Customer Management - PDF

4.1 Introduction to Customer Management On completion of the Customer Management module, candidates should be able to: Understand how a bank's customer-centric business model, discussed in the Business Models module, is put into practice to deliver its strategy through a custom...

4.1 Introduction to Customer Management On completion of the Customer Management module, candidates should be able to: Understand how a bank's customer-centric business model, discussed in the Business Models module, is put into practice to deliver its strategy through a customer management target operating model; Understand the importance of a customer-centric culture in delivering the operating model; Understand key roles in a customer-centric retail bank; Defining Customer Management "Customer Management is managing the relationship between an organisation, its people and its customers that is aligned with its strategy and business model. This relationship defines its ability to gain, grow, and keep valuable customers. An organisation achieves this through a deep understanding of customer needs, behaviours and value with the ability to engage specific customers or segments in a way that optimises their satisfaction and develops a relationship of trust and loyalty." Smarter Way Mentors Limited 2021 In the Business Models module, different business models have a different outcome for the organisation. If a bank selects a customer-centric business model, then it must align the way it manages the relationship between itself, its people, and customers with its chosen strategy and business model. It cannot operate customer-centric in its Marketing and Customer Management departments and operate product-centric or channel- centric elsewhere and expect the results from a customer-centric strategy. Channel- Characteristic Product-centric Customer-centric centric Design the best Offer the most Find solutions to customer Orientation product on the channels on the problems market market Push via Event & life-cycle trigger and a Push via direct Marketing channel hierarchy of products within marketing banners, segments  Balance between customisation Defined Defined by and complexity through a matrix of Processes product-by- channel actions and options based on the product capability customer Rigid team silos, Rigid team Organisational Cross-organisational teaming, low friction between silos, friction structure friction teams between teams Profit & market Cost & channel Metrics Mutual value measures share efficiency A product-centric or channel-centric strategy and business model requires a very different business alignment, and this module would be called 'Product Management' or 'Channel management' and have a quite different definition and content. The Business Models Module outlined some of the key characteristics of each of the strategy and business model. 4.3 Core Capabilities This section examines the core capabilities that a customer-centric retail bank will need to have to deliver a superior customer experience that improves satisfaction and builds trust and mutual value. It starts by using the definition of customer management capabilities at the start of this Module: "managing the relationship between an organisation, its people and its customers"; "ability to gain, grow and keep valuable customers"; "deep understanding of customer needs, behaviours and value"; "engage specific customers or segments"; "in a way that optimises their satisfaction and develops a relationship of trust and loyalty". Reality Check Although it was conducted a few years ago, the findings of this report are hard to ignore and in the ensuing years, they will not have improved a great deal. In 2014, the Chief Marketing Officer Council in the United States surveyed 500 global marketers and reported that: 73 percent said that customer-centricity was critical to the success of the business and to their own roles; 14 percent said that customer-centricity was a hallmark of their company and only 11 percent of respondents believed their customers would agree with that statement; How customer experiences are being delivered and developed may not be as positive, with only 10 percent of senior marketers highly satisfied with their organisations' ability to listen and respond to customer needs; 18 percent believed that their back-office technology platforms could deliver on marketing promises; 10 percent of brands were highly confident in their ability to use data to create insight and value; 20 percent of respondents had a comprehensive view of all the touch points that make up the customer experience; 28 percent were personalising customer experiences across both online and offline interactions. The volume, variety, and speed of change overwhelms many organisations. Many don't have the technology, systems, and processes to handle their data. As a result, they cannot segment and profile their customers effectively. Others lack the processes and operation capabilities to target customers with personalised communications and experiences. 4.3: Key Roles in a Customer-centric Bank Proposition managers Proposition managers are the owners of a portfolio of customers that the bank wants to grow, and their job is to develop and manage the bank's propositions so that they realise customer's dreams, solve their problems, or help them get a job done. It includes the products and services the customer needs and how these are delivered and managed by the customer. To achieve this, they collaborate with colleagues from other departments and teams, including product management, marketing, risk management, compliance, operations, and distribution teams, to define how the proposition is promoted and delivered to customers. One of their key behaviours is being able to empathise with their portfolio of customers, to understand the customers, their attitudes, behaviours, and needs. This is crucial, as a proposition manager who can't empathise with their portfolio may, through their confirmation biases, misinterpret the information, develop a proposition that customers don't want