Customizing Sales & Service for Profitable Customer Segments

1,117 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,117
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
31
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Customizing Sales & Service for Profitable Customer Segments

  1. 1. Customizing Sales & Service for“Profitable” Customer Segments Nate Wehunt, City National Bank Paul McAdam, FIS
  2. 2. Agenda• Size the market for loyal and profitable banking customers• Relationship banking for “Profitable” customer segments• Tailoring sales and service to the “Profitable” segments to deepen relationships and wallet share• Leveraging a blend of in-person and online interactions that maintain and/or rebuild trust Primary research conducted by FIS: • Online survey of 3,000 U.S. consumers • Fielded August 2011 • Nationally representative 2
  3. 3. Value propositions supporting customer intimacy dominate Executives’ perceptions of their financial institutions’ market positioning Relationship leader 60%* Customer intimacy Customer service leader 31% positioning Advice leader 2% Convenience leader 2%Product performance leader 2% Price leader 1% Other 2% * Read as: 60% of respondents believe relationship banking is the primary value proposition their financial institution communicates to the marketplace. Source: FIS Enterprise Strategy, July 2011; n=351 Source: FIS Enterprise Strategy, July 2011 3
  4. 4. Consumer loyalty is multidimensional andsegments can overlap• Functional – Believes products & services create value – Trust the provider – Willingness to recommend Functional• Transactional – Willing to repeat purchase – Share of wallet increases• Emotional Transactional Emotional – Appeal to individual’s values – Customer identifies with the brand – Personal relationship – Most sought and least attained – Switching is minimal Source: FIS Enterprise Strategy, August 2011; n = 3,000 4
  5. 5. 45% of primary DDA customers exhibit at leastone of the three types of loyalty Loyal vs. Non Loyal Primary DDA Customers 1. Has product /service expertise 2. Willing to recommend 3. Trust the organization 4. Prefer using primary checking account provider to meet all financial needs Loyal 5. Willing to repeat purchase Non-loyal 45%* 55% 6. Have recommended at least 2 times 7. Have personal relationships with employees 8. Even if overcharged, would not defect * Read as: 45% of primary checking account customers are loyal Source: FIS Enterprise Strategy, August 2011; n = 3,000 5
  6. 6. Functional and transactional loyalty dominatefinancial institution loyalty Functional 20% Transactional 22% Emotional 3% * Read as: 22% of primary checking account customers have functional loyalty Source: FIS Enterprise Strategy, August 2011; n = 3,000 6
  7. 7. We’re in uncharted waters • “I am a BoA customer for 20 years. Even though my balance exceeds the fee waiver threshold I will probably take my business elsewhere if BoA charges its less well off customers this outrageous fee.” • “My debit card uses MY OWN money; debit cards save YOU check handling/processing costs. There is no justification for this fee!” • “I am sick and tired of banks looking for ways to take my money because they cant pay for their own mistakes.” Molly Katchpole Source: Change.org, October 12, 2011 7
  8. 8. 39% of primary DDA customers are currentlyprofitable to their provider Profitable vs. Unprofitable Potentially Profitable Primary Checking Account Primary Checking Account Customers Customers Unprofitable 19% Currently Profitable Unprofitable 39% Potentially 61% Profitable 42%* * Read as: 42% of primary checking account customers are potentially profitable Source: FIS Enterprise Strategy, August 2011; n = 3,000 8
  9. 9. Six segments based on loyalty and profitability High Unprofitable Potentially Profitable Profitable Loyals Loyals Loyals 9% 18% 17%Loyalty toPrimary FI Unprofitable Potentially Profitable Profitable Non-Loyals Non-Loyals Non-Loyals 10%* 24% 21% Low Low High Profitability to Primary FI * Read as: 10% of consumers are in the “Unprofitable Non-Loyals” segment. Source: FIS Enterprise Strategy, August 2011; n = 3,000 9
  10. 10. The primary FI captures a small percentage of assets with all but “Profitable” segments$240,000 Deposit & Non-retirement Investment Balances by Segment$220,000$200,000$180,000 Total deposits and investments$160,000$140,000 With primary checking account provider$120,000$100,000 $80,000 $60,000 43% $40,000 28% $20,000 $0 Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable (17%) loyals (21%) Profitable Loyals Profitable Non- Loyals (10%) Non-loyals (9%) (18%) loyals (24%) Source: FIS Enterprise Strategy, August 2011; n = 3,000 10
  11. 11. The primary FI captures the majority of deposit balances from the “Profitable” segments$80,000 Deposit Balances by Segment$70,000$60,000 With primary checking account provider$50,000 Total deposits$40,000$30,000$20,000 82% 68%$10,000 $0 Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable (17%) loyals (21%) Profitable Loyals Profitable Non- Loyals (10%) Non-loyals (9%) (18%) loyals (24%) Source: FIS Enterprise Strategy, August 2011; n = 3,000 11
  12. 12. The primary FI captures a small percentage of debt with all but “Profitable” segments$140,000 Loan balances outstanding per segment$120,000$100,000 Total loans and credit card debt $80,000 With primary checking account provider $60,000 $40,000 62% 64% $20,000 $0 Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable (17%) loyals (21%) Profitable Loyals Profitable Non- Loyals (10%) Non-loyals (9%) (18%) loyals (24%) Source: FIS Enterprise Strategy, August 2011; n = 3,000 12
