CRM Rehab

By Kenneth Cline

Salvaging customer relationship management programs begins with setting modest goals and measuring results.

Few topics are likely to elicit as much consternation and frustration from bankers as CRM, or customer relationship management. By some estimates, institutions have spent hundreds of millions of dollars since the mid-'90s on technology that was supposed to help them improve sales and service with detailed customer information — to little practical effect.

In retrospect, bankers ruefully admit they became so enamored of the potential for a technological quick fix that they forgot what CRM was really about: organizational change and guiding employees to implement a new and more sophisticated approach to the customer. Behind the scenes, institutions encountered unexpected difficulty in integrating customer data properly.

There's lots of blame to go around, but the essential question remains: Can all the investment banks have made in CRM be put to some ultimate good use?

Some experts say the answer is yes — if bankers scale down their projects and expectations and measure results more precisely. "The key is to approach CRM in a methodical way, to take it in bite-size pieces and really pinpoint the paybacks," says Craig J. Kelly, executive vice president/marketing, with SunTrust Banks Inc. in Atlanta. "A lot of people jumped on the bandwagon before they understood where the parade was headed and what it was going to cost."

Kelly was part of a panel of experts Banking Strategies magazine assembled recently to explore the CRM puzzle. The other participants were Kathleen Khirallah, senior research analyst with TowerGroup Inc., Needham, Mass.; Robert Kottler, executive vice president, retail, with New Orleans-based Hibernia Corp.; and Seamus P. McMahon, president and chief executive officer, TD Bank USA in New York City. We spoke with the four during BAI's Retail Delivery conference last November in Atlanta.

Banking Strategies: What is the state of CRM as it's now practiced in the banking industry?

Kelly: One of the difficulties of answering that question is that CRM seems to mean so many different things to different people. I'm not sure there's even a common definition today.

In any case, I'd be hard pressed to name more than a half dozen banks that can be held up as poster children for mastering this. A lot of institutions got burned and are still trying to figure it out. At SunTrust, we're quite frankly in that situation.

Khirallah: Even the vendors are turning away from it. Two or three years ago, if someone had, say, an automated teller machine that dispensed postage stamps, they called themselves a "CRM vendor" to burnish the product. Now it seems everyone has almost completely walked away from that acronym. Vendors want to talk about being "customer-friendly," but not about CRM.

McMahon: One problem with CRM is it tried to bridge two different concepts. There's managing relationships at one end of the spectrum, which is what private bankers and good accountants do for you. And then there's statistical analysis and pattern recognition at the other end. The two are qualitatively distinct.

If CRM had been presented as a bunch of tools that might help you with pattern recognition, all of us would have said, "That's one more thing I should do." But, in retrospect, it was ridiculous to sell this as new way to win the hearts and souls of customers.

Kottler: In a number of cases, we acquired the technology before we designed the processes. If we had designed the processes first and then designed the technology to support it, people would have been able to manage it better.

At Hibernia, we rolled out a workstation with a lot of sales tools. It had profiling screens so our bankers could ask our customers questions that would lead to sales. The trouble was, that technology was installed before we taught profiling. And the incentive plan wasn't yet aligned to support sales and cross-sales.

Today, the workstation is paying off. But it took several years for the sales culture to catch up with the technology.

Banking Strategies: So CRM was oversold as an all-encompassing technical solution?

Kelly: I'd have to agree with that. We really lost sight of change management and its potentially vast implications. Instead, we were sold the idea that you simply flipped a switch one day and all your problems were solved. I haven't found anything that does that yet.

The people side of CRM was lost, which is ironic since the whole point of CRM is to manage relationships. In theory, CRM was designed to make things better for the customer, but in practice, it was more about the provider's views and preferences.

Banks tend to play "follow the leader" at times. A lot of people jumped on the bandwagon without even understanding where the parade was headed and what it was going to cost. Now they realize they need to have clear objectives and metrics.

