CRM 2.0 Meets the Financial Services Sector


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Who do you trust the most...or the least...with your money? Your bank or maybe your insurance company or your financial advisor. The savvier financial services guys know this and are applying best practices and cutting edge innovation in CRM 2.0 to their companies. Check out what the customer is thinking and what the financial services sector is doing here.

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CRM 2.0 Meets the Financial Services Sector

  1. 1. Service Excellence, Customer Delight Financial Services & CRM in the Experience Economy Paul Greenberg President, The 56 Group, LLC Chief Customer Officer, BPT Partners, LLC Author: CRM at the Speed of Light
  2. 2. Overview: The New CRM Definition <ul><li>“ CRM is a philosophy and a business strategy, supported by a system and a technology, designed to improve human interactions in a business environment.” </li></ul><ul><ul><li>Paul Greenberg, CRM Magazine, “Reality Check” (February 2003) </li></ul></ul>
  3. 3. Overview: The New CRM Definition <ul><li>Principle #1 </li></ul><ul><ul><li>Value & values are given & in return, value & values are received </li></ul></ul><ul><li>Principle #2 </li></ul><ul><ul><li>Each of us is governed by self-interest </li></ul></ul><ul><li>Principle #3 </li></ul><ul><ul><li>For ideas to be truly exciting, they have to be real </li></ul></ul><ul><li>Principle #4 </li></ul><ul><ul><li>Do unto others…you know the rest </li></ul></ul>
  4. 4. Overview: The Business World has Changed <ul><li>Pre 90s </li></ul><ul><ul><li>Product/Demand driven corporate ecosystem </li></ul></ul><ul><li>Late 90s to nearly present </li></ul><ul><ul><li>Customer driven corporate ecosystem </li></ul></ul><ul><li>Present </li></ul><ul><ul><li>Transition to customer ecosystem – “Era of the Social Customer” </li></ul></ul>
  5. 5. Overview: The Business World Has Changed <ul><li>“ People have changed more than the business organizations upon which they depend. The last 50 years have seen the rise of a new breed of individuals, yet corporations continue to operate according to a logic invented at the time of their origin, a century ago. The chasm that now separates individuals and organizations is marked by frustration, mistrust, disappointment, and even rage. It also harbors the possibility of a new capitalism and a new era of wealth creation.” – Dr. Shoshanna Zuboff, The Support Economy </li></ul>
  6. 6. The New Business Model: Experience Economy Goes Mainstream &quot;Companies used to focus on making new, better, or cheaper products and services....Now the game is to create wonderful and emotional experiences for consumers around whatever is being sold. Its the experience that counts, not the product.&quot; “People…want capabilities and options, not uniform products…business is there to provide the tools.” “The Knowledge Economy is giving way to the Creative Economy...” (Knowledge has become a commodity so the solution is to) &quot;focus on innovation and design as the new corporate core competencies.&quot; BUSINESSWEEK, DECEMBER 19, 2005
  7. 7. The New Business Model: Experience Economy Goes Mainstream <ul><li>2006 Davos World Economic Forum concentrated on the Experience Economy, creativity and innovation </li></ul><ul><ul><li>6 Workshops for CEOs on this subject including </li></ul></ul><ul><ul><ul><li>The Culture of Innovation </li></ul></ul></ul><ul><ul><ul><li>Prepping for the Creative Economy </li></ul></ul></ul><ul><ul><ul><li>Externalizing Innovation & Creativity </li></ul></ul></ul>
  8. 8. <ul><li>Generation C – Cross-generation ( source: Springwise) </li></ul><ul><ul><li>Focused on content, wired, creative, regardless of age </li></ul></ul><ul><ul><li>Baby boomers are getting set to retire – many with disposable income </li></ul></ul><ul><ul><li>Gen X is becoming a pre-eminent generation AND has disposable income </li></ul></ul><ul><ul><li>Gen Y is entering the workforce – and accumulating some disposable income </li></ul></ul>Characteristics of the Ecosystem The New Customer