  13. 13. Large variations in profitability among the six segments350 Profitability Indices by Loyalty and Profitability Segments300250 Primary checking account profitability index200 Overall profitability index150 Average = 100100 50 0-50 Profitable Loyals Profitable Non- Potentially Potentially Unprofitable Unprofitable (17%) loyals (21%) Profitable Loyals Profitable Non- Loyals (10%) Non-loyals (9%) (18%) loyals (24%) Source: FIS Enterprise Strategy, August 2011; n = 3,000 13
  14. 14. The level of fees paid by Profitable Non-loyalsmay contribute to their dissatisfaction Percent of consumers paying no fees for primary DDA and average fees paid per month70% $17.01 $18.00 65% 60% $16.0060% $16.09 56% $14.0050% $12.0040% $10.0030% $8.00 $6.0020% $5.47 $4.0010% $2.000% $- Profitable Loyals Profitable Non-loyals Rest of Population Percent paying no fees Average fees per month among those paying fees Source: FIS Enterprise Strategy, August 2011; n = 3,000 14
  15. 15. Three programs to encourage relationship consolidation with ~50% of customers Actions that motivate consolidation with primary DDA provider 54%No interest in further consolidateing 45% with primary FI 52% 17% Preferred interest rates on my Profitable Loyals 18% accounts based on total balances 9% Profitable Non-loyals 13% Rest of Population Ability to design my own rewards 14% program from a menu of options 18% 9%Lower fees because I use self-service 16% forms of banking 13% Source: FIS Enterprise Strategy, August 2011; n = 3,000 15
  16. 16. DDA and card-based rewards resonate most strongly with Profitable Loyals Impact of rewards programs on maintenance of primary DDA relationship 49%Checking account rewards separate 36% from cards 33% 44% Debit card rewards 29% 29% Profitable Loyals Profitable Non-loyals 36% Rest of Population Credit card rewards 34% 33% Source: FIS Enterprise Strategy, August 2011; n = 3,000 16
  17. 17. Profitable Non-loyals are less confident andknowledgeable regarding their finances Confident I will have enough money Have the time and knowledge to for a comfortable retirement manage all of my own financial 33% affairs 56% 43% 20% 16% 31%Profitable Loyals Profitable Non- Rest of Profitable Profitable Non- Rest of loyals Population Loyals loyals Population Source: FIS Enterprise Strategy, August 2011; n = 3,000 17
  18. 18. The primary DDA provider can benefit fromgreater “financial advisor” credibility Have a Financial Advisor Financial Advisor works with their primary checking account provider 29% 28% 43% 28% 25% 14% Profitable Profitable Non- Rest of Profitable Profitable Non- Rest of Loyals loyals Population Loyals loyals Population Source: FIS Enterprise Strategy, August 2011; n = 3,000 18
  19. 19. Profitable Non-loyals conduct the fewest in-person interactions Interactions with primary DDA provider per month Online and mobile 10.7 banking 9.1 9.4 Branch and phone call with live rep 2.7 2.2 2.5 Profitable Loyals Profitable Non-loyals Rest of Population Source: FIS Enterprise Strategy, August 2011; n = 3,000 19
  20. 20. Servicing and SELLING online is essential Branch Transactions Online & Mobile Transactions (Billions) (Billions) 49.0 42.7 14.7 14.1 13.7 13.3 35.6 29.8 2010 2011 2012 2013 2010 2011 2012 2013 Source: TowerGroup, “The Customer Has Left the Building: Selling Through Self-Service Channels,” June 2011 20
  21. 21. Even among older generations, branch usage israpidly declining Banking method used most often Percent citing branches as channel used most often (by age group) Telephone, 3% Mobile, 1% 52% Mail, 6% Branches, ATM, 20% 8% 37% 27% 24% 22% Internet, 62% 13% 2007 2008 2009 2010 2011 Source: American Bankers Association and Ipsos Public Affairs, August 2011 21
  22. 22. Online channels play vital roles in new product shopping Preferred method of receiving new product information Methods used to research products Email to computer 51% 77% Mail 49% Within online banking 41% 44% 46% At bank’s website 36% Talk with rep at branch 28% 16%Email or text to mobile phone 15% At ATM machine 14% Research Products Research Products Telephone call 12% 2005 2010Prefer NOT to be contacted by In-Branch Online 7% bank Source: Novantas, “Annual Multichannel Preference Study” as cited in Novarica, Source: FIS Enterprise Strategy, August 2011; n = 3,000 “Consumer Usage of the Mobile Banking Channel,” January 10, 2010 22
  23. 23. Tactics to deepen relationships with“Profitable” segments Profitable Loyals Profitable Non-loyalsProduct Packages • Target investments • Target investments and depositsFinancial advice • Opportunistic • Strong emphasisConsolidation • Preferred rates based on • Preferred rates based on balances balancesFees • Do not increase • Decrease • Eliminate with • Eliminate with consolidation consolidation or self- service behaviorsRewards programs • Checking, debit & credit • Checking & credit card card programs programsSales approach • In-person and online • In-person and online • Greater in-person • Greater online emphasis emphasis Source: FIS Enterprise Strategy, August 2011; n = 3,000 23
  24. 24. Customizing Sales & Service for“Profitable” Customer Segments Nate Wehunt, City National Bank Paul McAdam, FIS

×