ROI WORKBOOK€¦ · 40 South River Road, Unit 57, Bedford, NH 03110 USA +1 (603) 641-5482 Fax:...

40 South River Road, Unit 57, Bedford, NH 03110 USA +1 (603) 641-5482 Fax: +1(603) 647-5396 email: [email protected] www.kivagroup.com 40 South River Road, Unit 57, Bedford, NH 03110 USA +1 (603) 641-5482 Fax: +1(603) 647-5396 email: [email protected] www.kivagroup.com

ROI Workbook

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TABLE OF CONTENTS

INTRODUCTION ........................................................................................................................................................................................................ 3

ASSUMPTIONS ........................................................................................................................................................................................................... 3

THE GOALS OF UNIFIED CUSTOMER CARE SOLUTIONS ........................................................................................................................... 4

TOP 5 PAYBACK OPPORTUNITIES OF UNIFIED MEMBER CARE .............................................................................................................. 5

COST-JUSTIFYING UNIFIED MEMBER CARE AUTOMATION ..................................................................................................................... 7

MEMBER CARE TECHNOLOGY UPGRADE OBJECTIVES .............................................................................................................................................. 7

COST JUSTIFICATION CONSIDERATIONS ..................................................................................................................................................................... 9

Objective: Increase Sales ................................................................................................................................................................................... 9

Cost Justification Approach: ........................................................................................................................................................................... 10


Objective: Improve Member Service ................................................................................................................................................................. 12


Objective: Increase Productivity ....................................................................................................................................................................... 14


Objective: Reduce Operational Costs ............................................................................................................................................................... 17

COST JUSTIFICATION WORKSHEET .......................................................................................................................................................................... 18

ADDITIONAL CONSIDERATIONS ....................................................................................................................................................................... 23

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INTRODUCTION Over 20 years of experience in helping financial institutions prepare for and implement retail branch automation solutions has provided us with a broad understanding of the business and technology issues faced by financial institutions today. Cost-justifying a member care automation project for your Board of Directors or project committee can be a frustrating and difficult challenge. With that in mind, we have drawn upon all of our experiences in helping institutions identify payback opportunities for their retail service delivery projects to create this workbook. The exercises in this workbook will provide you with a comprehensive look at the returns your unified Member Care project can provide. The process starts by identifying the capabilities that a unified Member Care solution can provide your institution and the resulting revenue-generating and cost-saving objectives you can achieve. Following this identification process, you will begin the process of cost-justifying Member Care automation for your institution through a series of formulas. We have presented a representative selection of objectives for a typical unified Member Care automation project, measured the results, and generated financial values. You will want to identify all of your own objectives and create a financial value that reflects all of the benefits your institution will receive. The result is a summary of the total cost savings, increased revenue, and immediate return from your unified Member Care solution investment. Further analysis results in the determination of the expected payback period from your investment. In addition, other often immeasurable or intangible factors that you should consider are discussed in brief.

ASSUMPTIONS 1. All figures are based on a one-year time period.

2. Figures used are based on industry averages and estimations and are for demonstration purposes only. Figures for your institution may vary.

3. The following symbols have been used to indicate the corresponding mathematical functions: +…………………………………....Addition -………………………………….…Subtraction X……………………………………Multiplication /…………………………………….Division =……………………………………Equals

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THE GOALS OF UNIFIED CUSTOMER CARE SOLUTIONS Significant changes in the competitive nature of the financial services industry have created many new challenges to serving members. The development of Sales Cultures has naturally contributed to the evolution of an extremely competitive l environment. Now, with the emergence of enhanced technologies and the onset of open systems solutions, many new opportunities exist to use these technologies for entry into new markets as well as to further develop the value of existing Member relationships on a personalized basis. The ability to compete successfully, while maintaining growth and profitability, requires credit unions to provide competitive products and quality member service. Technology offers the tools necessary to aid in the delivery of outstanding personalized member service. The decision of when and how to automate these processes will differentiate a credit union’s products and services from its competitors. When an institution effectively manages its use of technology, it can excel at retaining and expand its existing member relationships, while creating many opportunities to attract new members. An organization investing in state-of -the-art technology expects to realize many benefits including improved member service, improved work environments, reduced training effort, higher employee morale, credit union-wide procedural consistency, and better, more effective management reporting. All of these benefits impact the bottom line. Various studies and surveys indicate that approximately a 15% increase in overall productivity and efficiency can be realized with the implementation of a unified Member Care solution. In addition, member experiences indicate that personalized Member Care Solutions increase cross-selling ratios. As little as a 10-15% increase in cross-sell ratios can have a significant impact on the bottom line. With these results, the benefits of unified Member Care Solutions will generate paybacks that are multiples of your investment.