  9. 9. <ul><li>Phase 1 – The customer and vita passiva </li></ul><ul><ul><li>New definition of trusted source </li></ul></ul><ul><ul><li>Information available nearly instantaneously – either structured or unstructured via the web (Google, Yahoo, MSN) </li></ul></ul><ul><ul><li>On Demand software as a service (, etc.) </li></ul></ul><ul><ul><li>Enterprise value chain supersedes siloed supply, demand & support chains </li></ul></ul><ul><ul><li>Link between lifestyle and business – consumers adopt “sexy” content </li></ul></ul>Characteristics of the Ecosystem The New Customer
  10. 10. <ul><li>Phase 2 – The customer and vita activa – Era of the Social Customer </li></ul><ul><ul><li>Social networks as active participants in effecting change (blogosphere, podcasting) </li></ul></ul><ul><ul><li>Collaboration between company & customers to provide useful value for each </li></ul></ul><ul><ul><li>Customer value chain subsumes enterprise value chain </li></ul></ul><ul><ul><li>Ubiquitous technologies leading platform </li></ul></ul><ul><ul><li>The Live Web (Web 2.0) (MySpace, Facebook) </li></ul></ul><ul><ul><li>Customer begin to include business as feature of life choice, not a separate factor – consumer created content becomes part of business ( AppExchange, John Fleuvog Shoes, BMW) </li></ul></ul>Characteristics of the Ecosystem The New Customer
  11. 11. <ul><li>Power of social networks </li></ul><ul><ul><li>Linked In – 9+ million members </li></ul></ul><ul><ul><li>MySpace – 92 million members </li></ul></ul><ul><ul><li>Facebook – 12 million members </li></ul></ul><ul><ul><li>ASmallWorld – exclusive membership for those who have social networks </li></ul></ul><ul><ul><ul><li>Social networks as capital </li></ul></ul></ul>Characteristics of the Ecosystem The New Customer
  12. 12. <ul><li>Each customer wants a personalized experience… </li></ul><ul><li>They couldn’t care less if they are high value or low value customers </li></ul><ul><ul><li>They don’t know if they are high or low value to you </li></ul></ul><ul><ul><li>But you have to care and yet, accommodate them to a degree </li></ul></ul><ul><li>But how do you deal with it when you have millions of customers? </li></ul><ul><ul><li>Understand the “typical” experience of a customer at every point </li></ul></ul><ul><ul><ul><li>And what they want </li></ul></ul></ul><ul><ul><ul><ul><li>Focus groups, in-depth interviews, surveys, etc. </li></ul></ul></ul></ul><ul><ul><li>But provide the tools for the customer to manage their own experience </li></ul></ul><ul><ul><ul><li>Information that allows them to make informed, empowering choices </li></ul></ul></ul>Characteristics of the Ecosystem
  13. 13. <ul><ul><ul><ul><ul><li>Growth of Internet banking services </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Initially expected to be a cost driver – lower cost delivery channel </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Value actually was increase in customer retention because of potential for control of own experience with banking institution and the requirement for social and self-expression by the new generations </li></ul></ul></ul></ul></ul>Characteristics of the Ecosystem Case In Point Often Surprising Results
  14. 14. The New Business Model Requirements A NEW MODEL
  15. 15. The New Business Model Requirements <ul><li>Differentiators are no longer products & services </li></ul><ul><ul><li>Pretty much the same from company to company </li></ul></ul><ul><li>Key differentiator is the customer’s experience with the company </li></ul><ul><ul><li>Provides a business value for the experience with the products/services </li></ul></ul><ul><ul><li>Comfort </li></ul></ul><ul><ul><li>Convenience </li></ul></ul><ul><ul><li>Simplicity </li></ul></ul><ul><ul><li>Ubiquity </li></ul></ul><ul><ul><li>Timeliness </li></ul></ul><ul><ul><li>Contemporary technology use (e.g. mobile technologies, not Oracle) </li></ul></ul><ul><ul><li>Wow factor </li></ul></ul><ul><ul><li>Customer feels sense of importance, self-control, ownership </li></ul></ul>
  16. 16. <ul><li>300 brands </li></ul><ul><ul><li>16 of those brands $1 billion and up (e.g. Charmin, Crest, Folgers, Downy, Pringles, Tide) </li></ul></ul><ul><li>2 billion consumers affected w/6 billion as goal </li></ul><ul><li>160 countries reached </li></ul><ul><li>One of 30 companies on the Dow Jones Industrial Average (DJIA) </li></ul>Case Study: Big Companies Proctor &Gamble
