Several factors are leading banks to increase their focus on enhancing the customer experience. Many have taken a more customer-centric approach to regain trust following the Financial Crisis. There has also been a shift away from an overarching focus on new customer acquisition and towards optimizing customer lifetime value. And banks are looking to counter the increasing competitive threat posed by FinTech firms that promise to manage all their clients’ financial needs through a single digital platform.
There are several ways banks can benefit by integrating an understanding of the customer experience in solutions development and delivery.
Change customer perceptions. Build systems and strategies around the customer experience that retains your traditional strengths (trust, experience, product breadth and expertise) while tackling some of the more negative perceptions of the sector (slow moving, inwardly-focused).
Differentiate yourself from other banks. To fully embrace the customer experience, you may need to make significant changes in many areas, including organizational structures, marketing, sales and service. And be sure to plan carefully. These types of changes often come with a number of barriers (including organizational inertia and lack of senior management buy-in) and, unfortunately, many banks fail to make the transition.
Optimize customer lifetime value. By understanding customer needs and challenges at various stages of the customer life cycle, you can reduce customer churn, while improving cross-sell/upsell rates.
Integrate your sales and service channels. One of the key selling points of FinTech firms is their commitment to providing a seamless customer experience on their platforms. Though banks have traditionally struggled to integrate their digital and human channels, many surveys have shown that customers do use multiple bank channels. Banks that can provide a seamless customer experience across their various channels can both increase customer satisfaction and gain a competitive advantage over the FinTechs.
Capture the voice of the customer. By developing opportunities for customer feedback at all sales and service touchpoints, you can gain real insights into customer needs, behaviors and preferences; identify gaps in these areas; and incorporate this intel into developing new products and enhancing existing solutions and service.
Leverage internal stakeholder insights. To gain a strong understanding of how to improve the customer experience, gather detailed insights from front-line sales and service staff who can offer unique perspectives. Along with the voice of the customer, use these insights to develop more informed product development as well as marketing, sales and service initiatives.
Optimize return on investment. Identify areas that have the greatest potential for enhancing the customer experience, and redirect investment to these areas.
Create customer advocates. Engaged customers who have a consistently positive experience often turn into advocates (on social media, through word of mouth, etc.) and may even become referral sources.
There is a wealth of evidence that consumers are using online and mobile channels as the primary channels for their everyday banking needs:
Having reached critical mass in online banking penetration, the largest U.S. banks continue to report strong growth in active mobile banking customers (Chase +23% y/y to 17.2 million; Bank of America up 17% to 15.5 million; and Wells Fargo +22% to 13.1 million)
Regional bank customers are also growing their usage of non-branch channels. 45% of PNC customers use non-branch channels for a majority of banking transactions. Fifth Third reports that ATM and mobile channels’ share of deposit volume rose from 12% to 31% over the past two years. KeyBank claims that online and mobile transactions are growing by 9% annually, while branch transactions are declining by 3%.
The rise of self-service channels for everyday banking transactions is leading banks to re-assess their investment in their branch networks. For example, banks are changing traditional assumptions as to what constitutes optimal branch density within markets. In a recent presentation, KeyBank claimed that branch density is now less relevant as long as a bank can pair branches with a good mobile offering. In addition, in a low-revenue-growth environment, banks are under pressure to cut costs in order to meet earnings expectations. As a result of these factors, banks are cutting branch numbers.
Bank of America is expected to cut branches to below 5,000 by the end of 2014, compared to more than 5,700 in the second quarter of 2011. It recently announced the sale of branch clusters in North Carolina and Michigan.
Over the past six months Citibank sold all of its branches in Texas, as it focuses its energies on a select number of large metro markets.
KeyBank has closed or sold 8% of its branches over the past two years, and plans to cut its network further, by about 2-3% per year.