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TOP 5 PAYBACK OPPORTUNITIES OF UNIFIED MEMBER CARE Personalized Member Profiles “Popping” a personalized member profile at the beginning of a member session immediately sets the stage for “knowing your member” strategies and is the foundation for personalized service. A profile screen should contain summary information for all existing accounts and services being provided by the credit union, demographics, contact history, an outstanding issues log, and personalized marketing messages. This screen should also provide for clicking on summaries to immediately reach the underlying details.

Paybacks:

Maximize the value of member time spent with MSRs Deliver a higher value experience to self-service applications thereby expanding usage of lower cost channels Increase cross selling through personalized focus on needs Reduce member defections through better issues management and higher quality service experiences Routing and Tracking Both automated and self directed workflow options across the enterprise offer many opportunities for improving the business process and the performance results of front and back office operations. Routing to other operating departments offers improvements in member problem resolution, fulfillment of product and service requests, referrals for new business opportunities and sales prospecting. Tracking outstanding issues and staff performance is critical to maintaining service level objectives, providing management information, and involving the entire organization in member service and sales. Tracking and using alerts is especially valuable when dealing with the most profitable member segments because, with automation, account or relationship managers can be brought into the transaction regardless of the channel the member chooses to use. Paybacks: Faster more efficient resolution of member issues Improved quality of the member experience Retention of high value members

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TOP 5 PAYBACKS (cont’d) Access Product Information Online Product databases can be hosted online allowing for access from any contact channel. The information can be automatically included in sales and service transactions as well as being made available for ad hoc queries. Information can go beyond specifications and can include answers to Frequently Asked Questions (FAQs), as well as feature/benefit statements for use in selling situations. Paybacks: Publishing, logistical, and obsolescence of materials costs are eliminated Time to market for new products is reduced yielding competitive advantage or defense from competition Personalization of service delivery is enhanced and message content and compliance is ensured eLearning When products and technologies are constantly changing, one of the biggest challenges is to keep pace with user training. Being able to utilize online training sources, as well as to access facilities like online help, knowledge databases and FAQ libraries is a very significant opportunity to cut costs and to enhance staff performance. Paybacks: Avoid logistical and man hour costs of classroom training Resolve member problems at the point of contact Reduce time spent looking for answers Supervisor and Management Controls Online controls provide real-time management opportunities. Responding to information in reports that are one month or even one week old is often, “too little too late”, when it comes to member service. A primary value of unified Member Care solutions should be the enhancement of management control on a real-time basis. Being able to adjust staffing requirements, to modify products and sales campaigns in response to competition and using alerts are just a few ways to take advantage of the technology investments. Paybacks: Balance staff schedules to optimize utilization and maximize member service delivery Support staff and members at key moments in time Ensure highest quality service to highest value members

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Cost-Justifying unified Member Care Automation

Member Care Technology Upgrade Objectives Increase Sales

0 Improve Sales Performance 0 Improve Product Knowledge of MSR’s 0 Promote Sales of the Most Profitable Credit Union Products 0 Achieve Greater Sales at Current or Lower Staffing Levels 0 Produce Qualified Sales Leads 0 Establish Consistent Approach to Product Sales

Improve Member Service

0 New Account Opening Performed Quickly, Accurately and Consistently 0 Provide Interactive Product Presentations 0 Determine Member Needs 0 Improve Image of MSRs as Professional Financial Representatives

Increase Productivity

0 Reduce Time to Process All Member Transactions 0 Make All Databases Accessible 0 Standardize Application User Interface 0 Allow Transfer Of Information Between Applications

