Magazine article Journal of Commercial Lending

The Information Advantage

Magazine article Journal of Commercial Lending

The Information Advantage

Article excerpt

By and large, financial products are commodities. Thus, the winning market strategy for tomorrow is differentiation--making sure each customer perceives a company's products or services to be distinctive. The delivery method is an integral part of differentiation, because individual products or services are not separate in the customer's mind from the way in which they are delivered.

Whether the delivery system is a branch, a calling officer, a telephone, or an ATM, what the customer cares about is that the product be the right fit or delivered in the most convenient way or both.

The key to delivering the right product exactly when, where, and how the customer wants it is information. The winning strategy is to use information to make the bank special in the customer's mind. If the bank does that right, the customer will pay a premium for quality and convenience, and the bank will make a good profit by controlling operating expenses and increasing sales. The bank will have differentiated its products and be out of the commodity-oriented financial services business and into the value-added financial services business.

Using technology to manage information is important to implementing this strategy. Banks must construct information warehouses containing data from the bank's own files as well as public sources of information. Information warehouses will provide information to senior management for control, to marketing staffs for market segmentation and product design, and to customer contact personnel for quick response to customer needs and sales enhancement.

From the customer's point of view, the information warehouse should have complete information on the total customer relationship. In this way, the customer can receive superior service at a single point of contact and in a timely manner. The information warehouse also supports advanced self-service technology--PC banking, smart phone, and TV banking--for use by the coming generations, who will be more comfortable with these delivery methods.

Fully exploited, new technologies provide the customer with easy access to the entire bank and meet demands for financial services delivered exactly when, where, and how the customer wants them. Fortunately, technology is beginning to provide the following tools to develop or enhance distribution systems:

* Complete information on customers available at every point of contact. …

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