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Service Excellence, Customer Delight
Financial Services & CRM in
the Experience Economy
Paul GreenbergPresident, The 56 Group, LLC
Chief Customer Officer, BPT Partners, LLC
Author: CRM at the Speed of Light
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Overview: The New CRM Definition
CRM is a philosophy and a business strategy, supported by a
system and a technology, designed to improve human
interactions in a business environment.
Paul Greenberg, CRM Magazine, Reality Check (February 2003)
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Overview: The New CRM Definition
Principle #1
Value & values are given & in return, value & values are received
Principle #2
Each of us is governed by self-interestPrinciple #3
For ideas to be truly exciting, they have to be real
Principle #4
Do unto othersyou know the rest
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Overview: The Business World has Changed
Pre 90s
Product/Demand drivencorporate ecosystem
Late 90s to nearly present Customer driven corporate
ecosystem
Present
Transition to customerecosystem Era of the Soc
ialCustomer
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Overview: The Business World Has Changed
People have changed more than the business organizations uponwhich they depend. The last 50 years have seen the rise of a newbreed of individuals, yet corporations continue to operate according toa logic invented at the time of their origin, a century ago. The chasm
that now separates individuals and organizations is marked byfrustration, mistrust, disappointment, and even rage. It also harborsthe possibility of a new capitalism and a new era of wealth creation. Dr. Shoshanna Zuboff, The Support Economy
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The New Business Model: Experience Economy Goes Mainstream
"Companies used to focus on making new, better, or cheaperproducts and services....Now the game is to create wonderful andemotional experiences for consumers around whatever is beingsold. Its the experience that counts, not the product."
Peoplewant capabilities and options, not uniform productsbusiness is there to provide the tools.
The Knowledge Economy is giving way to the CreativeEconomy... (Knowledge has become a commodity so thesolution is to) "focus on innovation and design as the newcorporate core competencies."
BUSINESSWEEK, DECEMBER 19, 2005
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The New Business Model: Experience Economy Goes Mainstream
2006 Davos World Economic Forum concentrated on theExperience Economy, creativity and innovation
6 Workshops for CEOs on this subject including
The Culture of Innovation
Prepping for the Creative Economy
Externalizing Innovation & Creativity
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Generation C Cross-generation (source:Springwise)
Focused on content, wired, creative, regardless of age
Baby boomers are getting set to retire many with disposableincome
Gen X is becoming a pre-eminent generation AND hasdisposable income
Gen Y is entering the workforce and accumulating somedisposable income
Characteristics of the Ecosystem The New Customer
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Phase 1 The customer and vita passiva
New definition of trusted source
Information available nearly instantaneously either structured or
unstructured via the web (Google, Yahoo, MSN) On Demand software as a service (salesforce.com, etc.)
Enterprise value chain supersedes siloed supply, demand &support chains
Link between lifestyle and business consumers adopt sexy
content
Characteristics of the Ecosystem The New Customer
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Phase 2 The customer and vita activa Era of the Social Customer
Social networks as active participants in effecting change (blogosphere, podcasting)
Collaboration between company & customers to provide useful value for each
Customer value chain subsumes enterprise value chain
Ubiquitous technologies leading platform
The Live Web (Web 2.0) (MySpace, Facebook)
Customer begin to include business as feature of life choice, not a separate factor consumer createdcontent becomes part of business (salesforce.com AppExchange, John Fleuvog Shoes, BMW)
Characteristics of the Ecosystem The New Customer
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Power of social networks
Linked In 9+ million members
MySpace 92 million members
Facebook 12 million members
ASmallWorld exclusive membership for those who have social networks
Social networks as capital
Characteristics of the Ecosystem The New Customer
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Each customer wants a personalized experience
They couldnt care less if they are high value or low value customers
They dont know if they are high or low value to you But you have to care and yet, accommodate them to a degree
But how do you deal with it when you have millions of customers?
