CRM in financial services: The rise of the customer

Financial services customers are more demanding than ever, and serving them requires firms to think carefully about segmentation and the cross-channel customer experience.

CRM in the financial services segment is a shifting, amorphous beast of a topic. In high-volume retail banking, CRM is not only becoming increasingly important, but the practitioners are becoming increasingly savvy about the technologies and strategies. In the insurance segment, CRM is once again gaining traction and importance after a lull -- but CRM has its own distinct challenges. Through it all, though, one thing is clear: Keeping existing customers is held high above most everything else.

"CRM means so many things to different companies, and there's still a lot of confusion, but what I think is emerging -- and financial services is in the lead, along with telecom companies -- is this new term of customer experience management," said Richard Snow, global vice president and research director for Ventana Research's customer and contact center practice.

"I've definitely seen in the last 18 months a big shift from a focus on new customer acquisitions to customer retention and up-selling and cross-selling, and as you get focused on the customer you start to think about the customer experience rather than an older CRM term," he added.

The key questions become, then, all about the customer's interactions with the company. If the customer calls, is it a good experience? If the customer emails, do they get the results they are looking for? If a customer visits a website, do they find the information they need?

To answer these questions, Snow said a new executive position in business-to-consumer companies is emerging -- the customer experience manager.

"In the past, you haven't really had an executive responsible just for CRM," he said. Customer management was dealt with via more fractured lines of business, but the customer experience executive, on the other hand, is someone who looks across the whole experience customers are having with the organization and tries to do something about it.

Snow said financial services firms need to understand that customer retention is all about a customer's experience across every channel."If they have good experiences, you'll have a good relationship,” he said.

It seems simple, but financial services companies are faced with the need to cover multiple channels of communication. If a call center is fantastic, a bad email experience can still erase years of goodwill.

Who are these customers?

Once a company chooses to focus on the customer experience, there's a natural move to customer segmentation.

"Gone are the days of big-blast marketing," Snow said. "If I have a marketing campaign, I want to know who to send it to -- and if they want to receive it via email or a text message. Segmentation is getting much more granular, much more customer focused."

At the same time, said Kate Leggett, a senior analyst of customer service and call center processes for Forrester Research Inc., financial services enterprises are still looking at a balance scorecard of key performance indicators as they try to squeeze out as many costs as possible from their operations.

A key difference in cost-control these days is ensuring that the changes don't adversely impact customer service and customer satisfaction. For example, she said, financial services firms are pushing out as many self-service tools as possible, trying to advertise across new communication channels, trying to make transactions as easy as possible, and going to paperless statements.

For example, banks are trying to make banking easy from mobile phones, even tackling innovative challenges like how to deposit paper checks by taking photos of a check via smartphone.

"It's very important that companies still focus on service, especially in financial services where you basically have undifferentiated products and you have to rely on customer experience and customer satisfaction to be able to preserve your customer base," Leggett said.

Even as technology becomes increasingly important to customer engagement, financial services companies are realizing that tools are only part of the equations they need to solve.

"Companies are looking at re-engineering their processes as well as looking to outsource easily reproducible activities that don't impact the customer experience to lower cost centers," she said.

Meanwhile, while the insurance industry is also focusing on its customers, it has several big wrinkles to iron out.

"CRM has had a rough ride in insurance," said Kimberly Harris-Ferrante, a vice president and distinguished analyst for Gartner Inc.'s insurance industry advisory service. CRM's early promise in insurance quickly faded as tales of failure emerged.

"Ironically, we've seen a resurgence in CRM in the last 24 months, but it's definitely a new type of CRM than we've seen before -- first and foremost it's not called CRM, it's called a lot of different things."

Because of the complex ways that insurance is sold through multiple channels and different types of agents, CRM efforts are being expressed through sales force solutions, lead management, distribution management, and even customer call center and servicing pieces.

"In insurance, some of the biggest service instances are around claims and the billing and correspondence piece. In old-school CRM, that really wasn't included in the definition," Harris-Ferrante said. "So for servicing pieces, it's a bit tricky because it means the CRM has to be tightly integrated with the core insurance applications that are doing the claims, the claims data entry, and a lot of people are doing customer self-service through a portal or a mobile device."

Additionally, insurance tends to have large, core legacy applications that do not communicate particularly well with off-the-shelf CRM applications, she said.

"These old systems are almost impossible to get data out of, and as they try to have a single customer profile, our data shows that even after 10-15 years of CRM in the industry, less than 50% of insurance companies have a single customer view," Harris-Ferrante explained. "We still struggle with getting customer data, cleansing customer data, reconciling customer data. And now we have conversations around customer analytics, profitability and customer segmentation. Without clean customer data, you're not going to get very far."

Agents or policy holders?

In the insurance industry, companies are still sorting out who their customers are: Is it the agent or the insurance policy holder?

"Even if we are an industry that sells through an intermediary, we still need to know who the end buyer is, what products they want from us, how they want to be serviced, what their expectations are around information delivery, around call center experience. You have all of these things you need to have conversations around to understand the big picture," Harris-Ferrante said. "It doesn't matter if you are never going to talk to that end customer directly, you still need to know from product creation to service delivery what those customers want and need."

Plus, to make matters more challenging, the insurance industry has tended to sell to older, more traditional policy holders. Consequently, the customers of today, Harris-Ferrante said, are quite different. For example, a young customer looking to buy auto insurance is far more likely to search and buy completely online than traditional customers who call up their local agents.

"If you map all the channels we have today based on the old customer, and then you put a radically different customer base next to it, it means you need to have different channels, products and services to offer these young people," she said, which is something forward-looking insurance companies are starting to grapple with.

And yet, it gets even more complicated. It might seem that an insurance company would want to intimately understand all of its policy holders so it could share that data with its agents. Not so fast. There are two basic kinds of agents, those who work only for or with a single insurance company, and those who are independent and sell policies from a dozen or more companies. "Insurance companies don't want to give too much information so independent agents can sell competitive products," Harris-Ferrante said. "So insurance companies are hesitant because they don't have good metrics on agent loyalty."

Which agents are most profitable? Which are most loyal? Are they loyal only to certain policies? Who should be given the best leads, special deals and new technologies?

"Within the last 12 months, agent segmentation is a hotter topic than customer segmentation," Harris-Ferrante said.

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