However, banks remain strongly committed to their branch networks. This is largely due to the fact that consumers continue to value the branch channel, even if usage has declined. A recent ABA survey found that 21% of consumers named the branch as their preferred banking channel, up from 18% in 2013. In addition, banks recognize the benefits in encouraging customers to use multiple channels. Wells Fargo found that customers using its stores as well as online and mobile channels have a 70% higher purchase rate than customers who only use online and mobile. With in this mind, the following are five branch strategies that banks should follow, with examples of banks that have already implemented these approaches:
Deploy new branch formats. Given lower traffic and transaction volumes in branches, banks should launch branch prototypes with smaller footprints, so that they can maintain their physical presence, but at a lower cost.
PNC has converted 200 of its branches to a smaller format, with 100 more to follow by the end of 2014.
Launch flagship branches in selected markets. With changing ideas around branch density, bank can consolidate multiple branches into a large flagship store. These flagship stores act as a brand beacon for the bank in specific markets, as well as providing space for the bank to showcase new innovations
Reconfigure branch staff. As branch activity is switching from transaction processing to sales and advice, and branches switch to smaller format, bank can reduce the average number of staff per branch, but should also change the functional balance, with fewer tellers and more sales specialists.
In the 18 months to June 2014, Fifth Third cut 22% of its branch service staff, but increased sales staff by 6%.
Over the past year, PNC has grown its number of investment professionals in branches by 4%.
Incorporate technology into branches. As consumers become more accustomed with using technology for their everyday financial needs, banks should showcase customer-facing technology in branches. This can enhance the user experience and capture sales opportunities
Regions is installing two-way video to enable customers communicate directly with bankers via an ATM.
Open branches outside of footprint. As having a critical mass of branches in a market is no longer a prerequisite for success, banks can open branches beyond their traditional retail footprint, to target specific consumer or business clusters.
City National has established branches in New York City, Atlanta and Nashville, dedicated to targeting entertainment firms that are clustered within these markets.
If you listen to Customer Success Management professionals talk about what they do, you’ll get the message loud and clear. In order to be viewed as a growth engine rather than a cost center, the CSM must move beyond being firefighters, which relegates the CSM function to the world of support – helpful, but totally reactive. Just because it is part of the story of how many CSM teams got started doesn’t mean that it needs to be part of how the CSM team is positioned going forward.
I’d like to take things one step further. I believe that success for CSM can be defined as the day that Success managers and executives no longer talk at all about how many customer relationships they and their team have “saved.” I understand the motivation – it’s a tangible demonstration of the value of their function and one that explicitly and clearly relates to the activities of the CSM team. However, there are three problems with ”saved customer” refrain:
It continues the focus on reactive impact, as saving implies that the customer was “at risk” until the successful intervention of the CSM team.
It undervalues the total impact of CSM on the top line because it doesn’t account for up-sell or cross-sell revenue and on the bottom line because, among other things, it doesn’t account for the lowering of customer acquisition costs through advocacy and word-of-mouth.
Finally, why should saving customers even be necessary? The strategic, pro-active approach of the CSM team should ensure that customers are kept on a path to value and rarely or never get diverted to end up at risk.
Not only does talk of saves do a poor job of positioning the CSM team within the organization, it has the potential to create or foster antagonism between CSM and other functions. The need to save results from some misstep, whether by marketing or sales in poorly setting expectations, product development in delivering an application with feature shortcomings or bugs, or support in failing to respond to requests quickly or thoroughly enough. Does the CSM team really want to be the nagging parent of the organization that always talks about cleaning up everyone else’s mess?
While we’re at it, maybe we should do away with the outward focus on “churn rate.” Talking about CSM in terms of churn still mires it in a framework of prevention rather than expansion and growth. Every customer relationship is an opportunity for growing revenue through renewal, upsell, cross-sell, and advocacy. So why not refer to the performance of the CSM team responsible for managing and nurturing those relationships in terms of conversion of that revenue opportunity? Sales isn’t measured by their loss rate (yes, win/loss is an element of sales performance analysis but it’s rarely the primary sales measure mentioned), but rather by their bookings against quota or their conversion rate. I’m not suggesting that churn should be ignored or even that it not be a/the primary measure used internally by the CSM team. Rather, I’m suggesting that perhaps CSM does itself a disservice and perpetuates the stale paradigms that it is trying to shift by highlighting “saves” to the non-CSM world.