to buy and use, resulting in losing customers and their value. For example, a young proposition manager, who graduated from university a couple of years ago would be well suited to empathising with student or graduate customers, who want to get their first job, find somewhere to live, and perhaps travel. But they may not empathise with a portfolio of customers nearing retirement, to whom the bank wants to offer retirement services. Likewise, a proposition manager nearing retirement may be a bad choice for a student or graduate portfolio. We outline what a student proposition might look like in the next section 'Ability to get, grow and keep valuable customers', that shows how a proposition manager needs to 'think like a student' to help solve some of their 'problems'. Customer Insight Manager This role belongs to a member of the Proposition Manager's team who creates valuable customer insight and hypotheses by working with the market research team, other departments, and the technically skilled customer analytics team. Customer Analytics Team At a retail bank, the role of the customer analytics team is to create customer segmentation models using customer behaviour and value data, and to track all customer contact The retail bank may have several analytics teams that include customer management, risk, fraud, finance, and operations support. Sometimes, to save on costs and ration scarce resources, the bank may combine all analysts into one team, with business managers allocating resources to departments on a project basis. A customer analytics team must be dedicated to retail banking for it to develop an understanding of its customers' problems and dreams and use to their skills and ability to create valuable insights. This diagram summarises their role. The data, and their analysis skills and experience are discussed further in Level II. Flower, Graham and Fawcett, Phil, Managing Information in Financial Services (Financial World Publishing, 2000. Updated 2021.) 4.4 Manage the Relationship Between the Bank, Its People, and Its Customers A customer-centric strategy requires a bank to ensure that its employees understand that they must operate differently from a product or sales-oriented culture. In the latter that may focus on selling as many products as possible to anyone who will buy one, whereas they should now focus on delivering mutual value through customer satisfaction and loyalty. It's a change that must be implemented through every level of the organisation from the CEO and the executive management team, through their departments and functions, such as operations, credit and risk, compliance, and channels, to the front-line employees in branches, call centres and maintaining digital channels. The bank must build and reinforce a customer-centric culture through formal training, through coaching, and in the language used to communicate with employees and customers. It must think and act differently, from being 'inward looking' to an 'outward looking' approach in how they interact with their customers. This means that they look to customers for guidance and insight concerning how they operate, rather than think for them, or refuse to shift how they've always operated. A customer-centric bank will build what it offers customers around propositions, not low-cost channels, or individual products (or bundles of them) that generate the most income. Propositions solve customers' problems and are based upon thorough customer research, modelling, and testing with small groups of selected customers to prove their commercial value and desirability to customers. It can be a massive mistake to bundle existing products and services into a 'package' that doesn't achieve the fundamental aim of solving customers' problems. A proposition includes products, services, and other features, including how customers get the products and services and how they manage them. Building a customer-centric culture The challenges of building a customer-centric culture should not be underestimated. Companies have been trying to adopt customer-centricity for over 20 years. The most common barrier to customer-centricity in an organisation is the lack of a customer-centric culture. As we stated in the Business Models Module, most companies are product-centric or sales driven, or customer-centricity is only a priority for certain functions like Marketing. Treating customers fairly, but not equally Besides any regulatory measures, the bank must have a 'code of conduct', derived from customer research into how they want their bank to treat them. This will help to realign the relationship between the bank, its employees, and their customers. In response to past problems, many regulators mandate retail banks to treat their customers fairly and monitor whether the banks adhere to the rules. This means that the product or service terms and conditions, 'the small print', must be fair in how the product or service is delivered. They must be free from technical jargon and written in plain language so that the intended customer can understand them. However, customers generate different levels of value for the bank and, whilst they must be treated fairly, they do not have to be treated equally. More valuable customers who feel that the bank isn't recognising the value that they bring might seek better service from competitors. This is where research might uncover needs and problems from this group of customers that leads to a proposition that solves those problems. Empower employees to make decisions that meet a code of conduct A customer-centric bank must use its code of conduct to empower its customer-facing employees to show that it values the customer, treats them as an individual, and leaves them in control and that it respects and takes customer feedback and complaints seriously. This helps resolve queries, problems, and complaints quickly and fairly at the first point of contact, sometimes called 'first point resolution'. Even though the customer may not get the result they want, it shows to them that the bank takes the matter seriously and doesn't evade dealing