The Power of Aggressive Analytics: If Your Bank Aspires to Be More Customer-Centric, You Need to Bulk Up to a More Muscular Analytics Approach. That Means Bolstering Your Method for Securing and Integrating Data; Upgrading Your Analytics Capabilities; and Applying More Effective Measurements to Your Marketing Mix
Castro, Carlos, ABA Bank Marketing
MANAGERS AT A LEADING RETAIL BANK believed there was a significant opportunity to attract high net-worth customers, but wanted to test their supposition prior to rolling out new services. The test would take the form of segmentation and market mix modeling studies, evaluating behavior of high net-worth individuals versus all other bank customers to different types of promotional activity.
However, the bank faced a significant obstacle: Data on high net-worth and other bank customers was spread all over the organization, rendering any type of meaningful analysis impossible.
Engaging with a leading consulting and analytics organization, the bank organized a series of templates and processes enabling personnel in each department to enter information into a central repository available to all decision makers.
After reorganizing the information, managers applied predictive analytics solutions and ran a series of "what if" scenarios focused on activities such as increasing the marketing budget in one type of promotional activity versus others.
One of the many findings revealed that high net-worth individuals have a higher response rate to telemarketing, and online advertising and promotions, while all other bank customers responded better to traditional print and television advertising. With this information in hand, managers reallocated the marketing budget and achieved a 40 percent increase in marketing return on investment (ROI).
The example shows the potential power of robust data collection in connection with the use of strong analytics. In the section below, we will discuss the steps that a bank needs to take in order to reach this level of strong marketing ROI.
Let's start by looking at some of the challenges retail banks face that might be easier to overcome with a more robust dose of analytics: Differentiation remains difficult. Many consumers feel most banks offer the same products and services, charge too many fees, fail to provide high-quality customer service and are simply a necessary evil." Other types of companies continue to encroach on traditional banking businesses. Many retailers offer credit cards and other banking-type products. Brokerages often offer checking and other accounts traditionally provided exclusively by banks.
Until recently, financial services marketers lacked the data to track customer behavior--the analytical solutions to gain new, discrete insights into customer activity; technology platforms that could integrate and process massive amounts of data in just a few minutes or hours; and the organizational structure and marketing skills to react quickly.
As financial services marketers begin the process of better utilizing information to answer critical qviestions about their customers, they must start with identifying the challenges to address. The most critical of these include:
* Creating a "single point of truth" about each type of customer; i.e., ensuring all units within the institution work from one central repository of customer data.
* Identifying "high-value" customers, based on both "size of wallet" and "share of wallet."
* Determining the success rates of existing marketing activities, especially the interplay between online and offline campaigns.
Steps to a customer-centric institution
What does the ideal customer-centric financial services institution look like? For one thing, it treats information as a competitive tool. It defines very small, discrete customer segments by learning all it can about these microsegments, and then develops integrated marketing strategies customized for each segment's needs. Information may enable financial institutions to become customer-centric organizations, but the transformation is frequently complex.
Building a customer-centric financial institution requires several steps. These steps are outlined below. …