An overseas banking client of Siebel Systems, the e-business software giant, has been focused on designing a CRM program for about threeyears. The bank is just now at the point of starting to deploy technology.
That sounds like a long time and it is. Although most banks don't spend that much time in the concept phase, it points to a growing awareness that CRM is first a strategy and philosophy that must be thought out before any technology comes into play.
"I've had companies tell me that they're implementing computer-telephony integration CTI-integrating a switch with the data, and they think that's CRM," said Dave Carter, director of product marketing for financial services at San Mateo, Calif.-based Siebel. "You can use CRM technology to help make your call center more efficient, but CRM is not just your call center."
Projects that start out based on technology are doomed to failure, noted Tom Richards, research director, customer management practice at Meridien Research. "CRM is not about systems and technology. CRM is about management and strategy."
Alberta Treasury Branches, a C$12 billion financial services company, came very close to falling into that trap. The bank wanted to expand its call center operation from an 18-seat credit card service center to something that would handle all its banking products. It started building the new call center in January 1999, and put out an RFP for sales automation middleware.
"We realized very quickly that this was not just call center that we should be looking at-it really was enterprise," said Ken Casey, vice president of operations at Alberta Treasury Branches. "We ran into this expanded scope."
The bank chose to open the call center without middleware, adding just a switch and some call scheduling software, and decided to revisit the project a year later.
"The challenge was to keep the enterprise view in mind while just putting it into the contact center," Casey said. "The new software had to work in the contact center, but it had to have the ability to fit into other channels."
With a software solution from Siebel and hardware from IBM, Alberta Treasury Branches expects its expanded180-seat contact center, with areas for sales and for customer service, to be in full production with the new middleware in June. By eliminating the need to access multiple systems to answer consumer questions, the contact center's fully integrated front end will allow employees to access data up to 20% faster. Casey also anticipates 20% growth in inbound sales, and 60% growth in outbound sales, thanks to a new ability to get a full customer view and target individual sales more carefully.
Future enhancements will roll out the system to its traveling sales force, branches and the Web site.
Alberta Treasury is a bit ahead of the curve. Most banks are at the very beginning of the process of sorting out what CRM means to them, and what they want to do with it, according to Meridien's Richards.
GETTING TO STAGE FOUR
Meridien estimates that 60% to 70% of banks are in stage one of a CRM strategy-establishing a customer database, doing direct marketing, getting better targeting and better response rates. At the other end of the spectrum, banks with highly evolved CRM strategies are considered to be at stage four, which involves a lot of customer initiated efforts, with highly targeted personalized service. Of the financial institutions that Meridien monitors, only three are in stage four: Royal Bank of Canada, USAA and Charles Schwab.
KeyCorp would like to join them. A year ago the Cleveland-based bank introduced the 1Key initiative-a customer-centric philosophy emanating from top management. "One of the major factors in our making a change in our approach last year was our decision, corporately and strategically, to focus on the customer," said Bob Dutile, senior vice president at $86 billion KeyCorp.
Key decided it needed a common goal for CRM across all lines of business. "We want to make sure that every one of our customers has the opportunity to work with all of our services," said Dutile.
One strategy for achieving that is an enterprise data warehouse, which holds all customer account data by customer instead of business line. But that's just the beginning. "We have gone through what our existing applications are and the connections between them, to see how far our gap is from a perfect model," Dutile said.
The goal is a complete closed loop with all the service aspects being available to everyone, all the sales aspects available to those that need it, and the sales process embedded into the workflow systems themselves.
But with this strategy comes a new responsibility. As technology and knowledge improves and banks barrel towards CRM nirvana, they're finding they have to deal with increasingly complex privacy issues.
"With both the Fair Credit Reporting Act and the Privacy Act, we had to make sure that our common infrastructure ensures that we can serve people who don't want to be approached for our other services," said Dutile. "Both for regulatory reasons and because it kind of ticks off customers when they've told you they don't want to be bothered."
One component of Key's strategy is to explicitly ask customers if they want to hear about all of Key's services, and track those who don't. "That was a major driver in our systems and our processes," Dutile said.
Although services and tools designed to help consumers mask their identity have been available for some time, developers of CRM technology are just beginning to understand their importance. "They play an important role in privacy, and their software tools must help businesses implement a balance between privacy and personalization," said Carol Meyers, vice president of marketing at Unica, a CRM software vendor. Unica has launched a full-scale privacy initiative dedicated to helping companies automate best privacy practices, and has appointed a chief privacy officer to head up the initiative.
Targeting those who opt in and out of sales initiatives is just one more spoke in the large umbrella of CRM. Meridien's Richards sees CRM focusing more on customer value, ensuring that the ones that are most profitable to the bank get the best treatment. "Today, the goal is retaining, building and managing profitable relationships, more centered on wallet share than market share," he said, noting that only two in ten bank customers contribute in a meaningful way to bank profitability. "There's an urgency on the part of banks to try to identify and manage those profitable relationships. Some call it the next wave in the evolution of financial services."
Siebel's Carter explained, "In the past, technology hasn't really been able to allow for the handling of different kinds of customers, because the systems were dumb. CRM systems today can help with identifying a customer-what their current and potential value is-and use that information for routing in the call center. A bank may want to give somebody who's highly profitable a two-hour window for a commitment, where for somebody who isn't profitable, maybe it's two days."
While Key does look at customer profitability, as well as how customers want to want to interact with the bank, segmentation has not been a driving force. "If all someone wants is basic checking, we want to tailor our service to delivering that, in the most appropriate channel," Dutile said.
"While we are tailoring our services to what the customer's real profitability is, we believe that if we don't provide services that are of value to them, we can't make them profitable. If all they want to do is cash checks, it's a waste of time and money to provide them with services they don't need," Dutile added. "It's not that the customer is not profitable, it's that we're not approaching the customer profitably."
In the end, every financial institution has to decide to what extent it's the provider of high-volume commodity transactions and to what extent it's a value-added financial service provider, i.e., providing advice, information, and additional value.
"When we look at our CRM systems," Dutile said, "the constant question is, 'What about that system is adding value to the customers?' That is an ongoing piece of all of our future plans."
What Price CRM?
As corporations feel pressure to build customer relationship management (CRM) solutions due to competition, customer complaints, or the pursuit of profits, they are creating sophisticated CRM plans. Meanwhile, CRM costs are skyrocketing due to overlapping product offers and poorly coordinated spending.
Companies can either save money by managing their investments and leveraging CRM systems to meet their most pressing problems or plan on spending an unsettling $60 million to $130 million over a three-year period.
"As consumers continue to expect a high level of customer service and company leaders feel intense pressure to build CRM solutions, CEOs will need to closely evaluate what drives their CRM spending," said Bob Chatham, principal analyst at Forrester Research.
Many companies have made no formal evaluation of their CRM program, and as much as 20% of typical CRM implementation is wasted due to overlapping software and lack of coordination across functions like marketing, sales, and call centers. "CRM is of the same scale as the ERP initiatives that firms spent tens of millions of dollars on and needs-and deserves-the same level of attention," said Chatham. "After all, this is how a firm expresses its personality to its customers."
With the explosion of customer contact channels, such as ATMs, email, voice recognition, and wireless, banks are faced with the challenge of tracking and pitching profitable customers wherever they appear. This drives up CRM costs on three fronts: contact centers, application licensing fees, and integration with legacy apps.
2001 CMP Media LLC. 7/1/01, Issue # 3807, page 34.