with the issue or pass the problem around. Within guidelines, supported by training and coaching, employees will make on-the-spot refunds or ex- gratia payments as necessary without referral to management. Customer Care Unfortunately, sometimes things go wrong. Misunderstanding and mistakes happen. Products and services don't do what customers expect them to. A customer may complain if the product or service cannot meet their expectations. A customer-focused bank will want to deliver its products and services with reasonable care and skill. This means acting responsibly towards the customer and keeping accurate records of their finances. It will provide its services when it says it will and within a reasonable time, depending on the service – and at the agreed price. Many countries have implemented regulations that require banks to publish their complaints processes. Under these regulations, banks must tell customers how to complain, the process that they will follow to resolve the complaint, and how long it should take. The regulations require the bank to explain how the customer may refer their complaint to any regulator or ombudsman for adjudication. The regulator or ombudsman may require banks to report the number of complaints that they receive by type of complaint, how long (on average) complaints take to be resolved, and the number that are escalated for adjudication by customers. They will regularly publish these statistics by bank. This can help consumers make informed decisions about the service delivered by banks that they are considering. A customer-centric bank will view customer complaints positively as a source of feedback on their products, service and delivery and take action to make performance improvements. Sense of Urgency and Cut Down the Delay Consumers are driving changes to how all businesses respond to them, whether it's pizza delivery within 30 minutes, same day delivery of groceries, or next day delivery of online purchases. Much of this is because of the access that Internet-enabled smartphones gives to consumers to get what they want, when they want, and how they want in a way that barely existed five years ago. The service levels at many banks are typical of product-centric or customer-centric thinking and are often designed to meet the needs of the bank, not the needs of customers. This change applies to retail banks as it does to any retailer: Reply to enquiries immediately, within the same day where possible, and certainly within 48 hours. Advise customers of transactions as they happen, for example, as a debit card transaction is authorised, providing the customer with re-assurance that their account is safe and that transactions are taking place as scheduled. Provide access to account information and services, such as checking their balances and transactions, making, and receiving payments, managing their debit and credit cards, and reporting fraud. Ensure that customers never have to repeat or re-enter information twice (or more) to buy, use, or manage a product or service. Open new products or manage existing products or services from the device or channel of the customer's choice and, at their convenience, not how the bank wants to manage account opening or product maintenance. Allow different channels to continue the customer's journey and making it a straight-through- process and without loss of information or delay. A customer-centric bank must understand how, when customers must move channels unnecessarily, it causes friction and frustration and 'bad demand' for the bank. 'Bad demand' is an unnecessary additional workload caused by not completing an interaction efficiently and the bank must eradicate this through process re-engineering. 4.5 Get, Grow, and Keep Valuable Customers A well implemented customer-centric strategy should improve a bank's ability to attract new customers, grow their mutual value, and make it easier to keep valuable customers. It is achieved by building and implementing profitable propositions that customers want to buy and use and that improves customer satisfaction, trust, and loyalty. Organise around Customers Customer-centricity means the bank organises its business around customers, not products or channels. What a retail bank does for customers The six principal things that a retail bank does for its customers: Keep their money and data safe; Handle payments (incoming and outgoing); Keep track of what they receive and spend; Lend money; Pay interest on savings; Offer other products, such as insurance. Traditionally, banks offered a current account with a debit card, a savings account if the customer asked for one, an overdraft if requested, and access to all channels irrespective of the purpose or need the customer had. Customer Propositions Customer-centric banks normally offer a range of customer propositions to meet the needs of their customers: these propositions are designed to solve a problem or get a job done. The following is an example of a customer proposition for students who are about to go to university and will probably live away from home and be budgeting for the first time.  Typical general Proposition Problem solved or job done features Offers budgeting information to help customer better manage their money through secure Internet Designed for a banking and Mobile banking app. student at University. Provides a wide range of payment options to make Customer must be regular and one-off payments to settle bills, over 18 years old. subscriptions, and shopping. Bank account with Helps the customer shop online with confidence debit card and through mobile phone app-based authentication access to limited using biometrics. Access to help, information and credit facilities. advice through the bank's channels, some of which Student are 24/7. Access to savings and other products Reduces the amount of cash that they need to carry such as insurance. through a debit card that is accepted worldwide. Interest free overdrafts (subject to credit status) to Access to all help manage unexpected expenses. channels. Offer of discounted insurance for their possessions, Offers up-front or such as phone and computer, not covered by on-going incentives parent's policy, whilst living and studying at college. to joining the bank. Offers of food and goods purchase cash rewards or cash back. Smarter Way Mentors Limited 2021 The proposition helps solve a common problem that students face when they leave home for university, such as budgeting to make sure they manage their money and can handle unexpected expenses during the term. For instance, a student's possessions may no longer be covered by their parent's household insurance. Finally, because the market for student accounts is highly competitive, this proposition offers discount or cash-back offers with retailers and food delivery services that students use, to reward the student for joining the bank. We discuss how a retail bank develops customer propositions later in this section. 