Enhancing Competitive Differentiation -- Page 2

Some banks and thrifts, especially the smaller ones, do an excellent job of developing and maintaining relationships with many of their customers. The can rarely compete on price or product breadth with larger banks but they can beat the larger banks easily in relationships.

The term "relationship" in banking has two meanings. One is the set of products and services purchased by each customer. The second is the set of interactions between a customer and the supplier, a bank or thrift in this case. We are obviously talking about the second meaning here.

Relationships are built upon a series of interactions between customer and supplier that build mutual trust and knowledge.

Some of these interactions are part of the sales process but many involve customer service, tellers, branch managers, and various back office people. You don't need to have the best products and services to build a strong relationship but your products and services have to be at least average or better so that customers are not paying a quality penalty for dealing with you.

Each interaction adds to or subtracts from the trust balance in the relationship. A bad experience can offset several good ones unless the bad experience is followed up promptly with corrective actions. Each interaction also adds to the knowledge on each side but there is a difference here. The customer gains knowledge about bank products and services, financial strategies, who in the bank to talk to about various needs, and what the bank doesn't do well. The bank gains knowledge about the customer's needs, preferences, financial situation and similar personal matters but this knowledge is typically scattered across the bank and resides largely in the heads of a number of bank employees. As employees leave or are reassigned, such knowledge gradually disappears.

Customer relationship management (CRM) systems have been developed in recent years to capture data on each customer interaction and to make the collected data for each customer available anywhere in the business. Some work and some don't, but that is another story. The point here is that you don't need an expensive CRM system to implement a customer relationship strategy. What you do need is a culture that supports such a strategy.

How does our measurement and analysis specialization fit into this picture? We define "measurement" as gathering data from a wide variety of sources in business situations. Under such a definition, gathering customer relationship data fits well. Customer interaction records are typically text-based and can be understood only in the context of many such records. You can collect this information using an expensive CRM system or you can collect it using e-mail and a simple, Web-based access approach. This is what we recommend.

Relationship strategies fail because of culture and people issues, not technology. No amount of technology can offset a relationship-insensitive culture or lack of management commitment. The right approach is to get these in place first,and then add technology as needed.

To be able to implement a relationship strategy, a number of critical elements must be present. The first step is discovering ("measuring") the status of these elements in your institution. If all are not present or are not well enough established, then you will need to take steps to prepare the organization for a relationship strategy. We can help with this important first step.

Once you have your foundation in place, you should begin by piloting the strategy in a branch or region with a reasonably small number of people involved. This makes training simpler and allows enough face-to-face support to address early issues and problems. Data should be collected by phone, e-mail and document review and organized into a simple, Web-based database accessible internally by anyone having customer contact. We can develop and implement quickly a pilot system of this kind. Once it is running smoothly, you can think about rolling it out bankwide and possibly adding a formal CRM system to support it.

If you have questions or would like to discuss how we might help you implement a customer relationship strategy for your organization, please contact us.

PLEASE TELL US — Was this material of any value to you?