Profiling Puzzle

By Stan Luxenberg

Personal financial profiles can help jump-start relationships, but only when a variety of other conditions are met.

Banks expended enormous resources during the past decade to beef up their investment product capabilities. The idea was to keep more of their customers' money in-house, instead of letting it stray to non-bank providers.

A product-based approach proved problematic, however, as customers continued to opt for major non-bank brand names, such as Vanguard Group Inc. and Fidelity Investments. The emphasis then shifted to selling within an advisory context, but a tool was needed to streamline the process for the mass market.

For some banks, the answer was profiling, a questionnaire-based interaction designed to tease out customer needs and set the stage for a broader, multi-faceted relationship. Reps create these profiles by interviewing customers in branches or from the call center. Some institutions ask a few brief questions; others probe in great depth.

Citigroup Inc. was at the forefront of this charge. It was joined in the Northeast by players such as J.P. Morgan Chase & Co., North Fork Bancorp. and Wilmington Trust Corp. In the Southeast, Wachovia Corp. and First Tennessee National Corp. make active use of profiling. Midwest players include Comerica Inc. and KeyCorp.

Many executives report success with their profiling initiatives, citing improvements in cross-sell and customer retention. But a host of execution issues have popped up as well, raising a red flag about the wholesale use of this tactic.

The weak link in the chain is typically the branch, where over-burdened employees are tempted to conduct cursory interviews or skip them altogether. In many cases, employees aren't sufficiently trained to identify the types of customers that should be referred to licensed brokers. In other cases, the data isn't fully used because of shortcomings in information systems and staff incentives.

"It's very unusual to see a bank employee who collects the right information and then puts it to use," says Les Dinkin, managing principal of Westport, Conn.-based NBW Consulting Group.

Managers, then, need to approach this issue from a realistic perspective. The benefits of personal financial profiles are undeniable — rich data on customers leading to greater sales and stronger relationships. But before an institution invests considerable resources in such a program, it needs to come to grips with the execution issues and make sure the benefits outweigh the costs.

Questions for Customers

The significance of profiling has grown as it has become clearer that with customers, the first chance is often the best chance — to establish rapport and present the appropriate products. In the right circumstances, a survey or questionnaire can help the rep to quickly identify a broad range of customer needs. The broader the range of solutions a provider has to offer, the more valuable profiling becomes.

One of the most prominent applications is at Citigroup, which in 2002 alone completed 180,000 "CitiPro" financial profiles for customers. The kickoff campaign, conducted two years earlier, highlights the level of orchestration needed to bring an abstract questionnaire to life for both customers and employees.

During this campaign, the New York-based conglomerate advertised a free financial needs analysis. Branch visitors were greeted by employees who passed out "CitiPromise" cards, which guaranteed that $25 would be deposited into their accounts if the bank failed to provide good service and a free CitiPro financial plan.

People who took up the offer met with specially trained employees called "client financial analysts," who sought to obtain the client's complete financial records, including income tax forms and investment accounts. These reps then completed 15-page forms that show how customers are spending their money and whether they are saving enough.

This campaign, which is continuing, involved a substantial outlay. Citigroup advertised the effort in metro New York and backed it up by licensing 3,000 employees to sell insurance and securities.

Although specifics about the cost/benefit ratio aren't public, the program is delivering measurable improvements in customer retention, accounts per household, balances per account and revenue per household, according to Maura Markus, president of Citigroup's North American retail distribution group.

Robert B. Albertson, chief strategist of Sandler O'Neill & Partners, L.P., a New York-based investment bank, says that in branches where the Citipro program was introduced, the number of products sold per household doubled in the first two years and customer attrition dropped by 36%.

This is not to suggest that a grandiose program is needed to obtain results. Comerica, for example, is a bit more subtle and informal. The Detroit-based bank compiles the needed financial information but uses a shorter questionnaire and doesn't promote the process as visibly as Citigroup.

Comerica began the program back in 1994, when it was struggling, like many of its peers, to compete in the investments arena with mutual funds and other nonbank organizations. "We became tired of nonbanks pulling our customers away," says senior vice president Tom Fisher.

Executives had noticed the more outgoing employees, those who talked with customers and got to know their problems, consistently recorded better sales. The challenge was to spread that expertise throughout the organization. At first, only senior employees tried the new approach, but gradually the training was extended and the questionnaires refined. Now, employees participate in weekly meetings where they talk about situations they have encountered and other workers chime in with suggestions on how to handle customers. "Every time we have improved the process, there has been a jump in sales," Fisher says.

Easy Does It

Of course, many customers flinch at the prospect of divulging large amounts of personal financial information, and that is why many providers simplify the process. The goal is to bring out enough information to at least get a conversation started, and take it from there.

In this approach, starter questions tend to be basic and open-ended, such as asking what brought the customer into the branch and whether he or she is concerned about saving for college or retirement. Besides gathering information, the interviewer aims to initiate a relationship that will help establish trust and rapport.

