Cosying up to the Consumer - the Customer Relationship Management Challenge   Bryan O'Connell specialises in providing strategic and marketing consultancy services to banks and financial service providers. He has more than 18 years experience in the industry both as a banking lawyer and strategic consultant.He has worked and acted for a wide range of banks, non bank financial institutions and corporations involved in the financial services industry. He can be contacted via email: bryanac@aibf.com.au

In their quest to get closer to their consumers, the banks are trying to harness their data bases to create a single view of the customer across all distribution channels and touch points.  

Their ultimate aims are greater customer loyalty, increased revenue and more efficient delivery channels. Much is at stake. In the increasingly competitive and more complex customer service environment, CRM is emerging as one of the banks' most fundamental retail revenue challenges.  

The Key Issues 

Banks have huge amounts of data on customers and this creates a major competitive advantage if it is used effectively. Banks have many avenues to collect and capture information from many sources when a customer transacts and deals with them. 

Data from these sources are usually captured into a data warehouse. The idea is then to disseminate it within the data warehouse to allow more effective analysis and distribution of it to other warehouses, or 'datamarts'. The ultimate goal is to create a single view of the customer to enable a more consistent and effective relationship.  

According to Joseph Ukelson of IBM, the key issue is under-standing what the customers actually want and how to use CRM data to do something useful for them. In other words, CRM is all about keeping the customer satisfied. The hardest part is keeping this objective in mind when developing CRM processes. 

IBM stresses that customers will expect to interact with their financial service providers through numerous easy to use channels, 24 hours a day. These include e-mail, the telephone, PC web browsers, webTV, Personal Digital Assistants (PDAs), and web-enabled mobile phones.  

Customers will also expect their financial service providers to know all about them, including what investment portfolios and insurance policies they hold, as well as the status of applications for new policies and claims. They will compare the service, not just with that of other financial service providers, but with companies in other industries as well. The quality of customer service is determined by comparison with best practice across industries and the bar increasingly is being raised.  

Quality, profitable service means financial service providers must know the customer and to anticipate their lifetime needs. From the technology-side this means being able to extract and aggregate all of the relevant data from a plethora of back-end systems and to monitor and analyse this data continuously. The institution must have answers and proposals available consistently, across a variety of access channels.  

Getting CRM right is not just about technology. There is also the issue of the organisation's culture and how it trains staff. The Asian Banker Journal recently reported that the National Australia Bank regarded putting in a CRM system as the easy part - the people change management process was the bank's most difficult challenge.  

But technology can assist training, says IBM's Ukelson. For instance, an online call centre may not have the most highly trained staff, but they can still be knowledgeable about the products and understand how to deal with customers effectively and appropriately.  

"Many staff - particularly in call centres - do not have a whole lot of time to think about these issues as they are dealing with so many calls and customers each day,'' Ukelson says. "They need technologies that are effective to assist with all this".  

Customer Value Management 

Also worth mentioning is CRM's 'cousin', Customer Value Management or CVM. Some banks also use CVM, which is predicated on the idea that they need to do more than just collect data and having the technology in place to do that.  

CVM requires a well thought out strategy that goes beyond mere data warehousing and other CRM investments. CVM is about the strategy and management of delivering value to the customer based on the acquired information. Much of it is about analysing the data and strategic models. One of CVM's aims is to get similar messages to the customer from all points of contact, so that customers are treated the same way whether they are applying for a credit card or a managed fund product. 

In addition, CVM becomes critical to assess other issues such as how best to generate sales leads. Customers respond in different ways to approaches, whether by phone, mail or over the internet. Understanding these dynamics should lead to reduced costs, better communication and, of course, more sales. 

CRM imperatives 

One of the clear imperatives of CRM is to acquire and retain profitable customers and to increase the bank's share of customer wallet, that is, the portion of customer business carried out with that institution. While banks and other retail service providers have thrown enormous energies into boosting their non interest income, further work needs to be done. Cross selling to customers cannot be done without a proper assessment of the customer's position. At the same time the bank needs to reduce the cost of acquiring the new business and lead each customer to the appropriate sales and service channels. 

Technology provider Siebel warns that powerful external forces are pushing the customer relationship challenge. "The whole landscape of financial services has changed and competition is far more aggressive than it has ever been,'' Siebel's vice president and general manager for Asia, Murray Creighton says. 

"The internet is exacerbating this issue with the creation of new competitors from not just the local markets just across the road, across the street or within the state, but globally."  

Creighton adds that customers are much more demanding. He believes that price was the most important issue for consumers, but they now value service much more than they used to. This is because of the increasing complexity and availability of products and services, as well as compliance and regulation issues.  

According to Creighton, the range of delivery channels now available means that financial service providers no longer can dictate how customers transact with them. Customers expect to be able to use one - or many - channels according to what best suits them. 

Technology's role in CRM  

Remember that CRM's ultimate aim is to have a single view of the customer and to be able to manage all customer interactions from the one point.  

Once this customer overview becomes clear, technology enables the institution to undertake initiatives such as marketing campaigns pitched to specific customers, or through specific channels such as the internet.  

It is essential the customer's history - such as where he or she has transacted with the bank - is available on a real time basis. This means the staff member at the customer's next contact point has the most up to date information, whether it's at a call centre or branch. 

But IBM's Ukelson notes that getting this single view can be a big problem for banks and other financial institutions, because their customer information is hidden in separate business divisions. They must decide that they want a single customer view and work through the organisational issues. Once these are resolved, they must then tackle the technology issues of how to bring the information together and how to sort out old or irrelevant data. 

In reality, many financial service providers are a long way off from reaching this single view goal. Creighton says a number of institutions have quietly admitted they have five or six different views of the customer, and the customer can have five or six different views of the institution!  

But there are also some powerful examples of CRM systems starting to work. Each night, the NAB's transaction data mining system scans and analyses every single banking transaction that a customer has made, searching for any significant changes in transaction patterns. If a lead is generated, it is sent to the bank's computer at a call centre or branch for follow up the next morning. The system, which has been tested since last year, so far has produced some impressive results. 

Ukelson says that as well as the currently available systems, a number of new CRM technologies are on the horizon. These include:  

> Natural language technologies that use not only speech, but also chat dialogue. Kids in particular are very comfortable with this form of communication;  

> Visual technology in which customers can glance summarised information. Humans are adept at visually processing information, so appealing to the eyes means a better understanding and a better reaction. 

> So called "multi modal" technologies. These involve creating a more natural attraction via the PC and other devices. It is all about interacting with the computer as though it were human, for instance by using gestures and pointing. This technology recognises that humans don't just use language to communicate.  

In summary, it is clear that CRM has become a very important priority for banks and financial service providers. It is crucial for them to get a single view of the customer through appropriate technology and applications, but they must also not forget to have focused strategies and tackle training and cultural issues.