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Member Care Technology Upgrade Objectives (cont’d) Reduce Operational Costs

0 Perform Accurate and Timely Sales Tracking and Reporting 0 Determine Needs of the Marketplace 0 Standardize Credit Union-wide Procedures 0 Streamline and Reduce Back Office Operations 0 Eliminate Redundant Paper Creation and Distribution 0 Identify Training Needs 0 Streamline Support Requirements 0 Create A Networking Standard For Data Communication 0 Eliminate Redundant Data

Update Branch Technology Infrastructure

0 Provide an open technology foundation

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Cost Justification Considerations

Objective: Increase Sales

0 Improve Sales Performance 0 Improve Product Knowledge of MSRs 0 Target Incentive Programs 0 Promote Sales of Most Profitable Credit Union Products 0 Achieve Greater Sales at Current Staffing Levels 0 Produce Qualified Sales Leads 0 Establish Consistent Approach to Product Sales

Member and prospect information are not uniformly accessible to sales and marketing people because of the disparate technologies that are employed at the present time. A standard workstation platform will allow the institution to design, implement and track sales and marketing programs uniformly among all sales and marketing employees and across delivery channels. As delivery channel options expand and the strategies to employ these channels become more diverse, then the benefits of a uniform technology platform will expand. A uniform strategy will allow more effective use of MCIF leads and provide integration of the MSR functions across the market segments. Delivery of on-line help and Computer-Based Training (CBT) via the intranet can be used to supplement the skills and product training without the expenses of classroom instruction used in conjunction with a powerful interactive sales presentation, MSRs are prepared to effectively present a variety of products. Incentive programs, coupled with the MCIF leads, targeted at the most profitable products, are motivators for MSRs to “ask for the sale.” Industry periodicals have repeatedly reported on the improved cross-sell ratios achieved by credit unions that have an integrated sales strategy. The example provided below shows how even a 10% to 15% increase in cross-sell ratios can have a significant impact on the organization’s bottom line. The first step in determining this impact is examining the relationship between profit margins and sales probability of each product within your product mix. Sales probability represents the likelihood that a particular product will be included in a new account/new product sale. Multiplying the profit margin by the probability factor for selling that product will provide you with the product value. The summation of all product values within your product mix will provide the average transaction value of incremental sales.

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Cost Justification Approach: Products Average Annual Interest Annual Direct Profit % Sales Product & Services Balance Fees Spread Revenue Costs Margin Probability Value Checking $1,000.00 $60.00 9%/$90.00 $150.00 $75.00 $75.00 .20 $15.00 Savings $3,000.00 $10.00 5%/$50.00 $160.00 $40.00 $120.00 .15 $18.00 Investment $20,000.00 1%/$200.00 $200.00 $20.00 $180.00 .15 $27.00 Mortgage $50,000.00 1%/$500.00 $500.00 $100.00 $400.00 .01 $4.00 Const. Loan $10,000.00 3%/$300.00 $300.00 $40.00 $260.00 .02 $5.20 Home Equity $30,000.00 $30.00 3%/$900.00 $930.00 $150.00 $780.00 .02 $15.60 Bank Card $500.00 $20.00 9%/$45.00 $65.00 $15.00 $50.00 .40 $20.00 Other $10,200.00 $30.00 45/$400.00 $430.00 $100.00 $330.00 .05 $16.50 Average Value of Incremental Sale 1.00 $121.30

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In order to determine the estimated increase to the bottom line you must examine the number of increased sales per year that can be realized as a result of improved product knowledge, increased cross-sales, and incentive programs. For purposes of this exercise, we have used an industry average sales increase of 10% (48 sales per workstation) multiplied by the average value of incremental sale to realize the increased profit potential of each workstation. This figure multiplied by the number of automated MSR workstations will provide you with the revenue realized as a result of increased sales.