  17. 17. “ We have to create a great experience every time you touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer’s experience better, but better in her terms.” – A.G. Lafley, CEO Proctor & Gamble “ I think its value that rules the world. There’s an awful lot of evidence across an awful lot of categories that consumers will pay more for better design, better performance, better quality, better value and better experiences.” – A.G. Lafley, CEO, Proctor & Gamble Case Study: Big Companies Proctor &Gamble
  18. 18. <ul><li>Focused around the co-creation of value and user communities </li></ul><ul><ul><li>Sales/Marketing </li></ul></ul><ul><ul><ul><li>Vocalpoint – 600,000 moms </li></ul></ul></ul><ul><ul><ul><li>Tremor – 225,000 teens </li></ul></ul></ul><ul><ul><li>Research </li></ul></ul><ul><ul><ul><li>Innovation Network – 80,000 scientists </li></ul></ul></ul><ul><ul><ul><li>Technology entrepreneur networks </li></ul></ul></ul><ul><ul><ul><li>Benefits? </li></ul></ul></ul><ul><ul><ul><ul><li>In 2001 – 20% of ideas, products, technologies external </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In 2004 – 35% of ideas, products, technologies external </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In 200X – 50% of ideas, products, technologies external </li></ul></ul></ul></ul><ul><ul><ul><li>Virtual design, 3D simulation </li></ul></ul></ul>Case Study: Big Companies Proctor &Gamble
  19. 19. <ul><li>Perhaps the most innovative company in the U.S. when it comes to understanding of the benefits of customer ecosystem </li></ul><ul><ul><li>They emphasize the “desired consumer experience” as their primary design focus </li></ul></ul><ul><ul><ul><li>Taste, smell, feel of products – not just utility </li></ul></ul></ul><ul><ul><li>Connect & Develop program </li></ul></ul><ul><ul><ul><li>Moving technology and ideas between cross-functionally </li></ul></ul></ul><ul><ul><ul><ul><li>Crest Whitestrips involved oral care unit (whitening teeth), corporate R & D (film technology), and fabric/home care (bleach experts) </li></ul></ul></ul></ul><ul><ul><ul><li>Tie the effort to working with consumers too </li></ul></ul></ul><ul><ul><ul><ul><li>50 technology entrepreneurs who scour for external resources including customers </li></ul></ul></ul></ul><ul><ul><li>Use of ethnographers to try to understand the activities of individuals in the context of social anthropology </li></ul></ul>Case Study: Big Companies Proctor &Gamble
  20. 20. <ul><li>Streamlined supply chain because of understanding of the “enterprise value chain” and its relationship to customers (2002) </li></ul><ul><ul><li>Sixty percent of P&G sales due to “events” (organized experiences) – can be promotions (e.g. Max the Stack – decoder cards for teens at theme parks or concerts) </li></ul></ul><ul><ul><li>“ Pull” events meant “pull” supply chain – i.e. produce only what the customers are buying – cut out excess inventory </li></ul></ul><ul><ul><ul><li>Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor is chosen. </li></ul></ul></ul><ul><ul><ul><li>Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes </li></ul></ul></ul>“ If you can’t drive sales and deliver product at the point of purchase, you lose.” – Jake Barr, GM, Supply Chain Innovation Case Study: Big Companies Proctor &Gamble
  21. 21. <ul><li>Key Performance Indicators </li></ul><ul><ul><li>Out of stock rates </li></ul></ul><ul><ul><li>Total supply chain response time – from purchase at register to purchase of raw materials to replace product </li></ul></ul><ul><ul><li>Shelf level quality – damaged or unappealing packages on store shelves – reduction to zero </li></ul></ul><ul><ul><li>Pricing design from the shelf back – what price is appealing to customer and then reverse engineer to see if product can be produced to make that price point </li></ul></ul><ul><li>Results? </li></ul><ul><ul><li>7.6% out of stock rates rather than 16.3% from 2003 to 2004 </li></ul></ul><ul><ul><li>Earnings growth went from 15% in 2002 to 20% in 2004 </li></ul></ul><ul><ul><li>Annual savings between $50 and $100 million </li></ul></ul><ul><ul><li>Increased sales from $40 billion in 2002 to $43.4 billion in 2003 </li></ul></ul>Case Study: Big Companies Proctor &Gamble
