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Face The Truth: Your Customer Data Sucks

A Snarketing post by Ron Shevlin

A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors

During a presentation at strategic planning session for a large credit union, I challenged the management team’s notion that the financial institution was “competing on superior service.” My argument went as follows:

  • The “superior service” market isn’t big enough. Only so many consumers choose a financial provider for its “superior service capabilities.” Many consumers choose a financial institution based on convenience — not service-related factors. Even there, “convenience” is not a singular or narrowly-defined concept. Does it mean nearby branches, or extended hours, or self-service technology-based tools that make managing finances easier?
  • The “superior service” strategy isn’t measurable. Managers need to be able to gauge two things: 1) To what extent is their chosen strategy a smart strategy, and 2) How well are they executing on their chosen strategy. There’s no shortage of financial institutions (especially credit unions) who claim to provide superior customer care — with no ability to measure or prove that claim. Without adequate measurement, focus/alignment/discipline becomes impossible to achieve.
  • The”superior service” strategy isn’t specific enough. The lack of specificity means that achieving any kind of focus, alignment or discipline will be extremely difficult. A financial institution that chooses to compete on “superior service” will still need to determine how it will deliver across other critical parameters — e.g., convenience, value and product quality. This isn’t impossible, but in practice, trying to build a brand position around “superior service” can lead managers to neglect other dimensions like value and product-quality. It’s vague.

( Read More: Your Service Is Not What Differentiates You )

One of the executive team members then looked at me and said, “You don’t get it. We do have superior service. It comes down to knowing our members better than any mega-bank could ever know them.”

I stared back at him as I blurted out, “Dude, you don’t know Jack!” (Okay, I didn’t really say it. But I was definitely thinking it in my head.)

I did say — out loud — that the credit union only really knows sliver of who its members are. Sure, when a member walks into a branch, credit union employees many know that member is Jack Jones — wife’s name is Jill, and that they have two wonderful kids, Jenny and Jimmy who attend Jefferson College. I explained, however, that the credit union doesn’t know Jack:

  • How much money Jack has. You only know how much he has with you. And if he’s got any money, it’s a good bet he doesn’t have much of it, let alone all of it, with you. So you really don’t know his investment needs or risk tolerance.
  • What Jack’s financial goals are. Oh sure, you have a PFM app that has a goal tracking capability. But PFM users account for what… 10% of your overall member base? What’s the chance that Jack is one of those members and uses the goal tracking feature?
  • How Jack makes his money. Oh sure, you might know how much he makes because you can see that direct deposit coming in every month, but you don’t know if that stream of income is safe and stable, or if Jack works in an industry that is on the decline.
  • How Jack (and his family, for that matter) spends his money. You’ve got a piddly percentage of your member base using your online bill pay platform, and it’s a good bet you didn’t issue all the credit cards he has, so you really don’t know where the money is going. And worse, you’re not even doing anything to analyze the debit card spend data you do have.

“You don’t know your members nearly as well as you think you do,” I told the credit union’s leadership with conviction. “And as I look around the industry, it’s megabanks and fintech startups — not community banks and credit unions — that are actually doing anything about it.”

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Big Data Delusions Grandeur

In a CU Times article on marketing trends, a consultant was quoted as saying:

“Where big data holds out great promise for credit union marketing, i.e., the ability to enrich target marketing, forecast next best products for members, and generate more efficient marketing budgets; it also yields great strategic value. Big data — better said, your data — can create unrivaled value for your members. Your data produces more than the next best purchase or transaction; it initiates models for loyalty and lifetime value from your members.”

What are they talking about? What, exactly, is this “big data” that he’s referring to? Most financial institutions I talk to keep telling me that they don’t do enough with the “small data” they have.

The truth is, there’s a yin and yang to the concept of data in marketing:

  • Yin = You have to have useful data.
  • Yang = You have to be able to do something with that useful data.

It has become trendy to say that financial institutions have all this data they’re sitting on that they don’t make good use of, but few firms really know what data elements are good (or useful) for what marketing purposes. Consultants that spew big data nonsense and toss around terms like “predictive analysis” and “next best product models” are only talking about the Yang (data analytics capabilities) without any consideration for the Yin (data quality). The reality is that the job of data quality typically falls to the IT group inside the bank or credit union. It’s their job to get the data in one place, get it cleaned, and make it accessible. But that really doesn’t address the utility of the data — the Yang.