4.6 Have a Deep Understanding of Customer Needs, Behaviour, and Value In the previous module on Business Models, senior marketing managers rated their company's capability of 'Capturing a single view' of the customer at an average score of 2.8 out of 5. This reflects the fragmented data architecture on legacy systems that exists in many organisations. How a Bank Achieves a Deep Understanding of its Customers Single View Being able to capture a single view of their customer is fundamental to understanding them, through their demographic profile, their potential needs through their product holdings and how they use them, and their current and potential future value to the bank. Understand their Customers' Needs, Life-cycle Events, and Problems Customer needs are unfulfilled dreams, jobs to be done, problems yet to be solved, or future life-cycle events that haven't been realised. By systematically collecting what customers are planning or expecting to deal with in the future, along with some sense of a timeline, the bank can build up a picture of where and when they can help fulfil a dream, get a job done effectively, or solve a problem. Many customers are happy to share this information with their bank, provided the bank uses it responsibly and for mutual benefit, and demonstrates trust in their bank. The advantage to banks is that they construct more accurate predictions of the customer's future value, although they still must undertake the activity to realise the opportunity. We discuss this in Customer Value. Understand their Customers' Behaviour This is how a customer interacts with their bank and provides valuable information about how they view and use their bank account. In the past, how customers transacted with the bank was used in anti-money laundering checking and credit scoring. Understanding how the customer interacts and transacts with the bank can reveal patterns of behaviour that show attitudes to the bank. For example: Are they a 'customer' who gets their salary paid into their account, and then pay their mortgage or rent and utility bills? Or are they a 'user' who just uses the account for free services, such as overseas travel and foreign exchange, for which another bank normally charges? Do they browse products and services that they don't yet use, but not buy them? How do they react to different communications, for example, do they open emails? Do they respond positively to the marketing message that recommends that they find out more, or buy, the product (that marketers name a 'call to action')? Do they use some channels in preference to others, such as visiting branches to make enquiries about products, rather than making a phone call or using Internet banking? 4.7 Prospects and Customers Customers and prospective customers (prospects) are both valuable to the bank, but to different degrees. Customers already have a product, or products, and an ongoing relationship with the bank. Prospects will not have a product, but if they are considering buying one within the buying process, they will have a relationship with the bank. The bank will know considerably more about a customer than it does a prospect: a prospect will have very different values to the bank, but it does not make them less of a priority. To grow their business, banks need a constant stream of prospects to replace customers who have closed their products, died, or reduced how they use them to a level where they are unprofitable. Customer Value To determine the right course of action for customers and segments, the bank must understand the current and future value of its customers. There are several measures of customer value: historic value; current value; future value and lifetime value. These are discussed in more detail in Level II. 4.8 Introduction to Segmentation There are four main methods of segmenting customers available to organisations. As discussed earlier, because of the level of information available to banks through how they use their products and services, their transaction history and how they use their channels, most banks should be capable of undertaking the more sophisticated and insightful behavioural segmentation. Type Characteristics Using one or a combination of age, income, gender, family make-up or Demographic education. Psychographic Solely uses attitudes, aspirations, or other psychological criteria. Geographic Solely by region, state, city, or neighbourhood. Using behaviour exhibited towards your organisation, include the products and Behavioural content consumed, and interaction frequency. Engage Specific Customers or Segments In undertaking the above, the bank determines some segments that aren't currently valuable. It's not uncommon for senior executives and others to demand that the bank withdraws from or closes certain customer segments. However, that the segment may not be valuable now isn't an automatic reason to close or withdraw, but a challenge to find a way that turns these customers into valuable ones. Resources in a bank are finite, and senior executives must allocate resources to where value will be created. The bank's senior executives will determine where they will focus and invest in that segment, proposition, or channel. In deciding