Financial Services Makeover Needs CRM


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Banks need to find customer enticement and retention strategies they can trust, or die trying.

Record earnings, mass layoffs. If you had to summarize the last four years in financial services history, there’s your start.

Of course, you’d also want to detail the collapse of Lehman Brothers, the sine wave of the S&P 500, as well as nationalization, forced recapitalization, and the furious pace of financial services technology change, from mobile banking on iPhones and Android smartphones to the simple act of photographing a check to deposit it.

Business-wise, these changes have driven banks and asset management firms to look beyond customer volumes as a way to improve their bottom line. Bank of America (BoA), Citibank, and UBS have all announced plans to become smaller; they want to reduce risk.

What does all of this mean in customer relationship management (CRM) program terms? It means that financial services firms have shifted from a growth-first focus, to instead prioritizing business efficiency, as well as customer efficiency. Accordingly, they need better ways of identifying and attracting the right customers, while avoiding the wrong ones.

Financial Services Succeeds Via Innovation

What’s especially interesting with the financial services industry is that it’s always been an early adopter of technology, and has also been much more influenced by the technology industry. That’s because financial firms are essentially a service industry. They lack the hard assets of a manufacturing concern. Instead, they differentiate themselves based on innovation.

With the focus on having fewer customers, but better customers, the principle innovation we’ve seen practiced by financial services firms has been to create a deeper profile of each customer. These profiles help financial services firms recommend certain products or product changes to prize customers. Likewise, they can literally fire customers if they don’t meet desired criteria, or charge them for the privilege of working with the bank. Case in point: the recently floated (and retracted) strategy from BoA — not one of our customers — to hit less desirable customers with a $5 per month fee to use their debit card for ATM withdrawals.

Such ideas show that banks’ hands are being forced by the flat yield curve for U.S. Treasury bonds. In a nutshell, banks typically make money by using the money people invest with it, to invest in U.S. Treasury bonds. Back in 2006, the 10-year bond return was 4%, versus 2% now, while the one-year is now paying 1.5%. With the spread between short-term and long-term rates so flat, it’s impossible for banks to make money, thus they have to raise fees.

Asset Managers Seek Long-Term Differentiation

As with banks, asset managers are under substantial pressure too, because funds overall aren’t performing well. Even at the best of times, the average asset manager only has a hit rate of 50% (meaning that they make the right decision about half the time, in which case chance would work just as well). Some do much better, but in today’s down market, it’s even tougher to beat the competition.

Accordingly, one well-known asset management firm that Innoveer is working with has been redoubling its focus on customer intimacy. With the whole world turning on its head every six months, the company has taken a proactive approach by ensuring its customers understand the insights that the asset management firm is delivering, including extensive, proprietary information on market moves. By doing so, the firm is giving its customers a long-term vision about how they can weather, better than everyone else, today’s volatile market.

Banks Must Cultivate Better Customers

Other recent Innoveer financial services projects also illustrate the industry’s “must cultivate better customers” imperative. Examples include:

  • Mobile CRM: For a large British bank, we’ve been helping to mobilize its CRM solution, giving bankers rapid access to complete customer details, so they can more rapidly court customers with profitable proposals.
  • Customer profitability: Backed by data analytics, customer analytics, and business intelligence systems, a European bank now computes each customer’s profitability. The goal is to enable salespeople to know the best customer to be targeting, at any given moment, and with which services. Likewise, its service department can ensure these customers stay happy and loyal.
  • Twitter customer service: Banks have been leading the charge to deliver customer service via social networks. For example, BoA (again, not a customer) now fields customer inquires via Facebook and Twitter.

As these projects illustrate, the best way to succeed in today’s turbulent financial services market is to ensure your salespeople have the right tools to identify, target, and sign the most desirable customers. Also deliver savvier customer service — not least via social networks — to keep those customers. Reduce risk and increase profits is by finding the best customers, then making sure you keep them.

Learn More

Want to create a customer service program that excels? Start by asking the right CRM service questions. Also review our “top 10” marketing, sales and service steps to see how your current program compares to best practices and our benchmarks.

Post and thumbnail photos courtesy of Flickr user Photomat; used with permission.

Republished with author's permission from original post.

Adam Honig
Adam is the Co-Founder and CEO of Spiro Technologies. He is a recognized thought-leader in sales process and effectiveness, and has previously co-founded three successful technology companies: Innoveer Solutions, C-Bridge, and Open Environment. He is best known for speaking at various conferences including Dreamforce, for pioneering the 'No Jerks' hiring model, and for flying his drone while traveling the world.


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