Cost Justification Approach:

Formula: Average X Additional Sales = Increased Profit X # of MSR = Revenue From Value of Sale Per Yr./Per Workstation Per Workstation Workstations Increased Sales Calculation: $120.00 X 48 (10%) = $5,760.00 X 100 = $576,000.00

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Objective: Improve Member Service

0 New Account Opening Performed Quickly, Accurately and Consistently 0 Provide Interactive Product Presentations 0 Determine Member Needs 0 Improve Image of MSRs as Professional Financial Representatives

unified Member Care automation will allow faster access to accurate, up-to-date information from anywhere throughout the network. Further, this information can be maintained from a single site eliminating redundant efforts and providing a consistent message throughout the organization, resulting in quick responses to member needs. In addition, the MSR rarely has to exit a member session for information, giving them more time to interact with members to understand their needs. In face-to-face sessions, the member can view product features and benefits with the MSR using interactive sales presentations. This ensures thorough and consistent presentation of product information. Recent studies indicate there is a correlation between quality member service and the most profitable credit unions. Improving the quality of member service can result in increased sales and higher member retention rates. Additionally, satisfied members are more likely to have multiple accounts with an institution and are less likely to move their accounts to another institution.

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Cost Justification Approach: 1) Measure the number of members currently lost each year. 2) Make an assumption on how many of those members you could keep if service was improved. 3) Place a value on the average member relationship. 4) Multiply this by the number of members you are forecasting could be retained. Formula: Members # Members Retained X Value of Average = Increased Revenue from Lost/Year by Improving Service Member Relationship Improved Member Service Calculation: 1,000 100 (10%) X $120.00 = $12,000.00

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Objective: Increase Productivity

0 Reduce Time to Process All Member Transactions 0 Make All Databases Accessible 0 Standardize Application User Interface 0 Allow Transfer Of Information Between Applications

Productivity within the organization is improved by automating many of the manual functions traditionally performed by MSRs. Industry statistics indicate that MSRs make an average of three phone calls per day for problem resolution and account and member information verification. The MSR will rarely have to divert their attention from the member, once again increasing productivity and improving the overall efficiency of the institution. unified Member Care automation provides quick access to accurate, up-to-date information, significantly reducing time spent researching and verifying information. This results in a high quality and focused member session and consequently, a satisfied member. Much of the time spent on paperwork can be eliminated with better on-line communications. Quick access to information speeds up required paperwork and limits missed information during account documentation. The result is immediate, accurate and consistent service to members. The MSR’s time can be divided into three main areas of responsibility. They are Sales, Service, and Administrative activities. The following is a breakdown of specific activities generally performed by MSRs along with a comparative pre- and post-automation time analysis of these activities. (Certain activities hold different responsibilities within various institutions. Individuals can substitute their own activities list and time study data.) With the increased productivity realized through automation, the number of MSRs required to do the same amount of work could be reduced through normal attrition. Also, with normal growth, fewer MSRs would be required to accommodate the increased work volume. Industry studies and surveys indicate that average increases of 15% in the overall productivity and efficiency of a MSR’s functions can be realized with the implementation of unified Member Care automation.

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MEMBER SERVICE TASKS PERFORMED

TIME SPENT PRIOR TO AUTOMATION

TIME SPENT AFTER AUTOMATION

% CHANGE (PRODUCTIVITY)

SALES ACTIVITIES * Member Needs Analysis * Presenting Products and Services * Cross Selling TOTAL: 32% 27.2% 15% SERVICE ACTIVITIES * New Account Opening * Member Service * Loans *Referrals TOTAL: 55% 46.75% 15% ADMINISTRATIVE DUTIES * Typing Reports * Filing * Answering Phones TOTAL: 13% 11.05% 15% TOTAL TIME: 100% 85% 15%

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Cost Justification Approach: 1) Determine percentage increase in productivity through the activity time study analysis chart provided above. Time Spent - Time Spent / Time Spent = % Increased Prior to After Automation Prior to Productivity Automation Automation 100% - 85% / 100% = 15% 2) Personnel costs include average salary and benefit costs per employee. Multiply this factor by the number of platform employees. Average + Benefit Costs X Number of = Personnel Salary per per MSR MSRs Costs MSR $17,000.00 + $3,000.00 X 5 = $100,000.00 3) To calculate savings in MSR personnel costs, multiply increased productivity by personnel costs. % Increased X Personnel = Savings in MSR Productivity Costs Personnel Costs 15% X $100,000.00 = $15,000.00