they will take into consideration the relative need to get new customers, grow existing customers and to keep customers from moving to a competitor, asking questions to develop what they need to do to direct resources to where value will be created. Then, by using techniques such as Market Management, Opportunity Management, Sales Management and Customer Management they realise the value. This is discussed in further detail in Customer management Level II. 4.9 Gathering Customer Dreams, Problems to Be Solved, and Jobs to Be Done A customer-centric bank achieves this competitive advantage through using customer research and all forms of feedback, integrated with data on how customers use the bank's products, services and channels to create valuable and actionable insight. That competitive advantage will be lost if the bank looks inward. The bank must guard against confirmation bias. This is where the bank's employees, including senior executives, rely upon their own interpretation of what customers need in a way that confirms or supports their prior beliefs or values. Ways to Gather Feedback Satisfaction surveys – these originated as paper-based surveys mailed to customers on a twelve-to-twenty-four-month cycle and have been replaced by online via an email to existing customers. Event-driven surveys – these originated as paper-based surveys mailed to customers after an interaction between the customer and the bank but have been replaced by online surveys conducted through an email to existing customers. Crowdsourcing through the Internet – because of their technology background, fintechs and neobanks have led the development of communities of users who provide beta testing of new app software, new ideas for functionality, and feedback on already released products and services. Online communities– fintechs and neobanks have often approached the problem of design from a different point of view, one based upon their technology background and experience, creating customer/user communities that tested ‘beta’ versions of the product and software, providing valuable feedback. Focus groups – these are business led, face-to-face sessions either on bank premises or off-site. They gather small groups of between ten and twenty customers or prospects who are invited based on the bank’s profile of them or their demographic characteristics. Customer complaints – feedback from customers when something goes wrong is sometimes overlooked as a valuable source of insight that helps understand bad demand and its causes. Insight “Customer insight is the understanding of people’s motivation that you can use to drive actionable change.” Wanderley, Carlos A Smarter Way to do Business (Amazon, 2019) It must be remembered that the bank doesn’t exist in isolation. There are dozens, sometimes hundreds, of banks trying to offer their products to consumers, with the same range of products and service that sometimes leads consumers to say, “all banks are the same!”. To succeed, the customer-centric bank must offer something that its competitors can’t or don’t want to do. They must offer a solution to a problem, help customers get a job done, or realise a dream that no other bank can do better (or be perceived as better by the consumer). Only by knowing their customers and target customers can the bank define what the bank should offer, how they should go about it, and what their employees should focus on. This will differentiate the bank from its competitors. The bank creates valuable customer insight by undertaking thorough research with customers and prospects through the above techniques, especially face-to-face focus groups, where bankers listen more than they speak. Employees listen to understand the participants’ dreams, problems and their attitudes towards money and banking, taking notes and gather the important points that customers make. At this point they don’t try and solve the customers’ problems or provide the solution. If they try to they will probably end up with the same proposition that they currently offer and won’t uncover new insight and find new, profitable solutions that their customers’ now want to buy and use. Insight to Hypothesesto New Propositions From all the sources of research mentioned earlier, and focus groups, proposition managers and their teams can identify similar themes from the customer research and internal behavioural data to create a deep understanding of the customers. They can then create tangible, profitable, and deliverable solutions, called Hypotheses, that may solve a group of customer’s problems, get a job done or satisfy a dream. The proposition manager can then test it against the bank’s business as usual activity to understand the difference that it will make. By testing various hypotheses against the bank’s existing proposition, and against each other, using sample groups of customers, the proposition manager will develop the optimal proposition for the market. We go into more detail in Customer Management Level II. Flower and Fawcett, Managing Information in Financial Services Share insight with all employees The bank should share relevant insight in an easily accessible format so that all employees, whether they are front-line or back-office, understand the bank's customers. This helps employees understand customers even though they do not deal with them directly and can improve internal and customer-facing processes that cause customer frustration and dissatisfaction. 