At Wachovia, bankers who hold series 6 securities licenses often take the lead in profiling sessions. These reps, who are able to provide both mutual funds and annuities, employ a soft-sell approach. Only if the customer has time will they attempt to conduct the 30-minute interview necessary for the financial profile. Initial questions seek to determine which accounts the customer already has and compile an overview of assets and liabilities.

As the banker lists the information on a paper document, the goal is to chat informally. "It is all very conversational," says Leslie Hayes, Wachovia's senior vice president of sales in Charlotte. "We don't want customers to feel that they are being asked a standardized series of questions."

If time is lacking to finish the survey, the employee may circle back with a note or phone call to request a follow-up meeting. Once a year, the Wachovia banker reviews the profile and attempts to update the information.

Another variation on the conversational approach might be termed "profiling lite." Banks adopting this approach restrict their intensive profiling to targeted customer groups, such as small-business customers or those already receiving intensive service from personal bankers. They may conduct only abbreviated interviews in the branches. Lancaster, Penn.-based Fulton Financial Corp., for example, limits its surveys to fewer than 15 minutes.

"During the lunch hour, the customer in a branch does not have half an hour to spend," says David C. Hostetter, Fulton's executive vice president for marketing and communications. "But when you explain that the goal is to serve customers better, most people will give 10 or 15 minutes."

Diplomatic Inquiries

Obviously, it is important to interact with customers in just the right way during profiling sessions, but that's just part of the story. Selecting the right prospects is itself a challenge, and then the provider must figure out how to make full and proper use of the information obtained.

Consultants who have studied profiling programs identify the branch as the place where the process often goes awry. The reason: rank-and-file employees don't always recognize who would benefit from investment and insurance products and sometimes focus on inappropriate prospects. "It makes no sense to use a high-cost marketing effort to reach a low-potential customer," says Charles Wendel, president of Financial Institutions Consulting in New York.

Even when prospect selections are on target and profiling sessions go well, the resulting customer data can only be used effectively if employees are trained and encouraged to use it. This can take considerable effort. Many institutions are plagued by high employee turnover, and staff members often are encumbered with routine activities.

To help workers cope with an expanding array of products, some banks provide special training in the use of profiles. Because some employees feel uncomfortable asking customers for private information, the classes emphasize diplomatic ways to make inquiries. Once the employee finishes training, managers sometimes sit in during profiling of real customers and coach employees.

At Cleveland-based KeyCorp, for example, reps go though a training program where a big part of the curriculum is focused on the proper use of financial profiles. To gain a clearer understanding of customer sentiments, employees must themselves undergo a profile interview. Then they practice by interviewing their own family members.

To improve the profiling process further — and also boost sales — many banks are upgrading their staffs by employing more people with licenses to sell insurance and stocks. Most employees at Wachovia have a license to sell mutual funds and annuities, for example. And there is one stockbroker assigned to every two branches.

KeyCorp, which already has 250 licensed employees in its 900 branches, recently began licensing even more employees to undertake profiling. Most of these employees hold Series 6 licenses, which permit them to sell mutual funds, but not stocks. To accelerate the process, KeyCorp is looking to hire people who already hold licenses. "When we bring on licensed people, they have an immediate impact on revenue growth," says Michael R. Orsino, national retail sales executive.

After completing a preliminary profile, the KeyCorp sales people can inquire if the customer is interested in going through a longer financial assessment. Those who supply the additional information can receive a free retirement plan designed by McDonald Financial Group, KeyCorp's brokerage unit. The report is completed within 72 hours and then the client is invited to meet with a McDonald representative, who holds a Series 7 license, which enables the broker to sell stocks.

Managing the human factor in profiling includes not only training but incentives as well, and it is here that many institutions have a great amount of work to do. There's an intellectual realization in the industry that product-based incentives can work at cross-purposes with needs-based selling, but revising a rewards systems is typically a complicated and drawn-out process. And the effects aren't immediate or even necessarily guaranteed.

Information technology also plays an important role in profiling because integrated information is needed to compile multi-faceted product packages. If you're going to ask customers comprehensive questions, then you have to be prepared to offer comprehensive answers, not just single-shot product solutions.

There are marketing implications as well. In many cases, data gleaned during profiling sessions is sent to a marketing unit where specialists try to determine which product combinations best suit the customer.

After identifying prime targets, such as small business owners with substantial assets, the marketers may pursue certain prospects aggressively, making phone calls and extending invitations for meetings with licensed brokers. For customers with limited assets, by contrast, the marketers may send a direct-mail piece or not make any sales effort at all.

Unfortunately, banks that are still struggling with systems integration problems may not be able to hand off profiling data easily from one unit to another, crimping the interpretive process and the range of potential responses.

While such challenges do not necessarily mean that profiling is a waste of time, they do highlight the larger thinking that is required of senior managers who put such programs in place. Instead of a standalone tool, profiling is but one part of an overall customer approach whose success hinges on a variety of factors, many complicated. The institutions that best address the complete picture will be the ones that get the most from their profiling initiatives.

Mr. Luxenberg is a freelance writer based in New York.

Copyright © 2004 by Banking Strategies, published by BAI.

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