Banks Lack Customer Knowledge to Make Relevant Offers
In a survey of 1,000 consumers by Deluxe Corp., St. Paul, MN, 43 percent said their financial services provider does not know their specific needs "well at all," 60 percent said the offers they received were not relevant to their needs, while 39 percent said they did not receive offers at all. Sixty-seven percent were more likely to accept offers if presented in person rather than by mail, phone or the Internet.
The results reflect a financial services industry just starting to embrace the data warehouse and data mining technology that can give it better insight to customer preferences. While they may not know enough to make relevant offers, Pat Hudson, vice president of targeted initiatives at Fair Isaac, San Rafael, CA, said financial services firms have enough information to avoid irrelevant ones.
"With all the technology in place, there is not much excuse to send out a blanket mailing," she said.
A handful of banks, insurance and investment firms have actionable systems in place, but it will take time for the industry to meet the demands of its sophisticated customers, who expect the same personal treatment on the phone, on the Internet and in the mail that they receive at their local branch office.
"Banks are just starting to get their feet wet with customer relationship management as a marketing strategy,'' said Kathleen Khirallah, senior research analyst for information technology consultant the Tower Group, Needham, MA. "The vast majority [of banks] are still trying to figure it all out.''
Customer relationship management involves the collection, analysis and use of customer data to make the right offer to the right person at the right time. It means giving call center representatives the data to upsell and cross-sell on an inbound call and cutting down on disparate offers from different areas of the same company. But as Steve Feldman, marketing director for Exchange Applications, Boston, said, going from concept to practice does not happen overnight.
Deluxe attributes the lack of connection with customers to a shortage of data, specifically debit data that includes check writing and account opening and closure history. Other experts argue, however, that the problem is not a lack of data but a lack of skill in leveraging that data.
"The view of the customer is in place,'' Hudson said. "Where we find the next big hurdle is using information intelligently.''
For CRM to work, financial services firms must learn more about their customers with each direct marketing campaign. It's a three step process that involves defining a marketing plan, choosing the applications to accelerate the plan and then building the infrastructure to carry it out. Firms need to select segments for the targeting of a mail piece, for instance, and then call on appropriate model to further define that segment to reach only those customers with a high propensity to buy.
Feldman said most companies are saddled with executing one campaign at a time instead of a continuous stream of campaigns in a cycle where they can plan, execute, then assess and evaluate results to determine the most pertinent communications, the appropriate marketing channels and most effective value propositions.
"In time that should improve,'' Feldman said, "With each campaign cycle, you increase marketing velocity and you learn more.''
In implementing CRM, consultants agree that financial services firms must also rework long held corporate mentalities based on products rather than customers. Firms must be convinced that the money they invest in new technology will produce a return. And this may require testing on a small scale before a commitment is made.
Employees motivated by the profitability of individual products need to be motivated by profitability of individual customers. They must be willing to share data and count on the resources of the whole organization to drive sales.
Andy Daniell, manager of the national consulting group for Harland Co., Atlanta, said banks need to be convinced that actions that may not make sense right away, such as convincing a customer with a high deposit balance to open a money market account, can pay off in the long term as customers remain loyal and retain their accounts longer.
"The technology is certainly there to be smarter marketers,'' said Dag Von Ruden, executive vice president of financial markets for Dynamark, St. Paul, MN. "Implementation and organizational issues are what is holding back progress.''
With the rise in online transactions and the resultant Internet scams, Deluxe also questioned consumers about identity theft. Only 30 percent of those polled worry that someone could steal their financial identity and damage their financial standing. Slightly more (41 percent) would rely on law enforcement officials than their financial institution (39 percent) to resolve an identity dispute.