The Frontline Factor. Develop Long-Term Customer Relationships in 3 Months. February 9, 2005

Transcription

1 The Frontline Factor Develop Long-Term Customer Relationships in 3 Months February 9, 2005

2 Develop Long-Term Customer David Relationships Klebba Vice President in Three Months Financial Services Oracle Corporation February 9, 2005

3 The Front-line Factor Study Background Banks have made enormous investments in relationship-based strategies in recent years, hoping to bolster profitable revenue growth through improved customer interaction But major initiatives such as customer relationship management, needs-based selling and segmentation often fall victim to front-line execution in the branch, causing potentially huge opportunities to be lost Fresh insights were needed so that customers, financial institutions and solutions providers can experience the maximum returns from relationship strategies Oracle teamed with BAI to launch The Front-line Factor to explore why the front-line implementation of relationship-based strategies have failed to yield anticipated results and provide insights on how performance can be improved

4 The Front-line Factor Study Highlight From the time a new account is signed until that customer is secured for the long term, you basically have three months in today s economy. Today we ll discuss What metrics are contributing to improved customer satisfaction What management techniques are making several banks front lines formidable How to maintain a solid bottom line throughout the transformation of your team

5 The Frontline Factor Our Panelists Paul D. McAdam, Managing Director, Strategic Research, BAI Robert Kottler, Senior Executive Vice President, Chief Sales Support Officer, Hibernia Corporation Paul J. Olivier, Group Executive Vice President, Frost National Bank

6 The Frontline Factor examined banks current priorities and performance in a range of relationship management initiatives New account opening Customer service Relationship expansion Retention management Needs-based profiling at account opening Welcome & switch kits Onboarding program Differential service & loyalty programs Needs-based assessments Capitalizing on service requests to upgrade relationship Book of business Contact strategies Utilization of crosssell & purchase propensity leads Proactive account upgrades Problem resolution protocols Attrition drivers & intervention programs Salvage processes Account closing protocols Problem resolution processes People: Skill sets, training/coaching, role clarity, incentives, turnover Process: goal setting, activity planning, measurement, capacity & coverage Technology: Branch automation, predictive modeling, lead management

7 Best practice account opening and onboarding framework Process Set internal expectations First day Open account Onboarding timeline First 1-2 weeks Orient / follow-up First 2-3 months Quality assurance & up-sell Champion Enablers Product Management Simplified, customer-focused products Clarified pricing Trained sales/ platform reps Consistent ads, collateral, promotions Branch Prioritize/triage treatments Needs-based sales/profiling Right products for customers Immediate fulfilment Switch kits Purchase receipts Welcome gifts Branch or Call Center Thank you letter Follow-up calls Additional data collection and needs analysis Quality check up (check order, ATM card, etc.) Customer Strategy: objectives and prioritization of customer treatments People: organizational alignment with onboarding objectives Process: mechanisms that install and sustain onboarding practices Technology: customer contact management Branch or Call Center Quality check up (online banking, bill payment, etc.) Problem resolution Activation & utilization incentives Additional needs fulfilment and cross-sell Technology: predictive modeling

8 High-performing banks leverage onboarding to define immediate customer needs and future relationship treatments Customer s Preferred Mode of Interaction Don t sell to me Hold my hand Reasons for Account Opening Recently moved, I need to established a new banking relationship Employment change Life event (marriage, children, divorce, inheritance, etc.) Student checking Recent immigrant Secondary checking account Drawn to bank by a promotion Self-directed I ll figure it out myself Seeking information, options; not advice Trust builds over time, based on demonstrated performance Advice-receptive I want ideas and guidance Willing to take time for consultative sales approaches Immediate Ongoing Limited customer potential limits justifiable efforts at relationship-building Challenging population Can absorb sales capacity Difficult to handicap, especially long-term potential Risk of second-class servicing syndrome High potential Low potential Relationship Potential

9 And define specific marketing programs for the first year of the relationship Data mining and lead management activities are accelerated to become actionable within the first 90 days of the relationship Data Mining Account Opening Propensity Modeling Contact Strategy Marketing Strategy Customer profiling information Segment identification Next most likely product Transaction preference Channel preference Prioritization Contact method Branch Phone Internet Mail Segmentspecific messaging / dialogue Prioritization of benefits & features

10 Banks recognize And define the need specific to improve marketing the programs profiling process, the storage for of the profiling first year data of and the relationship onboarding programs (a) Rate the importance of the following activities to developing strong relationships with new checking account customers. (b) Rate your institution s performance in these activities Importanceweighted GAP* Customer profiling process is used Phone calls are placed to new customers in the days following account opening Front-line staff receives training to conduct profiling Phone calls are placed a few weeks following account opening Customer profiling data is stored in a database New customers are provided a welcome kit Switching kits are provided to new customers Front-line staff receives the proper incentives to encourage profiling Not Important / No Activity Low Importance / Poor Performance Moderate Importance / Average Performance High Importance / Good Performance Importance Performance

11 The Frontline Factor Paul J. Olivier Group Executive Vice President Frost National Bank Robert M. Kottler Senior Executive Vice President Hibernia Corporation

