The first step towards Customer Experience Management in the banking sector

2008-06-27T10:52:00.000-07:00

The crucial factor for the success of a company is its ability to actively win, retain and regain customers. In order to reach this goal it is not enough for the client to be content with a contact. Rather, the objective should be to maintain the relation to a customer and at the same time create an emotional bond and brand loyalty. In a perfect situation, the customer will not only experience every contact with a company as positive but rather as enrichment (the "real" Customer Experience). This article shows how far banks in Europe have already come on their road to Customer Experience Management.

In Western Europe only every 10^th bank uses IT supported loyalty programs. This ten percent do not only include company owned systems, such as S-Points of the German bank chain Sparkasse, but also a bank's participation in a multi-partner program, e.g. the participation of the bank West-LB in Payback. However, this share seems to be rather small if one considers the offered product portfolio, the internationalization of the banking sector, and the increasing disposition of the customers to change their bank. Nowadays, regarding the maintaining of their customer relations, banks rely too much on products from the Customer Relationship Management (CRM) family. Comparing existing trends in the banking sector with the development of customer relations in seemingly very different market sectors such as FMCG, air transport or energy providers, many interesting similarities might be noticed, though.

B2C markets, such as FMCG, air transport, banking and finance sector, etc., aim at integrating solutions from the group of Customer Relationship Management (CRM) products into a new generation of products. The bundling of such competencies should lead to the creation of a "customer expertise". – The IT branch refers to this phenomenon as the deployment of a Customer Experience Management (CEM). But what is the difference between CRM and CEM? Is the only difference in the wording? – Well, of course not! The up-to-now practiced CRM has focused on organizing the direct contact with customers regarding internal processes, such as sales, services, and to a certain decree marketing. Its primary objective was to gather information based on historically collected data. CEM based on the Customer Experience, however, expands the current database functionality of CRM by giving it an emotional tinge. In a first phase, the objective of this new generation of products is to investigate customers' preferences through diverse analysis methods, which can be deployed at different customer contact points (marketing, sales, and services). In a second step, the communication can then be adjusted to the lifestyle (sinus milieu) and the specific needs connected with this branch of industry. To summarize the comparison, CEM turns the knowledge gathered by CRM into emotions and loyalty.

On international markets there are already companies realizing the strategy of Customer Experience Management. Aeroplan, Canada, e.g. has a special department consisting of 50 people who only deal with investigation into and forecasting of customers' needs. The company analyzes its customer relations based on surveys and exact statistical and econometric data. On these findings, Aeroplan is able to conduct reliable customer segmentation and to adapt to the true needs of its customers. This enables Aeroplan to fully realize Customer Experience Management.

In the banking sector, marketing, sales, and services directors are generally concerned with a very specific Customer Experience. This branch shows a high risk of failing brand and product loyalty. The loyalty towards a bank is usually based solely on material reasons, which are the crucial criterion when deciding for or against a certain offer. Despite this fact, established financial institutions do rather seldom intervene directly. It seems that the oligopolistic structures in the banking area lasting for decades are hard to overcome. Leading financial institutions could rely on loyal customers for a long time – until direct banking structures were developed and the international financial markets began to increasingly interlink.

The globalization caused two phenomena. On the one hand the number of foreign banks on local markets (which were believed to be secured markets) increased: Currently, not only established financial institutions, such as Royal Bank of Scotland, Santander Central Hispano, Deutsche Bank, and UBS, are experiencing a great influx of attractive customers, but also new, young, and cost-efficient financial institutions.

On the other hand, the internationalization in the banking and financial services industry led to an increase in the demand for other products. The result is the creating of new products and the diversifying of old ones. Standard products are being newly defined. The upswing in the demand for investment goods and credits, the increasing number of institutions, and at the same time increasing demand have extended the range of possible profits. This is why marketing departments can focus on one thing in order to maximize operating profits: What can we offer and sell fastest and how can we do this?

Despite this policy which the marketing departments pursued for years, one can notice a focus on Customer Experience. The era of Customer Experience Management begins with new ideas such as "Germany – branch office of the future", where, in a relaxed atmosphere, customers have a cup of coffee with their personal consultant. Starting point for the concrete realizing of such strategies and the differentiating in customer contact is the expanding of intelligent Customer Experience Management Systems.

Regarding the price competition, the characteristics of the banking sector are similar to those of the energy branch. Thus, the banker's bank intervenes in order to prevent an unlimited price competition. Therefore and despite growing competition, these branches will never develop in the same direction as the FMCG branch, where only a handful of vendors dominate the market. Here, Customer Experience Management was introduced in trading networks with such a success (most popular example is Tesco – excellent customer segmentation and forecasting of behavior) that energy providers try to reproduce these successes in their branch of industry. It is most likely that companies in the banking and financial services industry will follow this trend, too. Then, products will have to be differentiated more clearly and individual groups of products have to be offered to selected customer segments – through IT supported marketing campaigns, intelligent optimizing of sales processes, and lasting customer retention. This procedure – in accordance with grouping of products (bundle contracts) and segmentation of target groups – will be one of the most often used marketing/management tools in customer contact in the next five years. Banks will reward customers loyal to the brand with unforgettable presents, such as e.g. sailing trips or balloon flights. The banking sector, above all, will pursue the holistic strategy of Customer Experience Management, since the individual and exclusive customer contact is here developed furthest in comparison to other branches.

The biggest challenge in implementing loyalty management solutions is the integration in the existing environment, in a company's business processes. Comarch is a leading company in the field of research and development regarding Customer Experience Management. Therefore, it is a competent partner to companies introducing campaign, sales, or loyalty management. We see ourselves as a vendor with a multi-faceted product portfolio for the management of Customer Experience in the banking and financial services industry.

Lilianna Sułek

Business Development Manager

Comarch Software AG, Dresden

Comarch Loyalty Centre - banks

The first step towards Customer Experience Management in the banking sector