Understand the typical experience of a customer at every pointAnd what they want
Focus groups, in-depth interviews, surveys, etc. But provide the tools for the customer to manage their own experience
Information that allows them to make informed, empowering choices
Characteristics of the Ecosystem
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Growth of Internet banking services
Initially expected to be a cost driver lower costdelivery channelValue actually was increase in customer retention
because of potential for control of own experience withbanking institution and the requirement for social andself-expression by the new generations
Characteristics of the Ecosystem Case In Point
Often Surprising Results
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A NEW MODEL
The New Business Model Requirements
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The New Business Model Requirements
Differentiators are no longer products & services
Pretty much the same from company to company
Key differentiator is the customers experience with the company
Provides a business value for the experience with the products/services Comfort
Convenience
Simplicity
Ubiquity
Timeliness Contemporary technology use (e.g. mobile technologies, not Oracle)
Wow factor
Customer feels sense of importance, self-control, ownership
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300 brands
16 of those brands $1 billion and up (e.g. Charmin, Crest,Folgers, Downy, Pringles, Tide)
2 billion consumers affected w/6 billion as goal160 countries reached
One of 30 companies on the Dow Jones Industrial Average(DJIA)
Case Study: Big Companies Proctor &Gamble
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We have to create a great experience every time you
touch the brand, and the design is a really big part of
creating the experience and the emotion. We try to
make a customers experience better, but better in herterms. A.G. Lafley, CEO Proctor & Gamble
I think its value that rules the world. Theres an awful
lot of evidence across an awful lot of categories thatconsumers will pay more for better design, better
performance, better quality, better value and better
experiences.A.G. Lafley, CEO, Proctor & Gamble
Case Study: Big Companies Proctor &Gamble
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Focused around the co-creation of value and usercommunities
Sales/Marketing
Vocalpoint 600,000 moms
Tremor 225,000 teens
Research
Innovation Network 80,000 scientists
Technology entrepreneur networks
Benefits?
In 2001 20% of ideas, products, technologies external
In 2004 35% of ideas, products, technologies external
In 200X 50% of ideas, products, technologies external
Virtual design, 3D simulation
Case Study: Big Companies Proctor &Gamble
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Perhaps the most innovative company in the U.S. when itcomes to understanding of the benefits of customer ecosystem
They emphasize the desired consumer experience as their primary design
focusTaste, smell, feel of products not just utility
Connect & Develop programMoving technology and ideas between cross-functionally
Crest Whitestrips involved oral care unit (whitening teeth), corporate R &D (film technology), and fabric/home care (bleach experts)
Tie the effort to working with consumers too 50 technology entrepreneurs who scour for external resources including
customers Use of ethnographers to try to understand the activities of individuals in the
context of social anthropology
Case Study: Big Companies Proctor &Gamble
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Streamlined supply chain because of understanding of the enterprise value chainand its relationship to customers (2002)
Sixty percent of P&G sales due to events (organized experiences) can be promotions (e.g. Max theStack decoder cards for teens at theme parks or concerts)
Pull events meant pull supply chain i.e. produce only what the customers are buying cut outexcess inventory
Scary due to out of stock means 41% of the time the sale is lost and 28% of the time a competitor ischosen.
Also scary because 5000 key retailers & 30,000 key suppliers had to buy into the changes
If you cant drive sales and deliver product at the point of
purchase, you lose. Jake Barr, GM, Supply Chain
Innovation
Case Study: Big Companies Proctor &Gamble
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Key Performance Indicators Out of stock rates Total supply chain response time from purchase at register to
purchase of raw materials to replace product Shelf level quality damaged or unappealing packages on store
shelves reduction to zero Pricing design from the shelf back what price is appealing to
customer and then reverse engineer to see if product can be producedto make that price point
Results?
