Is Your CRM Strategy Helping Or Hurting?

Matt White, writing on Finextra, shares Turkish bank Garenti’s CRM strategy:

If you go into their branches you have to swipe your bank card receive a ticket, and wait to be called. But not all tickets are equal. High income ‘superstars’ get seen within five minutes, the pretty well off have to wait a bit longer, and the great unwashed should be granted an audience after about ten minutes. Non customers have to wait for up to half an hour. Garenti says that if these people want to be seen sooner, they had better open an account.”

My take: Funny, but instructive. Funny cuz’…well, you know why. Instructive, though, because it highlights two issues that banks, often unknowingly, have:

1) Their customer segmentation scheme does more harm than good. Although few (if any) North American banks require customers to “swipe in” before receiving service, the Garenti story does highlight a drawback that many banks here do face. Few banks, thanks to how they segment their customer base, account for a customer’s potential relationship value.

Like Garenti, many banks segment customers on number of products owned and demographic factors like income. But number of products currently owned may not provide any insight into how many more products a customer might have with the bank. And a customer’s income, while a potentially good predictor of the need for financial products, isn’t necessarily a good indicator of the products that customer will consider the bank for.

As a result, this approach to segmentation may lead to preferential treatment for customers who have no intention of expanding their relationship with the bank, and reduced service levels to (and attention to) the customers who represent their best long term opportunities.

While many observers complain that segmentation schemes are, often, not actionable, there’s another issue. Most approaches don’t help the bank understand the kinds of relationship a customer wants to have. Some customers are looking for a personal relationship with a banker, another wants help and guidance making smart financial decisions, while a third may only want to park his paycheck into a checking account before putting that money in investment accounts (that aren’t with the bank).

In Garenti’s case, it’s possible that some of its “best” customers might tolerate a longer wait in the bank, especially if they could come in, get a cup of coffee, and relax for a bit. Isn’t this what a lot of banks are going for, trying to re-create the Starbucks experience in their branches? But Garenti’s segmentation dictates a CRM strategy that forces it to ignore this option.

2) They fail to understand the importance of the initial sales experience.
Garenti’s tiered service levels may improve service to its “best” customers, and possibly even improve its retention levels. But it may adversely impact new sales (i.e., prospects getting up and leaving during their 30 minute wait), and — just as importantly — be hurting future customer loyalty. The longer-term loyalty impact is not as apparent because few financial firms really understand how important that initial sales interaction is for shaping future purchase intention.

Opening a checking account may not be a particularly stressful, or highly emotional, event for many customers. But it’s likely that they’ve made a conscious choice to pick one provider over another — and there is stress or emotion involved in worrying about whether or not they’ve picked the right one.

While a bad experience in that initial interaction may not dissuade a customer from doing business with the bank, it might produce a negative story that the customer tells himself about the bank. A story that could limit the future potential of that relationship right from the start by diminishing the customer’s desire to turn to the bank for more products and services.

So should Garenti — or any bank for that matter — flip-flop the scenario and give prospects priority? Well no, that won’t work either. Then they’d be no better than the telcos who give all the good deals to new customers and treat existing customers like 2nd class citizens.

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There’s no easy answer to these issues. But, as a starting point, banks must: 1) better understand the kinds of relationships that their customers want to have, and 2) develop a segmentation approach that builds on those relationship types. And not simply let the existing segmentation dictate their CRM strategy.

 

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