CRM is one of the primary initiatives in any industry and more so in financial industry sector, where competitive pressures from both financial and non-financial services are fueling the movement toward CRM as the companies are systematically raiding a bank’s territory to pick-off the most profitable customers. Thus, one has to begin with a financial institution’s strategic goals, develop a consistent technology platform that is scalable and support across delivery channels, train people at all levels and incorporate a customer-centric approach to every customer interaction. This article gives an overall picture of CRM with reference to financial service industry.
Customer relationship management (CRM) is one of the primary strategic initiatives in industry today, regardless of whether the company serves retail or wholesale customers, whether it provides services or manufactured goods. In the financial industry, the movement towards CRM (also known as ERM for enterprise relationship management ) is being fueled by competitive pressures from both financial and non-financial services companies that are systematically raiding a bank’s territory to pick off most valuable customers. Although CRM is not a technology, modern high-tech applications, from relational databases, to data mining, to computer telephony integration (CTI), to Internet delivery channels, are providing the means to implement customer relationship strategies today.
Estimates on the size of the CRM market vary, possibly because of the difficulty in defining CRM. International Data Group predicts the CRM market will grow from $1.9bn in1998 to $11 bn by 2003. AMR Research says the CRM market will grow from $2.3 bn in sales in 1998 to $ 16.8 bn in 2003.
8.1 Defining CRM
One of the greatest problems with CRM is what it means. “The whole CRM concept means different people, depending on what they want to do,” says Jimmy Sawyers, consultant, Reynolds, Bone & Griesbeck, Memphis, TN.
• Financial services that are transaction based, such as credit card companies or bill payment providers, want to manage the customer relationship to drive up transaction volumes and squeeze out expenses from individual transactions. One customer generally has one account and it doesn’t matter if others within the same household have accounts. The goal is to provide incentives that get the customer to use the service more. Transactions become commodities. The customer responds to price incentives and loyalty programs. There is almost no opportunity to cross-sell to the individual customer.
• Consultative financial services, such as investment advisors and financial planners, use CRM to deepen the trust the customer has in the service provider in order to increase the fees for services. These companies earn fees regardless of the number of transactions the customer makes. They may be able to increase their fees base by cross-selling additional financial services to individuals, or obtaining additional relationships from the same household.
• Retail oriented financial institution defines CRM as a combination of the two extremes- managing the entire customer relationship in order to reduce costs and increase the depth of the relationship with the customer. Generally, reducing costs means getting the customer to use less expensive delivery channels. Increasing the customer relationship means either obtaining a larger “share of wallet,” or increasing the number of fee-based services the customer uses, or both.
8.2 The Evolution of CRM & The Challenges of Personalized E-Support
Historically, customer relationship management has been the specialty of community banks. Bank management came from the community. Bankers knew their customers, their families, and their businesses. Lending decisions were based as much on good payment histories as on good standing in the community. Customers gave all their business to one bank, appreciating the good services they receive as a reward for their loyalty.
As banks automated back-office functions with mainframes, and the number of products and services a bank offered grew, banks found it increasingly necessary to replace branch- based filing cards with a central information file (CIF). In early 1970s, CIFs in even the largest banks were centrally located file cards. But by the mid-to-late 1970s, these card- based systems gave way to mainframe-based, hierarchical database systems.
8.3 Customer Support – A historical perspective
The Customer is King. This mantra, although used for a long time, has not been put into
practice until recently. Forget the ideology of royal treatment; customers were not even treated with dignity by most organizations. As recently as the 1970s and 80s, the concept of customer support meant that organizations were doing a favor by answering a few questions for the customer on the phone – after putting them on hold for an hour! Standing in line to buy something was common and expected. Remember when the customers had to go to the airports to buy tickets only because the airlines kept them there? Organizations simply lost touch with the realization – that they existed because of these customers.
The 1990s brought two new concepts that challenged the prevailing business landscape: Deregulation and the Internet. These forces brought down the barriers of entry, resulting in an environment of intense competition. Stores faced competition from on-line start-ups. Traditional bricks-and-mortar banks fought for customers with online or virtual banks. Airline tickets were increasingly purchased from the convenience of your home. The explosion in
information allowed consumers to compare features, and prices across multiple providers. Products became commodities and prices could not be lowered further to ensure survival.
Customer service became the only major differentiator in many cases. Customers received what they have always deserved – respect. The customer was now truly the king.
Business customers, although always treated with more respect than individual consumers, were more or less ignored in the early stages of the Internet boom. The emphasis focused on expanding the consumer base regardless of positive cash flow, revenues, and margins.
The demise of many dot-coms brought an epiphany. Companies realized that they
needed to focus on their enterprise customers. The advent of e-CRM applications was the first big step toward providing better support to the strategic business customers. Although these solutions provided automated self-service to customers, they still treated all customers the same.
Furthermore, the focus of these applications is more on improving call-center productivity.
Clearly, these applications add value and help many organizations execute their CRM initiatives. However, they are not effective in meeting the needs of an organization’s strategic enterprise customers. Each enterprise customer has its own needs and craves personalized support.
8.4 Evolution of Customer Relationship Management
The genesis of CRM (Customer Relationship Management) lies in Sales Force
Automation (SFA) tools. Companies like Siebel and Vantive (now part of PeopleSoft) took the early lead by introducing tools to help the sales personnel become more efficient in tracking their customers. There were also a few problem-tracking tools for help desk such as Remedy. As companies focused more on customer relationships, additional applications emerged in areas of customer support, field support, and marketing automation. Most CRM companies today are trying to address these four areas usually by partnering with other companies. Most of the ERP players are also expanding their solutions to include CRM.
