://www.cdcsoftware.com/en/Social-Media-Channels www.cdcsoftware.com/HomeBuildingRealEstate www.cdcsoftware.com/Manufacturing www.cdcsoftware.com/SMBCopyright © CDC Software 2011. All rights reserved. The CDC Software logo is a registered trademark of CDC Software.CDC Software | The Customer-Driven Company™ CRM White Paper | 8

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