Focusing on Your Customer Sept 2011

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Focusing on your

customerErnst & Young banking advisory services


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US retail banks have entered a new, challenging era. With consumer loyalty and trust at all-

time lows and regulatory and political changes posing new hurdles, banks are under pressure torestore consumer confidence and repair their reputations. The focus on customer-centricity is

increasing as banks work to retain their market share and rebuild their brands.

A recent global survey of retail banking customers by Ernst & Young1

highlights signicant challenges that banks need to consider as they

crack the code on customer-centricity.

Loss of confidence and trust in their institution was emphasized

by many retail banking customers as a key issue.

Since the start of the economic crisis, banks have experienced huge

challenges in building and maintaining customer relationships. Thecrisis directly affected perceptions of banks and the way that they

interact with their customers.

Fifty-ve percent of US retail banking customers

say that their condence toward the banking

industry has decreased.2

Banks need to focus on earning back the trust and condence of

customers and rebuilding their brand. The banks that fail to do so will

most likely see attrition rates continue to rise.

Thirty-eight percent of US customers havechanged their main bank in the past, and 7% are

planning to do so in the future. Poor service quality

is the main driver of attrition.3

1 Global Consumer Banking Survey: a new era of customer expectations,

Ernst & Young, February 2011.

2 Ibid.

3 Ibid.

The shift of power from banks to customers

31%General levels of service quality

Products and services on offer

Proximity of branches

Price

Lack of trust

Access

A specific service failing

Brand image/reputation

Friends recommendation

Ethical

Financial advisory competency

Minimum safe deposit limits

Innovation in direct channels

23%

23%

21%

21%

19%

16%

10%

7%

7%

5%

3%

2%

Figure 1. Main reasons for attrition for US customers who

have changed their bank or are planning to change

(multiple choices allowed).

Source: Global Consumer Banking Survey, a new era of customer

expectations, Ernst & Young, February 2011.


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3Focusing on your customer Ernst & Young banking advisory services

Increasing demand for personalization

With poor service quality as the key driver of attrition, banks recent

efforts to improve service quality seem to have had only a limited

impact on customers perceptions. In fact, many customers continue

to feel that they are not getting the level of personalized service they

would like.

One-third of all customers claim they get no, or

only occasional, personalized attention from their

main bank.4

Further emphasizing the severity of the issue, Forrester Researchs

2010 Customer Advocacy5 survey found that less than 40% of the

customers of all large US retail banks agree that the bank does what

is best for its customers, not just for its own bottom line.

Misaligned channel experience

With consumer behavior and channel preferences changing, banks

have invested heavily in existing and new channels, including mobile

and social media, over recent years. However, the survey results

suggest that banks investments in channel development have not

always been aligned with customer behaviors and preferences.

4 Ibid.

5 Customer Advocacy 2011: How Customers Rate US Banks, Investment

Firms, And Insurers, Forrester Research, Inc., 8 March 2011.

Satisfaction levels with the branch and internet

channels rate well over 80%. Conversely, the mobi

banking and call center channels receive the lowes

satisfactions scores, 34% and 60%, respectively.6

Banks need to improve their understanding of what customers expe

from each channel and how to effectively integrate the customerexperience across channels.

A new consumer protection regime

The Dodd-Frank Wall Street Reform and Consumer Protection Act

(Dodd-Frank Act). is shifting power to the hands of the regulators, a

well as to the individual customer. The legislation strives to provide

greater protection to the consumer. Banks have started to adapt

internal practices across the business, operations and technology

to improve transparency in communication, provide more product

choices, address customer complaints, and simplify sales practices..

However, there is a risk that all these efforts to protect customers ar

resulting in a more cumbersome and complex customer experience.

Ernst & Young believes that the banks that are able to combine bettconsumer protection and regulatory compliance with an enhanced

customer experience will gain an edge over their competitors.

6 Global Consumer Banking Survey: a new era of customer expectations,

Ernst & Young, February 2011.


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Rising to the challenge

Customer-centricity is the new win strategy

Facing the challenges of this new era, a customer-focused strategy

has re-emerged as a key lever of growth for US retail banks.