12 The first 90 days represent a critical window of opportunity to control attrition Checking Account Attrition ~ 2x 17% - 22% 35% - 45% Customers attrite at double the average rate in the early going Placed into the wrong products, or into too many products, or they fail to activate Fulfillment errors Negative surprises (fees) Annual Attrition First 3-6 Month Attrition

13 A large portion of cross-sales take place in the early stages of new customer relationships Timing of cross-sales to new retail DDA relationships Same Day 0-4 Months 4-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5-6 Years 6-7 Years 43% of all crosssales that occur within the lifetime of a DDA relationship take place on the same day of account opening through the first 12 months of the relationship 7-8 Years 8-9 Years 9-10 Years > 10 Years

14 Onboarding should serve as the foundation of a relationship-based selling process Components Product-based Selling Relationship-based Selling Offer Product focused Present products Reactive (order taking) Probe Customer qualification for products under discussion Cross-sell Sequential and driven by supply-side objectives Product-oriented mass marketing campaigns Customer-focused Explore needs Proactive probing for opportunities Products owned, wallet size/allocation Behaviors and preferences Initially achieved through profiling, multiproduct packaging and customer onboarding Ongoing: Through relationship management and event-driven triggers Employee Sales Incentives Based on units sold Based on balances sold and retained Lagged payouts to encourage account activation and retention Book of business Overall Process Straightforward, quick, easy to implement Time-consuming Skills-based Customer profiling

15 The consumer research findings support the need for onboarding and other relationship-based approaches Most Important Gaps Charges low fees Provides superior returns Does not surprise me with fees Staff empowered to decide fees Rewards amount of business brought them Has simple, easy to understand fees Executes my transactions without any mistakes Employees authorized to resolve issues Has short lines in the branches Knowledgeable, well trained staff Priority Initiatives Product Simplification Packaging Relationship Pricing Onboarding Onboarding Onboarding Product Packaging Onboarding Product Simplification Onboarding Six Sigma Quality Problem Resolution Onboarding Problem resolution Branch staffing Customer recognition Onboarding Needs-based selling Onboarding provides the opportunity to better meet customers needs through: Setting expectations and educating customers about products and fees Personalizing pricing based on relationship potential Highlight value delivered by products and specific benefits Provide opportunities to ask questions and clarify information A process that instills consistent execution and employee confidence

16 A number of frontline obstacles block banks implementation of relationship-based strategies Percent of bankers that rate these issues as significant to moderately significant challenges to their ability to implement relationship-based strategies Front-line lacks required sales skills 79% Inadequate front-line sales training and coaching Difficult for mgmt. to track front-line activities/results 68% 68% Front-line lacks required product knowledge Performance goals are not clearly understood Front-line focus on internal activities vs. serving customers High front-line turnover Inconsistent senior mgmt. communication of objectives Incentive schemes do not drive right behaviors Limited front-line access to customer information Incentive schemes are difficult for staff to understand 56% 56% 55% 54% 51% 49% 44% 36% 0% 25% 50% 75% 100%

17 Many banks are planning relationship-oriented IT investments in the coming year Percent of banks that have plans for significant new investments in the following technologies in the next 12 months Sales tracking Customer value/profitability Customer segmentation 46% 52% 56% Campaign management Data warehouse Enterprise CRM Branch staffing/capacity planning Sales force automation Lead generation and management X-sell or attrition predictive modeling 37% 36% 35% 35% 33% 32% 29% Teller cash automation 20% 0% 25% 50% 75%

18 Hibernia Bank Efforts to increase account retention WOO (windows of opportunity calls) Follow up branch calls Instant Issuance of debit card pilot Retention tracking Back to basics front line coaching

19 Frost National Bank Created a roadmap to implement onboarding A coordinated effort between marketing, consumer branch sales team, contact center and technology department Identified 24 distinct activities that enable a coordinated onboarding program. The 24 activities fall within the categories of: Marketing communication - merchandising, direct mail and outbound calls Managing the in-branch experience a professional sales encounter Data management collecting and acting on data, and the metrics that measure success Process improvement - fulfillment

20 There s a huge opportunity, but it will take a significant commitment to attain it Most banks remain product-focused organizations No standardized customer acquisition process The Challenges Executives develop a big picture view of how the process ought to work, but front-line staff: Remain task-oriented Are often resistant to large, expensive process redesigns Lack the proper tools, coaching and incentives The Opportunities Coordinated account opening and onboarding process with a simple customer segmentation approach that front-line employees can understand and implement Simplify products so customers can understand them and front-line employees can communicate the benefits Deploy a needs-based selling approach that extends across the first 90 days of relationships Targeted analyses of the triggers of fruitful cross-sales, and attrition behavior, during the first 90 days of new relationships A prioritized list of critical customer events and contact strategies Practical insights into how to dialogue with the customer at critical stages of the customer orientation process An operational roadmap identifying the best circumstances for the deployment of relationship-intensive resources

21 Q U E S T I O N S A N S W E R S

22 Webcast and Whitepaper To access today s webcast replay or to download the BAI Frontline Factor whitepaper, go to: oracle.com/industries/financial_services