  22. 22. <ul><li>Custom T-Shirt Company </li></ul><ul><ul><li>User Community-focused </li></ul></ul><ul><ul><ul><li>300,000 members </li></ul></ul></ul><ul><ul><li>User content creation </li></ul></ul><ul><ul><ul><li>Community members design the t-shirts </li></ul></ul></ul><ul><ul><ul><li>Community members vote on their favorites </li></ul></ul></ul><ul><ul><ul><li>Threadless produces them – 1000 – limited edition for each winner </li></ul></ul></ul><ul><ul><ul><li>Threadless shares the revenue with the designers </li></ul></ul></ul><ul><ul><ul><li>Premium pricing </li></ul></ul></ul>Case Study: Small Companies Threadless
  23. 23. CRM & Financial Services: The Challenges Investment in financial services- related CRM technology is expected to be around US$6.8 billion in 2006 and increase at the rate of roughly 14% per year for several years going forward DOES THIS MEAN THAT THE FINANCIAL SERVICES INDUSTRY FINALLY FIGURED OUT CRM? The answer is: NOT PARTICULARLY
  24. 24. CRM & Financial Services: The Challenges <ul><li>Two Problems: </li></ul><ul><ul><li>First </li></ul></ul><ul><ul><li>CRM isn’t merely a technology, but the desire to automate problems away is so deeply prevalent when it comes to CRM thinking that the spending on technology could easily be mindless or dangerous or premature </li></ul></ul><ul><ul><li>Second </li></ul></ul><ul><ul><li>The issues that customers have aren’t technological for the most part: They don’t see financial services companies considering them important – just as objects of product sales </li></ul></ul>
  25. 25. CRM & Financial Services: The Challenges <ul><li>Traditional financial services culture is product-centered </li></ul><ul><ul><li>Advantage gained is seen as: </li></ul></ul><ul><ul><ul><li>Price </li></ul></ul></ul><ul><ul><ul><li>Product variation and availability </li></ul></ul></ul><ul><ul><ul><li>Some targeted services to the high value customers of the moment </li></ul></ul></ul><ul><ul><li>The success metrics that financial services CRM initiatives often use are based on increased numbers of products per customer or segment </li></ul></ul><ul><ul><ul><li>Thus, sale to 80 year old customer of a 10 year certificate of deposit is considered a new product sale i.e. a good result </li></ul></ul></ul><ul><ul><ul><li>Ignored is the emotional response of the family to this sale – decreased customer loyalty due to the obvious lack of concern for the individual customer’s personal welfare </li></ul></ul></ul>
  26. 26. CRM & Financial Services The Challenges <ul><li>Customers Don’t Trust the Commitment of the Financial Services Companies – to Them </li></ul>Source: Celent, Emerging Affluent Baby Boomers, Financial Services, & The Web 2005; 467 respondents
  27. 27. CRM & Financial Services: The Challenges <ul><li>Results of this lack of trust by the customer and the product-focus by the financial services industry </li></ul><ul><li>Results are characterized well by the 2005 Forrester Group Study on “Usability Flaws on Financial Services Sites ” </li></ul><ul><ul><li>Rated on </li></ul></ul><ul><ul><ul><li>Value </li></ul></ul></ul><ul><ul><ul><li>Navigation </li></ul></ul></ul><ul><ul><ul><li>Presentation </li></ul></ul></ul><ul><ul><ul><li>Trust </li></ul></ul></ul><ul><ul><li>A minimum “passing” score was 25 </li></ul></ul><ul><ul><li>A superb score was 50 </li></ul></ul><ul><ul><li>The financial services industry average was 5.7 </li></ul></ul><ul><ul><li>The failure rate was 85% </li></ul></ul>
  28. 28. CRM & Financial Services: The Challenges <ul><li>Retail banks lose half their customers every two years (Economist, December 2004) </li></ul><ul><li>Walker Information Study on Executive Buyers (767 respondents/2278 observations, early 2004) </li></ul><ul><ul><li>66% are not loyal or planning on maintaining relationship with institutions </li></ul></ul><ul><ul><li>But 75% indicated some level of customer satisfaction, even when not pleased with the relationship overall </li></ul></ul><ul><ul><li>31% of the buyers were high risk – low intentions of continuing </li></ul></ul><ul><ul><li>33% felt trapped, unhappy but having to continue – for now </li></ul></ul><ul><ul><li>Only 34% were truly loyal </li></ul></ul>