4.10 Using Technology to Gain a Deep Understanding of Customers In this section, we briefly touch on four core components of a customer-centric bank, represented by this diagram. Flower and Fawcett, Managing Information in Financial Services A data repository is a store of customer data and transactions used by data analysts to help understand different customers' behaviour, value, segments, and target. Depending upon the maturity of the bank's technology, it can be a data warehouse, data pool, data lake or other sub-set of the bank's overall data. It may be operated in the bank's data centre or, increasingly, in 'the Cloud'. The bank's information technology team build and manage the data repository, ensuring that it is complete and accurate. We consider this topic further in Customer Management Level II and in the Operations Modules Level I and Level II. Customer Analytics Platform Customer analytics software can process customer transaction, interaction, and behavioural data from the bank's data repository that is used to help decide by using predictive analytics and segmentation to target customers with personalised, relevant, and timely offers. The software must help customer data analysts perform three main tasks: Identify target customers; Understand the customers' needs; Identify how the bank's products or services currently meet the customer's needs. Customer Relationship Management System A customer relationship management (CRM) system is at the core of delivering the bank's customer-centric experience to improve satisfaction, build trust and loyalty and create sustainable value. It is the foundation of customer-centric Customer Management. It is normally integrated with the bank's core systems which supply it with information so that it can deliver opportunities to the bank's omnichannel or multichannel banking platform. Banks can choose to buy a third-party CRM system from one of many vendors, build their own CRM, or customise a vendor system. Most CRM systems feature a 'single view' of the customer or prospect through a profile that is available to customer-facing and back-office employees, including: Profile – information about the customer, including their personal details, products held, channels used, marketing contact preferences, value scores, and credit scores; Future life-cycle events that the customer has shared, and when they plan to need them; In progress, cross-sell, and up-sell opportunities, including outbound campaigns recently communicated, and the status of sales that are in progress, using Next Best Actions (NBAs) to determine the next step;  Any complaints made recently, or in progress, showing who is dealing with it and its status. CRM systems can suffer from an adoption and usage problem because of organisations imposing them on their employees as a sales management tool, rather than as a tool that helps them be customer-centric. We discuss how to avoid this problem in Level II. Omnichannel Banking Platform Omnichannel Banking or its predecessor, Multichannel Banking, interacts with customers, allowing them to transact and receive offers from the bank. We consider Omnichannel Banking in the next section. 4.11 Engaging Specific Customers or Segments Deploying resources Most retail banks have hundreds of thousands, if not millions, of customers. How can it engage with all its customers in a meaningful, personalised, and relevant way? It can't. Often it doesn't have the resources, the skills and capabilities or the processes or technology. It must decide which groups or segments of customers or prospects to engage to gain, grow or keep. It does this by understanding its customers, as we have discussed in previous chapters. The bank will consider how it might develop a strategy for each of the segments it wants to gain, grow, or keep by improving their loyalty and the average return per customer. Needs, Life-cycle and Events Needs are customer jobs to be done, dreams to be satisfied, or problems to be solved. Lifecycle is understanding how customers travel though life: education, getting a job, being made redundant, starting a family, children leaving home, and retiring. It used to be linear, but modern life is far from straightforward. This topic is discussed in more detail in Customer Management Level II.  Events is information that customers have told you that will happen in their lives where you can help get a job done, satisfy a dream or solve a problem, and are specific individual life-cycle events, such as planning to retire. Improving Customer Satisfaction through Personalised and TimelyOffers There are two types of targeted campaigns that achieve the above aim. Outbound – includes traditional paper-based letters and brochures, email, SMS text message with a link to a product page on the bank's website or a call from a contact centre. Inbound – when the customer interacts with the bank through a channel, such as using a banking app, Internet banking, or visiting a branch to find out about a product. This can include generic product focused banner adverts and on-screen messages and personalised and relevant Next Best Actions (NBAs). They may follow-up outbound campaigns. Banks must Consider Several Factors A bank must consider whether the campaign is consistent with the customer's proposition, what products that they currently hold and the product hierarchy, what segment they are in, customer's contact and channel preferences, their value, the tone of voice to be used. These are discussed in more detail in Customer Management Level II. Integrated Contact Management To manage, analyse the result and report on outcome of the contact with the customer, the bank must be able to track every step of the interaction, closing the loop without loss of data. It must also learn from every interaction to improve the customer experience, its performance, and its products. It does this through a model such as the one below.  