Data Gentrification

The term gentrification usually refers to the renovation and improvement of rundown neighborhoods. But the word could also be applied to the financial industry’s data. Most banks and credit unions have some ugly issues with their data — the assets, warehouses, and analytical capabilities are all rundown and desperately in need of gentrification.

In my contribution to the Top 10 Retail Banking Trends and Predictions for 2017 article published here on The Financial Brand was the following:

“Over the next few years, banking providers will embark on data gentrification efforts — not just cleaning up the data they have, but collecting and using better data.”

Hey, let’s admit it… data is boring. If you went to an executive team meeting and said the big strategic initiative for the next year should be gathering, consolidating and improving the quality of the institution’s data, it might be your last presentation for a while.

But you have to face the truth: Your data sucks. And it’s not just a nuisance, it’s a serious strategic problem.

Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

All content © 2017 by The Financial Brand and may not be reproduced by any means without permission.

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Comments

  1. Gregory Shaver says:

    Ron,

    Too funny, especially the comment about the board member and the strategic planning. I had a board member say the same thing and I asked him how many members did he actually know. He said “over 500”. I countered with “we have 33,000″ members, so do we have anyone who knows the other 32,500 members.”

    I like using the words “Big Data” because it sounds cool and it makes me look like I have a clue, but the reality is I don’t have a clue about data, just like most everyone else in the financial space. The reality is until we start hiring people who can do something with the small data, the big data will have to wait. and wait, and wait.

  2. I tend to agree about data quality in FIs being sub-optimal. But how will data gentrification gain traction if FI execs find “data boring” and throw out anyone who tells them that “the big strategic initiative this year is going to be gathering, consolidating, and improving the quality of the data” the FI has? What am I missing here?

  3. Ron, this is so damn good! I hate it that (in this case) you are so right.

    The only thing I can add is that most credit unions and banks don’t actually know a thing about their data. It is locked up in their core system. They don’t know how it is structured, how (or even if) key interactions are captured, or if information is consistent (across products, lines of business, branches, etc.)

    More of our work is in data assessment and migration of data into an analytics platform where you can work with it.

    So, hard to compete in an insights-intensive market (like banking has become), without essential building blocks.

  4. Mike Bartoo says:

    I would have paid to be a fly on the wall in THAT planning session. My favorite part of this entire post is the Yin Yang commentary. Absolutely agree that not all data is useful. But just as importantly as identifying useful data is the fact that you have to USE IT. Pay attention to whether or not you received a benefit from using it (I know, more data analysis)…then learn and continuously improve. It’s not a “set it and forget it”.

  5. Thanks to all for the comments.

    Ketharaman: Are you REALLY looking for logic and rational thinking in one of my posts? Good luck with that. 🙂

    Steve: I think the problem goes way beyond knowing what data one has and how to access it. It’s about knowing the utility of specific data elements. There is no shortage of vendors out there touting their data source. Smart marketers test the performance of a new data source before acquiring it. I don’t see a lot of FIs doing anything remotely close to that.

    Greg: This isn’t about using “small” vs. “big” data. What the hell are people talking about when they use those labels? Data is data. Let’s stop with the stupid adjectives.

  6. Two “amens” for this article. (1) My plumber, HVAC guy and mechanic all offer superior service. It’s not differentiating. (2) Banks and credit unions have more consumer data at their disposal than Google and Yahoo combined. The problem is, many aren’t connecting the dots and measuring the four key areas you bring up in this article (how much money jack has, et al). Customer behavior data will tell you a lot more about what a customer needs than any customer survey will.

  7. I like that I found you Ron. The Snarketing Situation is entirely true and overall there are some faults and follies marketers need to admit to, capitalize on, and grow with, over, around or under. I am seeing so much in this marketing landscape that solves nothing and helps nobody.

    “The “superior service” market isn’t big enough. Only so many consumers choose a financial provider for its “superior service capabilities.” Many consumers choose a financial institution based on convenience — not service-related factors. Even there, “convenience” is not a singular or narrowly-defined concept. Does it mean nearby branches, or extended hours, or self-service technology-based tools that make managing finances easier?”

    And people also choose a service from an emotional place, or having a personal connection with it. 🙂

  8. Thanks for the kind words, Kira. Greatly appreciated.

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