Since its inception, the Internet loomed as the ultimate enabler of disintermediation. Marketing executives boasted that by using the Net to sell direct, middlemen such as insurance agents and stockbrokers would become obsolete.
Compounding matters, traditional insurance agents and stockbrokers and their employers initially attempted to keep the Net at arm’s length, viewing it as a direct threat to their business models. This unwillingness to embrace the Net opened the door for a host of fledgling online providers offering cut-rate commissions and “no-hassle” purchasing of financial services. The race to commoditize financial services was on, buoyed by the consumers’ option to buy direct and buy for less.
In short order, it became apparent to even the most stubborn of financial services providers that fighting the advent of the Internet was futile. The new questions became: How can our firm integrate the Net into the financial services sales and service process? How can we use the Net to better support our brokers and their clients? What online tools can we give the brokers to help them sell better – and what tools can we provide to customers to improve our company’s level of service? How can the Net help us build relationships rather than removing them?
Financial services companies started to figure out that the Internet did not have to be about disintermediation at all. It was really about providing a new, more efficient support system – a better way to get closer to customers, not distance themselves from customers.
In its simplest form, the Net must be viewed by financial services providers as a way to better enable agents and brokers to do what they do best: educate, sell and service clients. Less complex financial services products, such as term life insurance, are ideally suited to be sold over the Net, but smart marketers understand that no two prospects of these products are alike and human interaction will almost always still be necessary.
In financial services, the Net can be strategically positioned to add value at every point of contact with employees and customers. But a clear and differentiated strategy that provides a competitive edge must exist.
Ironically, the Internet’s inherent ability to provide access to seemingly unlimited amounts of information has dramatically increased the value of noninformation factors such as financial advice. When marketing financial services, companies should remind themselves that sound, professional, experienced advice will never be a commodity. For some, it took Wall Street’s recent sharp declines to realize this dynamic.
Drastic changes in the financial environment also have once-quiet telephones ringing again. Old-economy financial firms are seeing a movement back to clients looking for the human touch because many are looking for fresh advice – advice about their portfolios, weathering the market storm and financial planning ideas. Market conditions have also allowed financial services providers to take some time to rethink their e-strategies, but they must not be complacent and think that the pendulum has swung back in support of their old-economy business models. These firms should use this time to act quickly and widen the online gap over unsuspecting competitors that might still be waiting on the sidelines.
Market uncertainty also provides a wonderful opportunity for brokers and agents to renew old relationships and forge new ones. Now is the time to call upon those customers that may have been lost to the dot-coms or other Internet friendly competitors. Of course, if the financial advice provided proves to be poor and adds no real value, disintermediation will once again occur.
Research shows that most customers do not define “value” only in terms of better information. Value is usually also associated with improved communications, unlimited access, better technology and additional time savings. Therefore, if they properly leverage the Net, sales representatives will no longer be referred to as intermediaries but rather as valued “infomediaries.”
By mistakenly positioning the Net as simply another distribution channel, financial services companies overlook that the Net is perhaps more ideally suited as a platform for customer service, information gathering and communications. A focus on trying to use the Net to acquire or “own the customer” is misguided and will ultimately lead to low retention rates, in part because this marketing philosophy typically attracts the wrong kind of online customer (e.g., price shoppers) and fuels expensive marketing campaigns, which never lead to an acceptable return on investment.
Too many financial services marketers focus on this peculiar desire to “own” the customer, failing to realize that only the customer can “own” the customer. The customers own their wants, needs and desires. A company might own reams of data about these elements, but it will never own the customer.
Until financial services firms make a disciplined effort to position their brokers and agents as a critical link in the Net-based value chain, they will not realize the full scope of the Net’s value potential. Fortunately, the Net has yet to cause the level of disintermediation that was once predicted. Unfortunately, the real disintermediation has been caused by the financial services industry itself. The industry’s unwillingness to understand the strategic value potential of the Net to support employees has opened up the digital doors at many aspiring and agile online providers of financial services.