Flower and Fawcett, Managing Information in Financial Services 4.12 Optimise Customer Satisfaction and Develop a Relationship of Trust and Loyalty Trust and Loyalty As discussed in Business Models Level I, banks are suffering from a loss of trust that erodes customers' loyalty and opens them up to considering competitors' offers. It concluded that customer-centricity was a strong defence against loss of customers' trust, loyalty, besides being a convincing reason for prospects to buy products and services. Optimising customer satisfaction leads to improved trust and loyalty. How a Bank Optimises Satisfaction A bank can optimise satisfaction by understanding why and how customers buy, use, and manage their products and services and removing as much 'friction' as possible from the interaction. This starts with the bankunderstanding the jobs that customers need to do and the problems that they solve in doing so. Banks do this by optimising their regular interactions to remove friction from their customer's point of view and making sure that any interaction where the customer switches channel to complete a job, it happens seamlessly, adapting to the new journey option. Optimise Customer and Prospect Interactions Most banks, whatever their 'centricity', undertake customer journey mapping to design their new product sales, on-boarding and servicing processes to avoid bottlenecks and problems. However, product-centric, and channel-centric banks' 'inside out' approach can cause them to focus on the process from the bank point of view and not from solving the customer's problem or the job the customer is trying to do. Customer-centric banks take a more collaborative and wider 'outside in' approach that focuses on the problem that they are solving and the job to be done. To do this, banks must undertake customer journey mapping that understands what the customer needs to do. This approach strengthens the customer's experience, trust, and loyalty. Customers Demand a New Sense of Urgency and Responsiveness The Internet and ecommerce have created a new sense of urgency and responsiveness that is affecting how banks respond to their customers for services, such as obtaining product pricing quotes, responding to enquiries, or complaints. Banks Need to Automate Common High Priority Interactions Because customers increasingly want quick responses to their interactions, customer- centric banks automate through a combination of robust self-service solutions, with human oversight and interaction. Next Best Actions One solution for banks is to use Next Best Actions (NBAs) that are a range of responses that a bank predicts for an individual customer. This can be a new product, moving a product sale along to the next stage, or service actions that enhance the customer's experience. It can deploy them through Omnichannel banking. Omnichannel Banking "Omnichannel banking seamlessly integrates the bank's multiple channels to deliver an uninterrupted customer experience, whether the customer or prospect is buying, using, or managing the bank's products and services. Its focus is not only to conduct transactions accurately and efficiently but to interact with customers to gain valuable insights that build the relationship, improve trust and loyalty." © Smarter Way Mentors Limited 2021 Omnichannel banking is central to being customer-centric in today's competitive environment and is the next step in the evolution from a single channel to multiple interconnected channels. Evolution of channels © Smarter Way Mentors Limited 2021 Originally, banks and customers interacted through one channel, the customer's branch. Note that it wasn't just any branch in the bank's domestic network, it was the branch that opened and maintained their current account. Customers could perform simple transactions at other branches in the network, like cashing a cheque or paying in a credit. You could say that branches were 'product-centric' and because all revenue generating activity took place there, theywere the profit centre. There were no other channels such as telephone banking or contact centres (when the customer called the bank, they spoke to an employee in the branch), internet banking hadn't been invented. ATMs with basic functionality did nothing but dispense cash. This was mono-channel banking as everything happened through the customer's branch and the customer journey to buy products and service them was simple. As they developed new channels, such as telephone banking, Internet banking and mobile banking using an app, the bank moved towards being multichannel. Specialist salesforces and relationship managers were also introduced. This is the stage that most banks find themselves in. Revenue generating activity took place in multiple channels, resulting in multiple profit centres, where revenue is split between originating and contributing channels. The Difference Between Multichannel and OmnichannelBanking Multichannel Banking are channels that are not well integrated in their approach to interacting with customers. From a customer interaction point of view, Omnichannel Banking is highly integrated. In a truly omnichannel banking experience, customers can switch from one channel to another without fear of the bank losing track of their journey, and them having to start again (which was sometimes a multichannel outcome). Providing the link between the channels that a customer might use when they buy or use a product is the thing that omnichannel strategy must achieve. It does this by thinking of customer journeys and how its channels should work from the customer's point of view – an 'outside in' customer-centric approach. The Demand for Omnichannel Banking Demand for omnichannel banking is being caused by customers taking it for granted that they can access their bank account from any device, anywhere, anytime. They are blurring the traditionally defined channels of banks, but the result is often a disappointing and fragmented customer experience. Under pressure to not be left out of the current wave of digital proliferation, many banks have rushed to build and implement apps for many devices and channels. The result is a multichannel approach that has the unintended consequence of more channel silos and a severely fragmented customer experience. Conclusion Many of the process and technology components to be customer-centric and operate in the way described in the Module are often already in place and require configuration to focus on the customer. This is no simple thing, but it can be achieved through a step- by-step approach. By far the hardest challenge is to change the bank's culture from a deeply entrenched product-centric, sales-focused organisation to a customer-centric, value-focused one. In Customer Management Level II, we will examine how to use the techniques that we've outlined in this Module and discuss the measures and metrics to deploy resources effectively.