Up Close and Personal: Financial Institutions Get to Know Their Customers: Given Their Need to Boost Cross-Selling Rates to Their Existing Customer Base, Financial Institutions Have Invested Heavily in Information Management. It Is No Surprise That the Institutions with the Highest Cross-Sell Rates Have Achieved a Competitive Edge. (from the Chief Executive)
Unkles, John, Journal of Banking and Financial Services
Facing tight margins and limited customer loyalty, financial institutions are finding that the key to revenue growth is working harder at customer relationship management (CRM) and cross-selling strategies.
In today's highly competitive financial services market, customers are far more likely to use multiple service providers and this means the industry is increasingly focused on customer retention.
It is always much less costly and more profitable to grow the `share of wallet' of existing customers than to grow market share through acquiring new customers. When institutions make expensive acquisitions, cross selling becomes a crucial means of driving value from the purchased customer base.
Given their swelling databases of customer transactions across a range of channels, financial institutions have enormous new opportunities to understand customer needs and proactively offer the services they may require.
However, successful CRM and cross selling of financial services require substantial investment in information management technology, backed by a corporate culture focused on customer service and relationship management.
For front line staff to offer customers personalised banking or insurance products that are relevant to them, information systems must be in place that are capable of mining customer information from a range of channels--from transactions systems, customer databases, call centres and internet banking sites.
Financial institutions, often with tens of thousands of transactions being processed daily across dozens of branches and their call centres, are collecting vast amounts of customer data that can be very difficult to manage and to translate into meaningful and useful pieces of information.
Most major financial institutions have built data warehouses to store all this information in a way that allows for rapid retrieval of customised information, and they have invested in powerful transactional data mining systems that can track changes in customers' transactional behaviour and predict future transactions.
For a number of years, many financial service providers have employed data mining systems that can scour entire transactional databases on a daily, or overnight, basis looking for marketing leads.
However, new software technology has been introduced this year by at least one of Australia's major financial institutions to enable `real-time' analysis and targeting of customer banking and insurance transactions.
This technology, currently used by large US institutions such as American Express and Citibank, provides up-to-the-second profiles of customers to enable appropriate matches of marketing offers.
By providing sales consultants with fully scripted and highly personalised marketing offers for customers, the technology can test hundreds of offers a day and see what works with customers in real time, instead of waiting weeks for the results of direct mail marketing. Learning from its mistakes, the system also adjusts future marketing offers according to customer responses.
Clearly, this sort of technology provides opportunities to overcome a frustration that many customers have had with financial institutions in the past--their often slow and limited responses to customers' changing needs for financial services over time. …