The Human Dimension

By Thomas P. Johnson Jr.

Retail bankers made great technological and analytical strides in the '90s, but need to put similar effort into fulfilling customer needs.

One of the hallmarks of banking in the '90s was a march towards a new organizational model built around customers rather than operations and products. The plan was that banks would become skilled marketers of financial services, as opposed to utility-like transactors. To reach that lofty goal, banks committed vast resources to information technology while striving to transform branches into true sales centers.

As this edition of Banking Strategies makes clear, however, retail bankers have only partially achieved their goals. The compilation of unprecedented levels of customer information did help improve bank marketing, principally in customer segmentation strategies. Unfortunately, these strategies failed to boost overall industry revenue growth. Meanwhile, the drive to revitalize branches seems stalled.

What went wrong? As author Bill Stoneman points out in this issue's cover story, profitability analysis did provoke the industry to action. The famous "profitability skew" revealed that a handful of customers provide most retail profits, meaning that most client relationships put a drag on earnings. The problem has been designing remedies to take advantage of that insight.

The usual approach is to coddle the most profitable customers, while encouraging the unprofitable ones to use cheaper delivery channels or even leave the institution. A few banks have visibly capitalized on these policies, but the effect on overall industry profitability remains murky. Contributing writers Robert Giltner and Richard Ciolli argue that profitability segmentation fails to provide guidance for dealing with customers as individuals. Banks would be better served, they write, by creatively improving their own processes for meeting customers' evolving needs.

Some re-thinking may likewise be required on the issue of building a branch sales culture. Joseph Plumeri 2d offers one such alternative. Plumeri, who runs Citigroup's U.S. branch system, says banks need to adopt a consultative, advice-centered sales model, one where bankers empathetically connect with customers. That will require branch employees to view their jobs in an entirely new light -- no longer just passively responding to inquiries or reflexively cross-selling, but instead blending in-depth financial diagnostics and consultative expertise to fulfill client requirements.

This speaks to the continuing need of bankers to honor the human dimension of their business even as they improve their technology. While most institutions promote themselves as "relationship" bankers, few have developed an organizational mindset that transforms that slogan into a reality. That's where banking needs to go in the next decade.

Copyright © 2003 by Banking Strategies, published by BAI.

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