McMahon: It's very hard to roll out something profound unless there's something in it for the customers. We never explained, as an industry or as individual practitioners, why the customers should be excited about this.

Khirallah: Or even why employees should be excited about it. That strikes me as an even greater sin of omission. There's a tendency in the banking industry to hire people with certain skill sets and at certain wage levels that are perhaps incompatible with providing financial advice to customers and building relationships.

CRM, for all its sins, was really a technology play of the big banks to better understand their millions of customers. Unfortunately, while they bought the technology, they didn't worry about people or process.

It's interesting, therefore, to look at the smaller institutions that are able to generate organic growth without the CRM technology investments. They typically have a strong community and customer focus.

McMahon: When you don't believe in your ability to lead your people through change, it's tempting to find a technology solution and hope it works. This probably betrayed a lack of self confidence at some of the big banks.

Kelly: A lot of people started pulling back from CRM when the CEOs started asking the right questions.

McMahon: A "chagrin factor" has been prevalent in the industry, and it probably hurt some careers. But we may also have overdone the cynicism. Now we're hitting practical singles and occasional doubles with CRM. If you present your boss with a half million-dollar investment and you can really show how you're going to use it and measure the results, it's a legitimate topic again. We're probably through the worst of it.

Khirallah: "Pragmatic" is the best word to describe what's happening now.

Banking Strategies: So the CRM concept is salvageable?

Kelly: Acquiring better information about customers in order to serve them better is paramount in this industry. After all, our customers are already dealing with companies in other industries that have improved their products and services with this kind of information. They know what a great customer experience is like. And they expect our industry to start delivering the same things.

The key is to do it in a methodical way, to take it in bite-size pieces and really understand where the paybacks are. As Seamus says, we need to hit some singles; we don't need everybody trying to hit home runs.

Kottler: As our employees interact more with customers, they'll start asking for better information tools. That will work better than a top-down approach.

McMahon: Some progress has been made, for example in orchestrating handoffs between branches and the call center. It doesn't always work perfectly, but it works better today than it did four or five years ago because of CRM. We do have better databases.

But customer expectations have ratcheted up at the same time. And we haven't talked enough about those expectations. When you sign up for a frequent-flyer program, for example, you expect to get something back for providing the company with information about yourself. If customers don't get something back, they'll see the process as invasive and manipulative.

Kottler: One problem is that banks don't do a very good job of listening to customers. We have over 30 places in our company where we collect customer feedback, but the information is siloed. We don't collect it systematically and we don't share it in real time.

Khirallah: Customer expectations are complex; they are never static, as I know from my own patterns. Some days, I want to move through a transaction as fast as possible. Another day, I want someone who can answer a question in an intelligent manner and take me through a process. Do banks actually understand what the customer wants at each interaction?

Banking Strategies: So how do bankers make this work for customers?

Kelly: I don't think there is one single answer or silver bullet. There's a whole list of things we need to do better. But you need to establish clear objectives up front and make sure there are clear benefits for everybody involved.

It's about execution, making your products work as advertised and putting the customer in the right product. We're an industry that has forgotten, in many cases, the importance of paying attention to details.

Banking Strategies: Is more training the key to this?

Kottler: I don't know if it's more training. It's slowing down and moving at a pace our people can digest.

Khirallah: Besides slow down, one of the things banks need to do is actually come up with a definition of what they're trying to accomplish. Some institutions say CRM is all about sales; some say it has to be about service. If you don't have a definition that everyone rallies around, the term CRM will be hijacked again and people will say it means delivering postage stamps out of an ATM.

You also have to define the intended results. How do you know when you can declare victory? Institutions need to sit down and do the hard work of deciding which metrics to use. If, for example, you say, "We will move the cross-sell ratio x amount and increase customer profitability by y amount," then you will have a sense of when you can declare victory.

McMahon: Even those goals may be too high. We think the goals should be more modest, like, "How many people did we profile today? How many times did we put the right offer in front of the right people?"

