Customer Relationship Management: How Can Banks Regain Foothold with Consumers in Today's World?

American Banker, November 13, 1998 | Go to article overview

Customer Relationship Management: How Can Banks Regain Foothold with Consumers in Today's World?


Banks have a "window of opportunity" with consumers, but these customers are demanding new levels of service, convenience and expertise-- and banks better deliver.

In recent years, bankers have become painfully aware of the tremendous untapped profitability within their retail customer bases. The key to unlocking this potential is to further penetrate and up-sell the captive audience.

Case in point: A recently completed strategic planning engagement for a $4 billion-asset commercial bank with 120 branches and 200,000 customer households. An analysis of the bank's customer base revealed that the retail bank could generate an incremental $25 million in after-tax earnings over a three-year time horizon by cross-selling each retail banking customer household an additional 1.5 products.

Losing Ground fast

As a group, U.S. banks hold an enviable position with consumers: To be viewed as the primary financial institution, a financial provider must have either a physical presence or the consumer's checking account-two hallmarks of the banking industry.

But banks are losing ground because consumers also require superb product, pricing and service capabilities, things banks aren't delivering. As a result, they are missing out on significant strategic opportunities.

Although research indicates that Baby Boomers are interested in consolidating their business with one financial institution, for instance, they don't believe any one bank can address all of their needs. Fifty-three percent of all U.S. households would prefer to have their financial needs met by one institution, but they doubt that any one bank will provide the value proposition, the level of service, and the financial acumen they can derive from using multiple providers.

To combat this and implement a truly customer-focused strategy, banks must address five vital issues that hinder their ability to serve as a full-service providers of financial services.

* Strategic issues. More often than not an overall marketing strategy is not in place to focus and prioritize the marketing initiatives of the consumer market. Many bankers believe that their marketing planning and priority-setting processes "could use an overhaul." Through interviews they reveal that management's attention is too often focused on product sales to the detriment of identifying and capturing relationship opportunities.

Typically, there is no universally accepted retail marketing strategy and related segmentation scheme within the organization to guide strategic marketing planning. Instead, banks generally subscribe to several market segmentation studies; none of which are acted upon.

* Service issues. Banks often neither adequately determine which consumer segments deserve higher levels of customer service nor price the relationship to incorporate the customer's preferences. As banks have provided incentives to consumers to stay away from traditional branches through pricing, consumers have become hungry for convenient access to their accounts via telephone banking, ATM networks, and the Internet. This "new" convenience has introduced "new" competitors who are aggressively bombarding consumers with more product choices and greater perceived benefits.

* Business development issues. Because bankers are driving customers away from expensive face-to-face sales and service, they are reducing the number of opportunities they have to cross-sell. …

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