7.6% out of stock rates rather than 16.3% from 2003 to 2004 Earnings growth went from 15% in 2002 to 20% in 2004 Annual savings between $50 and $100 million Increased sales from $40 billion in 2002 to $43.4 billion in 2003
Case Study: Big Companies Proctor &Gamble
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Custom T-Shirt Company
User Community-focused
300,000 members
User content creation
Community members design the t-shirts
Community members vote on their favorites
Threadless produces them 1000 limited edition for eachwinner
Threadless shares the revenue with the designers
Premium pricing
Case Study: Small Companies Threadless
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CRM & Financial Services: The Challenges
Investment in financial services- related CRM technology isexpected to be around US$6.8 billion in 2006 and increase at therate of roughly 14% per year for several years going forward
DOES THIS MEAN THAT THE FINANCIAL SERVICES
INDUSTRY FINALLY FIGURED OUT CRM?
The answer is: NOT PARTICULARLY
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CRM & Financial Services: The Challenges
Two Problems:
First
CRM isnt merely a technology, but the desire to automate problems away is
so deeply prevalent when it comes to CRM thinking that the spending on
technology could easily be mindless or dangerous or premature
Second
The issues that customers have arent technological for the most part: They
dont see financial services companies considering them important just
as objects of product sales
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CRM & Financial Services: The Challenges
Traditional financial services culture is product-centered
Advantage gained is seen as:
Price
Product variation and availability
Some targeted services to the high value customers of the moment
The success metrics that financial services CRM initiatives often use arebased on increased numbers of products per customer or segment
Thus, sale to 80 year old customer of a 10 year certificate of deposit isconsidered a new product sale i.e. a good result
Ignored is the emotional response of the family to this sale decreasedcustomer loyalty due to the obvious lack of concern for the individualcustomers personal welfare
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CRM & Financial Services The Challenges
Customers Dont Trustthe Commitment of the
Financial Services
Companies to Them
Source: Celent, Emerging Affluent Baby Boomers, Financial
Services, & The Web 2005; 467 respondents
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CRM & Financial Services: The Challenges
Results of this lack of trust by the customer and the product-
focus by the financial services industry
Results are characterized well by the 2005 Forrester Group Study
on Usability Flaws on Financial Services Sites
Rated on
Value
Navigation
Presentation
Trust A minimum passing score was 25
A superb score was 50
The financial services industry average was 5.7
The failure rate was 85%
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CRM & Financial Services: The Challenges
Retail banks lose half their customers every two years
(Economist, December 2004)
Walker Information Study on Executive Buyers (767
respondents/2278 observations, early 2004)
66% are not loyal or planning on maintaining relationship with institutions
But 75% indicated some level of customer satisfaction, even when notpleased with the relationship overall
31% of the buyers were high risk low intentions of continuing
33% felt trapped, unhappy but having to continue for now
Only 34% were truly loyal
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Verbal terrorists are rising to new levels of activity
Conventional, oft quoted research from companies like TARP say:Advocates will speak to between 5 and 9 people about what they loveVerbal terrorists will speak to between 9-16 people
Current reality is that a verbal terrorist can reach tens of thousands ofpeople through user communities and blogs.2005 Dell Hell from The Buzzmachine - Study entitled Measuring the
Influence of Bloggers on Corporate Reputations (2005, Market Sentinel,Onalytica, ImmediateFuture.com) found that
Bloggers as a group were the second most influential group about Dellservice after Dell itself and had more impact than Dell on negativecustomer service rather than positive customer service
The Buzzmachine buzz penetrated the mainstream press. Second most frequent references to Dell Hell story after Buzzmachine
was the NY Times.
