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Who will be the Winners and Losers in Customer Engagement– the Banks’ Perspective

As an industry the big banks face common problems when it comes to engaging with their customers. Addressing these challenges and being the winners in terms of customer engagement, will play a big part in determining which banks best weather the storms that continue to plague the banking world.

The pressure on banks remains relentless. The income challenges brought about by historically low interest rates, increasing operating costs, the need for greater capital adequacy, increased regulatory scrutiny and bank bashing now having become a national pastime.

Customer Engagement – The Virtuous Circle

So what can the banks do to improve their lot and what lessons can be learned by others from the approaches that are being adopted? “Putting the Customer First” is rhetoric that’s often used, but what does that mean. In simple terms it means creating what we call the ‘Virtuous Circle’ which ticks all the boxes from a customer, commercial, reputational and shareholder value perspective. Very simply put – happy customers stay longer and do more business with you. That in turn means you become more profitable as income increases, in turn keeping your shareholders happy. Your reputation also improves as a consequence. So what gets in the way?

The Five Losers – What Gets in The Way of Banks Truly Engaging With Customers?

1. Lack of Differentiation

Market research amongst holders of Current Accounts consistently reveals that they don’t consider changing provider because they think it won’t be any different somewhere else. Link that to the perceived ‘hassle factor’ of changing bank accounts and there often isn’t much impetus to switch. So whilst in the resulting short term low churn levels might be the bank’s friend, the real opportunity is to clearly differentiate the proposition and the service you provide to give clear competitive advantage – engaging customers who become not only satisfied with you but advocates for you.

Approach – So how do you achieve differentiation? – by really understanding the customer journey and what elements of the experience is key. We’ve all know that in stress terms taking out a moving home and taking out a mortgage is right up there with bereavement and redundancy, so think of the opportunity to get it right for those customers, at a time when they are feeling most stressed and anxious and what that might mean in terms of the future relationship and opportunities

2. Disenfranchised Customers & Colleagues

The consequence of the lack of differentiation is disenfranchised customers and colleagues. Let’s face it, for most people financial services is boring and a necessary evil so we’re not looking at brand advocacy through the same lens as you would Apple or Virgin. Your relationship with your bank is 24/7, 365 days a year. Getting it right relentlessly, being there when they need you, being simple and straightforward to deal with, for them to be able to trust you, to be pleasantly surprised regularly and blown away every once in a while is what customers want. Colleagues too are energised and passionate about what they do when they feel empowered to help customers and have the back office support and systems to do just that. Otherwise they become disenfranchised too. So, engaged colleagues dealing with engaged customers. That’s real chemistry.

Approach – Understanding customer needs is an overused phrase, but banks are sitting on masses of customer data that really enable them to do just that. Using data to not only model what product the customer is most likely to buy next, but to add real value to the relationship is crucial. The purchase of a car is not only an opportunity to sell motor insurance, it’s also a great time to remind customers of the value of the breakdown protection they get from having a Value Add Current Account.

3. Acquisition Focus 

So why have banks traditionally focused on acquiring new customers as opposed to looking after their existing customers. With each of the big banks having double digit market shares in each of their key markets it makes sense that there are two ways to grow- acquire more and engage better with existing customers have so you get a bigger share of wallet and they stay longer. Focusing on acquisition is easier. It’s easier to measure, it’s easier to incentivise, it’s easier to put process and structure around and it’s easy to run sales teams. The prize, not just in banks but any business, is getting the balance between acquisition, growing relationships and retention right. At its core, customers that are getting a great experience will buy more from you. It’s the Virtuous Circle again.

Approach – Measuring and rewarding the benefits of increasing the emphasis on customer engagement and retention activities will never be an exact a science as measuring sales. Proofs of concept localised trials and test and learns will play a part, but the real benefits come from industrialising the successful approaches.

4. Complexity 

Banks are complex things to run. Over the years they have become increasingly complex and it’s the end customer experience that has often become victim to the complexity. To remain successful and to grow their businesses banks, as with every other type of organisation, really have to start with what it feels like to be a customer. What putting the customer first really means is putting yourself in their shoes, looking at everything you do from their perspective as the absolute guiding principle.

Approach – The likelihood is that life will become ever more complex for the banks, but that doesn’t mean that the priorities from a customer point of view should change. We all have many different relationships with a whole range of providers be it Apple, Amazon, McDonalds or John Lewis and we all subconsciously relate the experience we have with other organisations (e.g. our bank) with those. Complexity doesn’t mean losing that customer focus; it just means that the importance of keeping ever more clearly focused is still greater.

5. Short Term Objectives

Another reality that sometimes gets in the way of truly focusing on the customer is the short term nature of many of the things that go on in large banks. Hitting the weekly, monthly, quarterly or annual income target (the knee-jerk response to which is usually to sell more because it’s instant and the results easily measured), the pressure on resource to manage projects, the cost of delivering change programmes, being able to clearly demonstrate a quick return on investments, regulatory change and necessary bureaucracy. Everything delivered to plan and on budget. Focusing on the customer can easily get lost in the mix.

Approach – Work out how much of your income and your profit contribution comes from your existing customers and how much comes from new customers. Then work out how much of your operational costs come from acquiring new customers. Next look at how many new customers you are bringing in and how many customers you are losing. That will begin to show you strategically where the opportunities – especially if you are an established business with a significant share of the market. It will also help you to start to focus more on the medium to long term and how engaging better with existing customers is just as important as bringing in new customers as a means of sustaining and growing your business.

Turning Losers into Winners

In the structured environment what you need then is a structure – you need the idea, but you also need a plan. You need Board level commitment, resource and budget allocation, you need KPIs and targets, milestones, key deliverables, roles and responsibilities, you need management information, reward structures and so on. As with any organisation, banks don’t run on rhetoric. They run on business plans. Of course you need the vision, but until you have the plan, the structure and have quantified the benefits to your business you will struggle.

Shifting Cultures – Actions Speak Louder Than Words!

Culture is always an odd one. We believe that you change culture by the way in which you are structured, the way you operate, the way you target and reward colleagues and how you communicate with customers and colleagues alike. You need to engineer a cultural shift. If they can’t already, empowering and enabling cashiers to fully resolve a customer complaint would be a key component in delivering cultural change as it directly (and positively) impacts both customer and colleague perception of what the organisation stands for.

Customer Engagement – A Strategic Imperative

With no sign of interest rate changes to help manage margins, little sign of economic recovery, new regulatory challenges on the horizon and little favourable shift in the perception of banks, tough times continue for the banks. As we move forward, it is those banks that start to really get to grips with how they engage with their customers that will begin to pull away from the competition – driving deeper and longer relationships on the foundation of providing customers with great experience.

There will be winners and losers. The winners will be those who are passionate about customer experience and customer engagement and who are aligned to deliver it. They will be those that can really deliver industrialised customer engagement processes with the clear and clinical understanding of how it will benefit the business commercially, from a customer perspective, reputationally and from the point of view of having better engaged colleagues.

Improving customer Engagement is not just an aspiration any longer, it’s a strategic imperative for banks.