Those sound like very small victories. But they're the only ones I think you can measure accurately. Cross-sell ratios can go up or down for lots of reasons.

Banking Strategies: How do the rest of you measure CRM success?

Kottler: In the retail and small business world, we're beginning to measure the number of profiles, cross-sales, and retention rates. So we're beginning to measure very specific things. We're also examining how we can tie those metrics to revenue gains over time.

Kelly: At SunTrust, our emphasis is going to be on making sure CRM is focused on the customer experience. So we measure things like, "Is it easier for customers to get the information they want? What kind of satisfaction levels are we seeing on customer surveys?" Measuring success has to do with whether the customer experience is improving.

We don't care if the customer relates that improvement to CRM. In fact, we're not even talking to our own employees much about CRM. We talk to them about improving their relationship with customers and the tools that help them do that.

McMahon: We're focused on singles at TD Bank. You only have so many hours in the day and dollars in the budget. It's very hard to know what worked and what didn't at the end of a quarter if you set your goals way out in the distance. So we're asking employees, "How many times did you call a customer and what was their reaction?"

Banking Strategies: So you've pulled back from the grand CRM vision?

McMahon: Our institution has very little appetite for an overarching discussion of a tool. We talk a lot about customer satisfaction. And we measure it obsessively. And all our bonuses are tied to it. But we don't talk about tools in elitist terms.

Banking Strategies: What kind of metrics does the industry at large use?

Khirallah: There really aren't any metrics. There aren't many institutions that can coherently explain their CRM strategy and what they're doing to validate it. They can talk about measuring customer satisfaction, but it's the same customer satisfaction metrics they were doing before CRM. I think the whole area of metrics is ripe for improvement.

Banking Strategies: Does that mean banks have probably wasted too much money on CRM technology?

McMahon: I don't think banks spent quite as much money on CRM as people once thought. A couple of institutions made big announcements early on, but I'm not sure those totals were reflected in the final checks to the vendors.

Most banks had database problems, so they couldn't implement systems costing $30 million to $40 million. Today, they're in a better position to spend a couple of million dollars reorganizing those databases. I'm not sure expense is as big an issue as simply managing the data.

Khirallah: As a consultant who has to deal with spending estimates all the time, I can tell you it's hard to determine what is and what isn't a CRM project. Money was invested under the name of CRM that includes projects such as upgrading call centers. Those projects will continue to add value.

Kottler: My sense is that a lot of the money was spent for infrastructure that eventually will prove useful. I know we're circling back to a lot of these tools and really focusing on them now. Some of the money spent hasn't been fully leveraged yet.

Kelly: People aren't talking so much about CRM now, but they're actually starting to work at it while being much clearer about what they want to accomplish. While you're probably not going to hear about grand programs anymore, there's still a lot of activity.

Khirallah: It's a healthy change.

Banking Strategies: So wrapping it all up, how should bankers proceed from here?

McMahon: First of all, I wouldn't get involved in a big debate over what CRM means and doesn't mean. Instead, I would get involved in a debate over which specific forms of customer learning and interaction could be most helped by better processes and better training. And the more specific those goals are and the better you can measure them, the better off you will be.

Kottler: On top of that, we need to do a better job listening to what customers are telling us. We also need to listen to what our frontline service and sales people tell us and then do fewer things better. That will help us to regain a lot of credibility.

Kelly: There needs to be a clear focus, which leads to a shared understanding of the objectives. You also need metrics to measure where you are, what's working and what's not. And you ought to be willing to change course if necessary. Finally, you need to realize that people make it happen, not just technology.

Khirallah: Banking is a people business, whether you're talking about customers or front-line employees. You can't ignore the basic fact that humans are motivated by certain things and respond to certain things. Thinking that a technology solution is going to make it better is naïve.

Mr. Cline is senior editor of Banking Strategies.

Copyright © 2003 by Banking Strategies, published by BAI.

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