  29. 29. <ul><li>Verbal terrorists are rising to new levels of activity </li></ul><ul><ul><li>Conventional, oft quoted research from companies like TARP say: </li></ul></ul><ul><ul><ul><li>Advocates will speak to between 5 and 9 people about what they love </li></ul></ul></ul><ul><ul><ul><li>Verbal terrorists will speak to between 9-16 people </li></ul></ul></ul><ul><ul><li>Current reality is that a verbal terrorist can reach tens of thousands of people through user communities and blogs. </li></ul></ul><ul><ul><ul><li>2005 “Dell Hell” from “The Buzzmachine” - Study entitled “Measuring the Influence of Bloggers on Corporate Reputations” (2005, Market Sentinel, Onalytica, found that </li></ul></ul></ul><ul><ul><ul><li>Bloggers as a group were the second most influential group about Dell service after Dell itself and had more impact than Dell on negative customer service rather than positive customer service </li></ul></ul></ul><ul><ul><ul><li>The Buzzmachine buzz penetrated the mainstream press. </li></ul></ul></ul><ul><ul><ul><ul><li>Second most frequent references to “Dell Hell’ story after Buzzmachine was the NY Times. </li></ul></ul></ul></ul>Advocacy v. Verbal Terrorism
  30. 30. CRM & Financial Services: The Challenges <ul><li>Early successes built around accumulation of customer data </li></ul><ul><ul><li>Reorganization around customer segments; </li></ul></ul><ul><ul><li>Metrics that measure customer value; </li></ul></ul><ul><ul><ul><li>Recognition of the difference between high value and low value customers </li></ul></ul></ul><ul><ul><ul><li>Differences in treatment and resource expenditure </li></ul></ul></ul><ul><ul><li>Marketing and service programs that were coordinated and increasingly better targeted; and </li></ul></ul><ul><ul><li>Technology solutions that enabled somewhat more relevant and increasingly efficient interactions </li></ul></ul>
  31. 31. CRM & Financial Services: The Challenges <ul><li>But this is not what the new generations require nor the laurels the financial services sector can rest on </li></ul><ul><ul><li>New generations of customers are younger with less assets – now but not necessarily in the future </li></ul></ul><ul><ul><li>Mindset must change at the banks toward a view of providing personalized and meaningful services to individual customers </li></ul></ul><ul><ul><li>Great customer experiences are essential – and, probably as much as a wedding, a family/household’s finances are an emotional matter, more than just a purchase. </li></ul></ul><ul><ul><ul><li>How do you deal with that? </li></ul></ul></ul><ul><ul><li>Metrics cannot be based on the number of products purchased or portfolio investments </li></ul></ul><ul><ul><li>Nor can the concern be just around just efficient processes </li></ul></ul>
  32. 32. <ul><li>Sadly, these challenges are borne out even further by recent results </li></ul><ul><ul><li>Forrester study in 2006 of 60,000 bank customers shows that, in general retail banks have sub par customer advocacy scores </li></ul></ul><ul><ul><ul><li>Citibank and JP Morgan Chase have 20 percent </li></ul></ul></ul><ul><ul><ul><li>Highest is Wachovia at 40 percent, not great but there is a reason they do relatively better </li></ul></ul></ul>CRM & Financial Services: The Challenges
  33. 33. <ul><li>Wachovia Bank Success Story </li></ul><ul><ul><li>13 million customers </li></ul></ul><ul><ul><li>Focuses on lifetime customer equity, not just LTV which is just an average. </li></ul></ul><ul><ul><ul><li>Developing value profile for each household </li></ul></ul></ul><ul><ul><ul><li>The effect on the customer of a sale of a specific new product or service over time is examined before the discussion begins about the product with the customer </li></ul></ul></ul><ul><ul><ul><ul><li>They also examine how it will affect other future products/services for that specific customer </li></ul></ul></ul></ul><ul><ul><ul><li>The data is also used to optimize the approach to the individual customer and their household </li></ul></ul></ul>CRM & Financial Services: Competitive Advantage
