State of Alert

By Steve Klinkerman

Keen sensitivity to customer information has become a competitive requisite. Are you listening?

Is your company customer-driven? If the enterprise does not support its decision-making processes with a full suite of customer feedback mechanisms, the answer of necessity must be no. The danger of not connecting with clients before making important decisions about them seems readily apparent, yet many executives still get snared in this trap.

That's a problem for the financial service industry at large, but it also spells opportunity for the players who can master customer information. It stands to reason that between two equally capable institutions, the one most keenly sensitive to the customer will have the best shot at winning the business. Conversely, the competitor that is flying comparatively blind is at the greatest risk of making expensive mistakes.

A recent study by Bank Administration Institute and Cambridge Group shows how customer information can make all the difference in handling even the most basic of products, the lowly checking account. Institutions are worried about depositor defection, for example, but the study shows that only certain customer segments are highly prone to leaving while others actually pose a growth opportunity. The institutions most adept at identifying these segments and their hot buttons will have the best chances of wringing payoffs from their prospecting and retention campaigns.

As for cross-selling: the checking account is a strong bridge to other products and therefore the full product suite should be brought to the depositor's attention, right? Well, the study shows that basic banking products — credit cards, other loans, certificates of deposit and money market accounts — do indeed possess cross-sell appeal. But companies trying to cross-sell life insurance, brokerage accounts or annuities within the context of a depositor relationship are probably barking up the wrong tree.

Then there's service. Is great customer care a universal formula for attracting and retaining coveted core deposits? It's an appealing sentiment until you realize that there's no such thing as a universal formula. Working-class families appreciate value-added advice and support from a nationally-known and respected company; nest-egg builders look for low minimum balances and high rates; and sophisticated clients place a premium on extensive automated teller machine networks, convenient branch hours and 24/7 access. Even if a provider is committed to supplying all of these attributes, it had better understand which ones appeal to which segments.

Fred Wiersema, the former Harvard University professor who wrote The Discipline of Market Leaders, said in a past Banking Strategies interview that a fear of a loss of control is one reason that executives don't work harder to understand customers. "Suddenly you see that the customer is in the driver's seat, and it's a threatening feeling," he said.

Redemption, however, does not lie with a data deluge. Different types of decisions require different types of information, and part of the art is learning where to look and the right questions to ask. A further challenge is learning how to turn information into action by weaving customer insights into all of the corporation's decision frameworks and response mechanisms.

Mastering customer information is no easy task, obviously, but it's an important key to mastering one's own corporate destiny. "The moment of interaction can be the moment of enlightenment about how to align the organization's strengths with customer needs," said Wiersema. "The more you work with customers and incorporate their feedback into your approach, the more comfortable you will become and the better you will perform."

Mr. Klinkerman is editor-in-chief of Banking Strategies.

Copyright © 2003 by Banking Strategies, published by BAI.

back to top