Throughout the industry, investments in channel innovation,

sales training, advertising campaigns and customer relationship

management (CRM) solutions are increasing. However, many banks

are not reaping the full benets of their investments because theylack holistic, end-to-end thinking. They have not coordinated their

efforts across business functions and channels to fully transform

their business and consistently deliver a differentiated customer

experience. As a result, while many banks are talking about being

customer-centric, there are few, if any, that have succeeded in

putting it into practice.

Becoming customer-centric

Customer-centricity is attainable when the customers view is

incorporated into the banks business strategy, product offerings and

service delivery across all channels and at every interaction.

Successful transformation to customer-centricity requires a two-

pronged approach that includes an outside-in perspective on what

customers want across the banking relationship life cycle and

identies all business enablers from the inside-out. (See Figure 2.)

Simply put, the customers and companys views must meet. Only

through this two-pronged approach will banks be able to transform

themselves into truly customer-centric organizations that providedifferentiated value and experiences for target customer segments.

Ernst & Young believes that a banking organization that truly wants

to achieve a customer-centric business transformation should

concentrate its efforts on the six key areas illustrated below.

Banks can move toward enhanced customer-centricity in different

ways and at different speeds ranging from tactical improvements

in a single unit to enterprise-wide transformation. Every path

to change, however, should consider both the customers and

companys perspectives.

4

The bank should use advanced

analytics to develop an

enhanced understanding of its

customers and their behaviors

and to identify opportunities to

deepen existing relationships.

It should apply the analysis to

improve product offerings and

customer service experiences,

and to develop strategies to grow

revenue and prot margins.

The bank should segment

customers into groups that sha

similar characteristics across

key dimensions, such as needs

behavior, values and strength

of relationship. It should then

deploy targeted customer value

propositions and actionable

treatment strategies for each

distinct segment.

1 2Get to know yourcustomers Develop segment-bavalue propositions


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Ernst & Young services

Ernst & Young provides advisory services to nancial institutions focused on enhancing their customer-centricity. Our experienced customer

and retail banking advisory professionals assist companies with the implementation of a combined outside-in/inside-out approach. This

approach encompasses a customer view, based on research and analytics of customer data, and a company view that considers how

operations, products and delivery processes should be tailored to take into account the customer view.

Our experienced advisory professionals can assist with all phases of this approach, including:

Outside-in perspective

Customer insights and analytics

Customer retention and profitability analysis

Voice of the customer analysis

Customer interaction analysis

Customer strategy

Brand vision and value proposition

Growth strategy

Customer segmentation

Product and pricing strategy

Customer experience

Customer experience and multichannel design

Customer satisfaction management

Complaints management

Inside-out perspective

Operational effectiveness

Sales force effectiveness

Contact center transformation

Marketing transformation

Operating model and organization design

Capability assessment and planning

Process improvement

Solution enablement

Architecture definition

Channel renewal/integration

Single customer view

CRM integration

Service-oriented architecture

Analytics engine and business intelligence integration

Execution excellence

Program planning and management

Change management

Performance measurement


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Contacts

Heidi Boyle

Principal, Financial Services

US Customer Practice Leader

Ernst & Young LLP

+1 312 879 3820

[email protected]

Clayton Baker


US Banking Advisory Practice Leader

Ernst & Young LLP

+1 415 894 8862

[email protected]

John Weisel


US IT Advisory Services Leader

Ernst & Young LLP

+1 212 773 8273

[email protected]


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Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & Young

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2011 Ernst & Young LLP.All Rights Reserved.

SCORE No. CK04641107-1276021 NY

This publication contains information in summary form and istherefore intended for general guidance only. It is not intendedto be a substitute for detailed research or the exercise ofprofessional judgment. Neither Ernst & Young LLP nor anyother member of the global Ernst & Young organization canaccept any responsibility for loss occasioned to any personacting or refraining from action as a result of any material in thispublication. On any specific matter, reference should be made tothe appropriate advisor.

Focusing on Your Customer Sept 2011

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