The promise of real-time data

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1 A report from The Economist Intelligence Unit The promise of real-time data Sponsored by

2 The promise of real-time data Introduction The important aspect of relationship marketing is anticipating the need of the customer and being ready to serve that in realtime. Julianna Young, director of marketing, Movenbank Of all the businesses people interact with on a daily basis, financial services firms generally hold the most personal information. This might suggest that banks, insurance companies and other financial institutions have a big leg up on other industries in deeply understanding their customers needs, wants and behaviors. Yet this does not seem to be the case. There are two likely explanations. First, some financial services firms have been reluctant to use data that might be perceived as privileged. Second, banks tend to follow traditional organisational models with information sequestered in silos. This is beginning to change, according to a global survey of executives conducted in July 2012 by the Economist Intelligence Unit (EIU) with sponsorship from SAS. In that survey, financial services executives acknowledged that they have been slow to shift their focus from products to customers. Only 11% agreed strongly with the statement that their organisation is a customercentric business, versus 20% of their peers in other industries. Moreover, financial services executives were only about half as likely to claim a clear understanding of customers tastes and needs. Paradoxically, however, they were slightly more likely to say they have the data, tools and processes in place to act quickly to changes in customer behavior and other dynamics. So they ostensibly have the tools, but have not fully learned how to leverage them. The tidal wave of both proprietary and unstructured data flowing in from external sources such as social media makes this even more challenging. So much noise can drown out actionable insights that may create value. The term big data says it all: more information, from a wider range of sources, in different formats, of varying complexity, arriving at an ever-increasing pace. High-performance analytics can help banks glean insights from the noise. But, ultimately, banks will need to transform their customer-engagement processes to effectively monetise this information. Taking the customer s pulse Banks already use customer data to cross-sell products and services, build loyalty, detect fraud and manage risk. The next step is a shift toward relationship marketing. This is increasingly critical as digital financial transactions are integrated into daily activities and customers visit bank branches less often. By focusing on the customer relationship rather than products, banks can expand their businesses through nimble, welltimed responses to customers wants and needs. Advanced analytics enables banks to understand these needs, not just by tracking customer activities, but also by interacting with them. The result is a 360-degree view of customers, and the ability to respond to their needs even as they migrate across channels. Customer expectations 1

3 for this kind of responsiveness are building as people become more accustomed to Google- and Amazon-like services anywhere they want, and in near real-time. This move toward relationship marketing requires the integration of existing structured information with unstructured data from new sources. Jim Marous, in his blog Bank Marketing Strategy, writes, Analytics can respond to the migration to digital channels by improving branch efficiency and effectiveness, integrating sales and service tools within a new digital environment and by helping to drive high-value, high-touch traffic back to branches. Predictive analytics adds another dimension by shifting focus to what will be, as opposed to what was. Julianna Young, director of marketing for Movenbank, explains that predictive analytics can interpret lifestyle choices and transactional behavior to assess which product offers will most appeal to an individual. The important aspect of relationship marketing is anticipating the need of the customer and being ready to serve that in realtime, she says. Retail marketers have already developed sophisticated models. But overlaying bank transaction data further refines the targeting algorithms to be more effective. This gives an advantage to banks, she adds, since they can predict whether a consumer has discretionary spending capacity to act upon a particular offer. Baby steps Financial services firms are responding to these developments with new marketing strategies. The EIU survey found that C-level executives in the financial services sector were substantially more likely to cite customer analytics as a top marketing investment priority than their peers in other industries (42% vs. %). (See graph, below).they are also much more likely to say that data-driven analytical capability is an increasingly important CMO skill (39% vs. 23%). Yet, despite this progress, these executives continue to struggle with customer data. Nearly one-third (32%) of respondents cited difficulty in mining big data for customer insights as a key obstacle preventing the marketing function from contributing greater value to the organisation. This compares with only onequarter of executives in other industries. In their quest to improve customer engagement, CMOs must overcome silos. Brett King, founder and Q Investment priorities for marketing to maximise its contribution to the business (% respondents) Financial services Other industries Customer relationship management (CRM) Customer analytics 42 Brand advertising Collaboration tools Direct marketing Training employees Marketing automation tools Mobile application development Reputation management Social media Web optimisation tools New hires Source: Economist Intelligence Unit survey, July

4 Q Internal barriers that impede marketing from delivering more value to the organisation (% respondents) Financial services Other industries Lack of a strategic role for marketing in the organisation Inability to turn data into actionable insights Difficulty in mining big data for customer insights Limited ability to demonstrate ROI/ accountability of marketing investments Disagreement about the role of marketing Hiring and retaining skilled marketing talent Lack of senior management support for marketing investments Lack of transparency across customer touch points Misalignment between marketing investments and business objectives Sharing insights quickly across the organisation Source: Economist Intelligence Unit survey, July 2012 CEO of Movenbank, believes understanding how customers use banking services in their day-to-day lives can help banks surmount this hurdle. Such data can be interpreted to identify behaviors, triggers, needs and benefits to craft compelling journeys, he says. This typically requires sharing data across an organisation. Mr. King points out, for example, that building a journey that triggers a credit card offer might use data from the cards division, from the core marketing database and from the transactional team. He goes on to explain that the transactional team might notice a trip booking or a change in employment that could signal an opportunity for an upgraded credit card offer. No one silo owns this customer or the data that will lead to a credit card journey for the engagement, he says. Any move to break down silos requires a solid business case, so proponents need to move beyond the promise of real-time data and start with quickwin initiatives. Bank marketing executives interviewed for this story say that the best strategy is to clearly define objectives and then apply a testand-learn approach. But David Bonalle, executive vice president and director of marketing and client insights at KeyBank, cautions that achieving buy-in from key stakeholders also requires a persuasive business case. I like to use the example of a marketing campaign that was driven by our product managers view of best assets, he says. The analytics showed it wasn t working, which ran completely against their business intuition. To get buy-in, we spent a lot of time going through the analytics to show how the data supported our conclusion. Ultimately, they [the product managers] agreed to change the approach. Through this iterative process of testing, learning and persuading, lessons learned from initial experiences can be applied to more ambitious projects. But a broader leveraging of customer data requires tracking the value of marketing investments a skill not all CMOs share. This underscores a key finding from the EIU survey. To play a more strategic role in their organisations, CMOs need to broaden the skills available to the marketing function. Notably, senior financial services executives polled ranked underinvestment in talent acquisition, training and retention as a bigger obstacle to a more strategic CMO role than under-investment in technology. 3

5 Whilst every effort has been taken to verify the accuracy of this information, neither the Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper. Cover: Shutterstock 4 SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. indicates USA registration. Other brand and product names are trademarks of their respective companies _S

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