Retail Banking’s New Approach, Part 2
[Editors' Note: Part 1 of this series can be found here.]
How does your organization define its "customer"?
Customer definition is a critical concern. A business that hopes to succeed in delivering value to its customers and value chain members must deliberately ask itself about customer definition not only at time of its inception but throughout its corporate existence.
Sadly, many firms avoid deliberately defining and understanding the true customer. In the recent retail-banking fallout, for example, some of the world's largest banks apparently defined platform bankers as "the customer" -- and senior management appears to have demanded that those platform bankers lead with products to optimize numbers and maximize commissions from the banks' own perspective.
In part 1 of this series, we mentioned Larry Wilson and Adrian Slywotzky. In his 1988 work, Changing the Game, Wilson coined the acronym TASTE:
- Truthfulness and
TASTE requires 100 percent reciprocal effort between both parties -- and would have informed the bankers referred to above that the customer is never the salesperson!
Slywotzky's Value Migration examines basic questions that businesses ask to stay relevant and provide value, such as:
- What business are we in?
- Which customers and markets do we serve?
- How do we make our money?
Our conclusion: The most important set of decisions any enterprise can make -- the foundational decisions for CRM efforts -- are those involving selection:
- selection of the products/services it will provide;
- selection of the customers for whom it will provide them; and
- selection of the channels through which it will market and service them.
A company must define its customer to be successful in effectively implementing a customer-centric business model.
So who is your customer? Our preference is for a simple definition:
A customer is a person -- or, in B2B, a functional area within an organization -- who buys X dollars of Y products over Z duration.
Platform bankers are under extreme duress to sell. They receive relatively low base pay, annual turnover runs higher than 40 percent, training is lengthy, and the pressure to perform to make money is tremendous. This trend to build sales cultures within banking stems back to the mid-’80s under President Reagan. With the 1999 repeal of the 1933 Glass-Steagall Act, however -- which mandated the separation of commercial and investment banking to protect depositors from risky investment and speculation -- President Clinton accelerated the shift to a business model focused on the sales force.
In a world in which the salesperson is defined as the customer, we can see a complete disconnect from true customer centricity. At the very least, the decision to define the customer as the banker violates TASTE and raises many questions as to the propriety of lending and compensation practices. The decision to be truly customer-focused must begin at the top, and that decision must -- in training, communications, incentives, and motivational decisions -- complement the strategic decision and be reflected in all organizational policies.
Two forces are present during customer fact-finding in banking: the client's needs and the metadata template used to understand the customer. The client/customer interview is one key to building the organization information profiling "the customer," with its success enhanced by instilling the TASTE precepts into the interview approach.
The profiling interview sets the stage for targeting, segmentation, and customer valuation (or grading) -- the essential analytical tools that underpin CRM and drive the organization's sales, marketing, and service models. Without an actionable, shared definition of the customer, no firm can optimize its CRM efforts. In today's changed world, the banker's customer interview should help flesh out the business information system's single profile of the individual, family, and household, and only then be used to sell products. In other words, the interview should functionally benefit the customer and the institution. Specifically, the customer interview allows the organization to:
- capture client data to build a profile;
- understand the customer's view of what's important;
- identify current customer needs and anticipate future needs;
- build a personal, trusted relationship; and
- offer products, services, and solutions that benefit both parties.
To recap, CRM is a strategy based on customer focus, on customer knowledge, and on delighting the customer, and CRM includes a customer portfolio management approach. Additionally, effective CRM provides value -- as defined by the customer -- at each interaction. While a successful CRM strategy and implementation will drive profits, sales, commissions, retention, and loyalty, the customer is external -- not part of the sales team!
We would submit that no CRM effort can ever succeed if the end user -- the bank customer -- isn't seen, treated, and respected as the customer.
TASTE should be the touchstone upon which CRM and customer experience management are based. Part 3, coming later this year, will offer an expanded definition of each concept of the TASTE acronym and examples of these concepts used correctly in retail banking.
About the Authors
Nick Poulos (firstname.lastname@example.org) is managing partner of Chrysalis Marketing and Valerie O'Connor (email@example.com) is managing partner of VBO Marketing Services. Nick can be reached at 1-414-324-2559; Valerie is at 1-770-543-9272.
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