Advocacy v. Verbal Terrorism
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CRM & Financial Services: The Challenges
Early successes built around accumulation of customer data
Reorganization around customer segments;
Metrics that measure customer value;Recognition of the difference between high value and low value customers
Differences in treatment and resource expenditure Marketing and service programs that were coordinated and increasingly
better targeted; and
Technology solutions that enabled somewhat more relevant andincreasingly efficient interactions
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CRM & Financial Services: The Challenges
But this is not what the new generations require nor the laurels the
financial services sector can rest on
New generations of customers are younger with less assets now but notnecessarily in the future
Mindset must change at the banks toward a view of providing personalizedand meaningful services to individual customers
Great customer experiences are essential and, probably as much as awedding, a family/households finances are an emotional matter, more thanjust a purchase.How do you deal with that?
Metrics cannot be based on the number of products purchased or portfolioinvestments
Nor can the concern be just around just efficient processes
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Sadly, these challenges are borne out even further by recent
results
Forrester study in 2006 of 60,000 bank customers shows that, ingeneral retail banks have sub par customer advocacy scoresCitibank and JP Morgan Chase have 20 percentHighest is Wachovia at 40 percent, not great but there is a reason they do
relatively better
CRM & Financial Services: The Challenges
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Wachovia Bank Success Story
13 million customers
Focuses on lifetime customer equity, not just LTV which is just an average.Developing value profile for each household
The effect on the customer of a sale of a specific new product or service overtime is examined before the discussion begins about the product with thecustomer
They also examine how it will affect other future products/services for thatspecific customer
The data is also used to optimize the approach to the individual customer andtheir household
CRM & Financial Services: Competitive Advantage
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CRM & Financial Services: Competitive Advantage
Could there be business value in treating a
low value customer with high value services
and experiences?
Yes, when customer data is used for
insight, not just portfolio managementand product sales per se
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CRM & Financial Services: Competitive Advantage
Example: Telecommunications of Customer Insight & Planning
Chief Technology Officers are found to be users of the
residential service
Colombian Orbitel S.A. ESP
NOT YET
They are automatically treated as a high value
customer with all the attendant quality of services
Even if he spends no money on residential service and
doesnt have a commercial account
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Sometimes success comes at an apparent (and actual price)
E-Loan discloses all fees upfront guarantees no change during theprocess
Vanguard sliding scale for fees from investment advice to brokerage
commissionsBased on assets and length of time customer has been investor
Multiple banks open a money market account, no fees of any kind ING will reward you with $10 if you tell a friend of this no-fee feature
Tough to do since non-interest revenue streams that are affected are of
all operating income generated by U.S. commercial banks But these are the kinds of things that generate trust and confidence
CRM & Financial Services: Competitive Advantage
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CRM & Financial Services: Competitive Advantage
Competitive advantage is gained by customer-centered culture
And KPIs, compensation programs, etc. that support the levels of service excellence and thinking thatdrive employee and business partner behavior
Because the new generations of investors both local and international are technologically savvy,empowered and demanding, the financial tools to determine their own destiny are important to them
Personalized service for family based or socially based portfolio development including corollaryservices (help them find support in other areas e.g. retirement planning services)
Improvements in the customers experience with the institution
Think of customer for life through generations, not objects of sale at the moment
All business processes should be focused around customer value
That means that operational success cant trump customer value
Increase in customers sense of security
Im not talking about actual increases in security measures though that too, of course We care about your future not just your money
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More institutions beginning to take advantage of social tools that are out there to
attract newer generations of future high value customers or are used by customers to
make decisions about financial services
TVNZ in New Zealand launched the first free podcast in New Zealand ASB Business run byASB which is a NZ bank
UMB Financial in Kansas City launched a podcast at the end of 2005 to offer listeners a chanceto learn how best to manage their money at their convenience.
About.com has a user community to discuss money and finances and even banking
UK and Switzerland has several banking blogs that are discussing the current instruments andprograms available through banks and will rate (emotionally) bank services (see BritBlogs)
CRM & Financial Services: Competitive Advantage
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THANK YOU FOR THE OPPORTUNITY
For more information please feel free to email me
at: [email protected] or read my blog
at http://www.the56group.typepad.com
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