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Objective: Reduce Operational Costs

0 Perform accurate and timely sales tracking and reporting 0 Determine needs of the marketplace 0 Standardize credit union-wide procedures 0 Streamline and reduce back office operations 0 Eliminate redundant paper creation and distribution 0 Identify training needs 0 Streamline Support Requirements 0 Create A Networking Standard For Data Communications 0 Eliminate Redundant Data

unified Member Care automation provides a means for profiling members. This allows for personalizing the recommendation of products and services. unified Member Care automation can perform sales tracking and reporting, assist in determining where further employee training is needed, and whether individual sales goals are being met. It can also provide valuable product research information. Streamlining and standardizing credit union-wide procedures through unified Member Care automation will reduce personnel required in back office areas. and eliminate special forms and reduce the amount of paper used overall. Improved productivity reduces overtime, while reports designed to analyze staffing requirements will provide management with important staff and work scheduling information.

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Cost Justification Worksheet

Improved Member Service

Member # Members Retained X Value of Average = Increased Revenue from Lost/Year by Improving Service Member Relationship Improved Member Service _______ _____(____%) X $______ = $______

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Cost Justification Worksheet

Increased Productivity 1) Determine percentage increase in productivity through the activity time study analysis chart provided above. Time Spent - Time Spent / Time Spent = % Increased Prior to After Automation Prior to Productivity Automation ______ - ______ / ______ = _____% 2) Personal costs include average salary and benefit costs per employee. Multiply this factor by the number of platform employees. Average + Benefit Costs X Number of = Personal Salary per MSR MSRs Costs $______ + $______ X ______ = $______ 3) To calculate savings in MSR personnel costs, multiply increased productivity by personnel costs. % Increased X Personnel = Savings in MSR Productivity Costs Personnel Costs ______% X $______ = $______

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Cost Justification Worksheet Reduced Operational Costs Personnel X Overtime = Reduction in Costs Expense Overtime Expense $______ X $______ = $______ Uncollected X % Increased Collection = Increased Revenue from Fees through improved Operations Collection of Fees $______ X ______% = $______ Cost of + Storage, Shipping = Cost Savings of Special Forms & Handling of Forms Special Forms $______ + $______ = $______ % Increased X Personnel = Savings in Back Productivity Costs Office Personnel ______% X $______ = $______

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Cost Justification Worksheet Summary Once the total cost savings and increased revenue have been determined, the next step is to get an estimate of what the cost of the unified Member Care automation system would be. Once you have an estimate, you can compare the cost of the system against the value of the benefits which have been identified. 1) Subtract the system cost from the present value of total cost savings and increased revenue $______ Revenue from Increased Sales $______ Increased Revenue from Improved Member Service $______ Savings in MSR Personnel Costs $______ Reduction in Overtime Expense $______ Increase Revenue from Collection of Fees $______ Cost Savings of Special Forms + $______ Savings in Back Office Personnel Costs $______ Total Estimated Cost Savings & Increased Revenue $______ Less Estimated Cost of unified Member Care Automation System $______ Immediate Gain/(Loss) from Initial Cost of Investment

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Cost Justification Worksheet Payback To determine the payback period of the investment: Total Cost / Total Cost Savings = Payback UCC System Increased Revenue Period in years $______ / $______ = _______

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Additional Considerations Following is a list of the places to look for Intangible Benefits. They may be difficult to measure, however, there should be a consideration when justifying the investment in unified Member Care Automation, particularly since intangibles can make up 30% of the benefits generated from an automated systems.

0 Channel Management Productivity and Effectiveness 0 Integration of MCIF with Sales Platform 0 Sales Tracking and Incentive Processing 0 Impact on Staffing requirements 0 Single view of member relationship 0 Employee Morale and Job Satisfaction 0 Image (as viewed by members) 0 Image (as viewed by employees) 0 Improved Corporate Communications 0 Ability to react to Marketplace Demands 0 Competitive Pressures 0 Regulatory Requirements 0 Time-Sensitive Opportunities

ROI WORKBOOK€¦ · 40 South River Road, Unit 57, Bedford, NH 03110 USA +1 (603) 641-5482 Fax:...

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