There are a number of niche players focused only on certain pieces of CRM such as e-mail management, sales force automation, technical support, marketing campaigns, among others. “CRM is a business strategy designed to optimize profitability, revenue, and customer satisfaction” – Gartner Group
Although there are quite a few vendors providing CRM related products and services,
there is still a lot of confusion around the concept of CRM. CRM is not just an application or a technology that can be thrown at the customer satisfaction problem to make it go away. CRM, essentially, is a strategy that involves applications, processes, policies, business context, and people, to enable companies to manage and increase profitable relationships with their customers. An enterprise’s strategic customers expect top-notch treatment. They want the vendor to understand their needs. They want companies to build a strong relationship with them - on a 1-to- 1 basis.
8.5 Current CRM and E-support Environment
There are currently over 200 CRM software vendors and the number continues to grow.
Although, there are various types of applications included in CRM suites, as described earlier, the core application within the CRM landscape that truly builds customer relationships is the customer service application. Other pieces, though useful, are focused on helping the vendor rather than the customer.
Many of these applications were initially focused on providing an environment to improve the productivity of call-centers. In addition, some of these applications integrated message queuing functionality to provide a common environment for all channels. So, whether
the customer was trying to reach the call-center by making a call, via e-mail, by fax, or through the Web site, their query is prioritized and channeled through the same mechanism.
Most customer service applications now provide Web-based self-service features for
companies to offer their customers. Customers can look up their basic information like billing, order status, etcetera by logging in to the vendor’s Web site. While this solution works for a B2C model, for enterprise customers with hundreds of users and hundreds of products to support, this simply doesn’t work. Enterprise customers demand personalized support in order to access their information quickly and easily. In the era of information-glut, they want specific and relevant information.
Companies are trying to manage relationships with their customers, partners, and suppliers in a personalized and automated manner. True personalization is not easy as each
customer has its own needs and requirements. The issue is further complicated by the fact that these customers are in different vertical industries and also geographically dispersed making their requirements even more unique.
8.6 The challenges of personalized Enterprise E-Support
While certain aspects of personalization are relatively easy – such as allowing customers
to create their own preferences on the Web site – the process of providing only customer-specific information, especially to enterprise customers is challenging. These challenges include:
• Relevant information: One major issue that most organizations face is finding information
pertaining to each customer. Most often, this information is buried in disparate databases and extraction of relevant information at a customer level is a Herculean task.
• Information Updates: As the information is constantly evolving, continuous updating for
basis resulting in delayed and inaccurate information and high overhead costs of updating the information.
• Publishing of information: Since the information resides in various diversified
functions within an enterprise, publishing of information is a major problem. Traditionally,
publishing was restricted to certain IT professionals and business users who typically forward their documents to these IT groups for publishing on the Web. This approach is not only bureaucratic, and expensive but also excludes a wealth of tacit and explicit knowledge that never gets published due to lack of tools.
• Personalized Applications: Some vendors offer personalized portals based on custom profiles
created by users. Although these models work for the consumer level user, they do
not provide value for enterprise customers. It puts the burden on users to define in what information is more relevant versus not. Business customers need an autonomous environment can all their users interface with the vendor enterprise and get the relevant information quickly
• Communication: A relationship is based on two-way communication. Most esupport
and relationship portal solutions are designed for enterprises to communicate to the user.
A critical challenge is to enable a process where business customers are able to truly interact with the vendors, beyond the usual e-mail and phone options.
• Security: Security continues to be a major issue for organizations especially for -based
support. User authentication and management can be a nightmare for vendors trying to manage thousands of users coming from diverse locations.
• Scalability: When hundreds and thousands of users try to get to the same information in a
central database, scalability is a big issue. Response times get slower and systems can breakdown. Companies are trying to solve the scalability issue by throwing more and more
powerful hardware at it.
• Deployment: Deploying a CRM solution is a tough and lengthy process. Deploying a Web-
based support system is even tougher. Furthermore, deployment in a personalized fashion focused just on enterprises, that can be a rat’s nest if not implemented carefully.
8.7 Overview – More than just E-Support
As competition intensifies, organizations need to increase their focus on enterprise customer relationships. An urgent need exists for solutions that enable enterprises to manage
relationships with their key customers on a personalized basis. Most of the current solutions fall short in providing a truly scalable model, where customers receive an autonomous and
personalized environment for their support needs over the Web.
Each customer gets their own personalized Weblet, with real-time information that pertains only to them. Customers are able to get specific and relevant information -quickly and easily - to resolve any problems or issues without going through numerous steps or phoning the call-center. Enterprises cut their costs by drastically reducing the number of calls into the call-center. Since these Weblets allow bi-directional communication, customers can give instant feedback to the enterprise. The solution is not just about providing support on the Web. It’s about managing
The following diagram shows how solution integrates disparate databases within the enterprise and provides targeted Web-based support to the business customers:
patent-pending mediation technology provides a unique, innovative, and intuitive architecture that automates an enterprise’s collaborative ecosystem comprising of
customers, partners, and suppliers. The solution enables companies to interface with multiple customers through a mediator, allowing them to deal with enterprise customers on a one-to-one basis, without creating separate processes. Organizations can achieve a return on investment of 20X of their up front licensing and implementation costs. The solution not only provides a major competitive differentiation, it also enhances an organization’s shareholder value.