  34. 34. CRM & Financial Services: Competitive Advantage Could there be business value in treating a low value customer with high value services and experiences? Yes, when customer data is used for insight, not just portfolio management and product sales per se
  35. 35. CRM & Financial Services: Competitive Advantage Example: Telecommunications of Customer Insight & Planning Chief Technology Officers are found to be users of the residential service Colombian Orbitel S.A. ESP NOT YET They are automatically treated as a high value customer with all the attendant quality of services Even if he spends no money on residential service and doesn’t have a commercial account…
  36. 36. <ul><li>Sometimes success comes at an apparent (and actual price) </li></ul><ul><ul><li>E-Loan – discloses all fees upfront – guarantees no change during the process </li></ul></ul><ul><ul><li>Vanguard – sliding scale for fees from investment advice to brokerage commissions </li></ul></ul><ul><ul><ul><li>Based on assets and length of time customer has been investor </li></ul></ul></ul><ul><ul><li>Multiple banks – open a money market account, no fees of any kind </li></ul></ul><ul><ul><ul><li>ING will reward you with $10 if you tell a friend of this no-fee feature </li></ul></ul></ul><ul><ul><li>Tough to do since non-interest revenue streams that are affected are ½ of all operating income generated by U.S. commercial banks </li></ul></ul><ul><ul><li>But these are the kinds of things that generate trust and confidence </li></ul></ul>CRM & Financial Services: Competitive Advantage
  37. 37. CRM & Financial Services: Competitive Advantage <ul><li>Competitive advantage is gained by customer-centered culture </li></ul><ul><ul><li>And KPIs, compensation programs, etc. that support the levels of service excellence and thinking that drive employee and business partner behavior </li></ul></ul><ul><ul><li>Because the new generations of investors both local and international are technologically savvy, empowered and demanding, the financial tools to determine their own destiny are important to them </li></ul></ul><ul><ul><li>Personalized service for family based or socially based portfolio development including corollary services (help them find support in other areas e.g. retirement planning services) </li></ul></ul><ul><ul><li>Improvements in the customer’s experience with the institution </li></ul></ul><ul><ul><li>Think of customer for life through generations, not objects of sale at the moment </li></ul></ul><ul><ul><li>All business processes should be focused around customer value </li></ul></ul><ul><ul><ul><li>That means that operational success can’t trump customer value </li></ul></ul></ul><ul><ul><li>Increase in customer’s sense of security </li></ul></ul><ul><ul><ul><li>I’m not talking about actual increases in security measures – though that too, of course </li></ul></ul></ul><ul><ul><ul><li>“ We care about your future” – not just your money </li></ul></ul></ul>
  38. 38. <ul><li>More institutions beginning to take advantage of social tools that are out there to attract newer generations of future high value customers or are used by customers to make decisions about financial services </li></ul><ul><ul><li>TVNZ in New Zealand launched the first free podcast in New Zealand – ASB Business – run by ASB which is a NZ bank </li></ul></ul><ul><ul><li>UMB Financial in Kansas City launched a podcast at the end of 2005 to ““offer listeners a chance to learn how best to manage their money at their convenience.” </li></ul></ul><ul><ul><li> has a user community to discuss money and finances and even banking </li></ul></ul><ul><ul><li>UK and Switzerland has several banking blogs that are discussing the current instruments and programs available through banks and will rate (emotionally) bank services (see BritBlogs) </li></ul></ul>CRM & Financial Services: Competitive Advantage
  39. 39. THANK YOU FOR THE OPPORTUNITY For more information please feel free to email me at: [email_address] or read my blog at