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Adapt to Changes by Adopting CRM

For direct marketers in today’s financial services market, there has never been a more challenging time to stretch their imaginations, prove the value of their institutions’ offerings and play a pivotal role in maintaining and expanding their customer base.

The financial services industry and the role of the marketer within it have changed drastically under the influence of factors such as the Financial Services Modernization Act, the recent popularity of mergers and acquisitions, and the new impact of the Internet.

With Congress having passed the Financial Services Modernization Act during its last session, competition will only get more heated as the act helps usher in new financial service providers, more service options, and an increased focus on technologically delivered products.

A study by PricewaterhouseCoopers, Columbus, OH, recently uncovered that the financial services market will undergo the following significant changes:

o Blurred lines among financial and insurance markets: The Financial Services Modernization Act will continue to blur the lines among banks, insurers and securities firms, leading to increased competition and an even more challenging role for the marketer to truly differentiate its offerings in a crowded, confusing market.

o More mergers and acquisitions: With the Citibank-Travelers merger just the tip of the iceberg, financial institutions will continue to consolidate both within their industry and outside their traditional wall, extending to European players as well as nonfinancial institutions.

For marketers in the financial services space, this will require expanding their knowledge base beyond their country’s borders and becoming familiar with laws governing the European market.

For nonfinancial services marketers, this will require gaining an in-depth knowledge of a new market space and articulating the benefits of the merger and/or acquisition to a non-banking customer base.

o Increased reliance on the Internet: For both brick-and-mortar and online businesses, the Web will continue to widen its channel as it takes on a bigger share of the distribution of financial services products as well as insurance.

Added to this will be the Internet’s increasing role as another face of an institution’s customer service model and e-commerce chain.

Considering all of these influences, it’s no wonder that the financial services arena is relying more and more on the value of technology and the benefits that a customer relationship management solution can provide.

In fact, industry analyst firm Meta Group Inc., Stamford, CT, predicts that the global CRM market will grow from more than $13 billion in 2000 to $67 billion by 2004.

As a marketer, you’ve probably heard the mantra of how a CRM solution can change your business by decreasing attrition, increasing customer profitability and ensuring longer-term, more successful customer relationships. With so many CRM options and so little time, it’s increasingly more difficult to identify which CRM package is best for your company’s business goals.

One key distinction to make is between the operational CRM systems that organize and manage customer contact (call centers, campaign tools, Web site, sales force management) and the analytical CRM systems that help decide what is the best CRM action to take. All operational CRM systems deliver benefits in operational efficiency, but they need analytical drivers to deliver the best results in terms of effectiveness of action.

These days, all marketing executives are measured in terms of market share, customer value or customer retention. Using the best of breed in analytics will deliver the best results in these areas, not just average results.

A large Midwestern bank was faced with many of the challenges cited above. Like other financial institutions, the bank needed to identify the right customers for the appropriate promotions. As you can imagine, getting the message to the most responsive customers maximizes returns from the bank’s marketing budget. Conversely, a poorly targeted marketing campaign wastes marketing dollars and can isolate customers who view the promotions as annoying. Finding the balance in building stronger customer relationships was this bank’s primary goal when it set out to build a CRM solution. Marketers in the financial services arena know that the behavior of customers purchasing the same product can vary significantly.

For example, a customer who opens a $50,000 home equity line, yet never uses it, is a less profitable customer (for that product) than a customer who opens a significantly lower line of credit, yet frequently uses it.

Identifying which customers will exhibit more profitable behavior in response to targeted marketing programs is critical to running effective, cost-efficient marketing campaigns.

While banks and other customer-intensive businesses recognize that principle, finding the correct tools enabling them to gather pertinent information quickly and easily is a challenge for many banks.

Marketers know that to do their jobs most effectively, they need to quickly transform raw customer data into easily understood, predictive models of customer behavior – models that allow marketers to target appropriate customers as they plan campaigns.

After investing significant financial and technical resources in operational CRM systems to contact customers, the bank was frustrated that its current analytical CRM tools were too slow and unable to analyze its database of more than 2.2 million customer accounts in time to respond to the fast-moving market.

Convinced of the value of a CRM solution driven by real analytical understanding, the bank set out to identify the best answer to its business needs.

In evaluating the myriad products available, it asked the following critical business questions:

• Will the system integrate with an existing CRM product?

• Can the system process volumes of data quickly and easily?

• Does the system present the information visually so that the marketer can quickly draw conclusions?

• Does the system incorporate data from both brick-and-mortar and online transactions?

• Will the system improve customer service?

• Does the system ensure privacy?

• Does the system offer a comprehensive, 360-degree view of customer behavior?

• How quickly can the system be operational?

• What is the CRM vendor’s experience in the financial services market?

• Does the system support analysis of European financial transactions?

Now fully deploying a comprehensive CRM solution, with analytical and operational systems in tune, the bank is able to analyze customer data and take the best marketing action in just days – a drastic difference from the previous system, which took months. Furthermore, the bank was able to create data that was customer-centric, not just product- or service-centric.

With a consistent and up-to-date set of customer information, the bank’s marketers now execute better-targeted direct marketing campaigns that yield higher response rates and establish more productive, long-term customer relationships.

As the financial services market continues to undergo a complete shift in its approach to identifying, securing and retaining customers, CRM – operational and analytical – is sure to be a critical component of more institutions’ long-term business strategies.

Just as a financial institution’s ability to adapt to change is critical to its survival, the same applies to the marketer caught in the eye of the storm.

A great challenge lies ahead for today’s marketers, as these changes are certain to present great opportunities to demonstrate their skills and stretch their imaginations while positively contributing to their companies’ bottom line.

• Clinton R. Cave is vice president of marketing at Quadstone, Boston, a provider of customer behavior modeling and predictive marketing software.

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