For companies in any industry, customer experience and segmentation strategies are vital elements of maintaining effective relationships with your customer base. But, one sector where they are particularly important is in the saturated and often-blurred banking and financial services arena, where increasing a bank's "share of wallet" can make a significant difference in top-line performance.
Consider the needs and potential of a bank's midmarket customer base. These customers typically have a variety of financial services business needs -- cash, lines of credit, retirement accounts, demand deposit accounts (DDAs) for their businesses, as well as the owner's (or owners') investment, mortgage, and personal accounts. Based on various industry studies, it is estimated that midmarket companies typically use between six and nine different banks to fulfill these needs. And, while an individual bank offers eight to ten products to each of its midmarket customers, it typically captures only one to two products.
What would happen to the bank's revenue if it added just one product per midmarket customer? Research shows that the average annual incremental increase in revenue from the addition of one midmarket customer product is $23,000. Multiply that amount by 1,000 midmarket customers, and the benefits of creating and increasing "share of wallet" can really begin to add up.
So why do so many banks struggle to expand their customer relationships?
Creating an accurate "wallet model"
Successful penetration of midmarket banking customers relies on a broad spectrum of products, combined with attentive relationship management delivered through the customer's preferred channel(s). Moreover, building and growing relationships in this segment requires banks to develop a clear and complete picture of their customer relationships -- from profitability, to services currently used, to the various types of providers used, to channel and customer service preferences, to buying behaviors, and so on. In short, a view that enables a bank's customer-facing personnel to make the right sales and service decisions at the point of contact.
But many banks lack this view -- a critical element in creating a "wallet model" that enables the bank to accurately assess three key customer components:
- A customer's propensity to buy each additional product
- The volume measure or average expected balance of the account
- The actual wallet revenue gained from the account.
Understanding these three things will enable the bank to tailor and market its midmarket products more effectively.
Addressing customer analytics, strategy, and experience
To create an accurate wallet model, a bank must do two things well. First, it must establish an effective customer analytics capability. Banks tend to have a lot of data, but it often comes from disparate systems and a variety of internal and external sources. The keys are to:
- Aggregate and mine that data to produce the intelligence that aids effective cross selling, and
- Deliver that data to customer-facing personnel, from sales managers to contact center agents, so that they have an accurate customer profile at the point of contact.
If a contact center agent needs to pull data from several independent systems or sources in order to effectively assess, serve and target an offer to a customer, it is unlikely the agent is going to be able to deliver the experience the customer expects or the results the bank desires.
Second, the bank must use this information to refine its customer segmentation and experience strategy-defining segments that enable the bank to effectively target its products and services to appeal to those segments...profitably.
Implementing these strategies takes time, but there are a variety of incremental steps that can move a bank in the right direction, enabling it to build effective customer profiles, understand profitability by segment, and assess its potential return on marketing, sales and customer service investments.
About the authors
Dave Tilson is senior manager and CRM practice co-lead at West Monroe Partners. He specializes in creating collaborative environments within sales, customer service, marketing, and management teams. Tilson may be reached at email@example.com. Kyle Mooney is a senior consultant at West Monroe Partners. He has also worked with customer-centric management-consulting firm Novantas and with Lockheed Martin Space Systems. Mooney may be reached at firstname.lastname@example.org.
Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. If you would like to submit a Viewpoint for consideration on a topic related to customer relationship management, please email viewpoints@destinationCRM.com.