Time To Think

CRM tools evolve into business intelligence solutions that use customer data to solve an array of problems

Bent on improving customer experience and retention, financial institutions are discovering that marketing is just one piece of the customer relationship management (CRM) puzzle.

As banks seek to integrate all touchpoints, CRM tools are morphing into business intelligence (BI) solutions that employ a single set of customer data to support not only marketing, but strategic initiatives like expanding business charters and developing new products.

Because it costs five times more to acquire a customer than to retain one, most CRM projects to date have been aimed at boosting customer retention.

"We know that acquiring a customer costs a great deal more than retaining one, but more important is learning how profitable this customer is," said David Campbell, partner in the financial services division of IBM Business Consulting Services. "Understanding the profitability of a customer, and more broadly customer segment profitability, is a key building block of a successful CRM strategy."

BB&T has developed a flair for customer segmentation. Two years after implementing a CRM strategy, the Winston-Salem, N.C.-based institution has segmented its customers into distinct categories, from which it analyzes their current relationships with the bank, the products they own and those they need. Based on their historic profiles, the bank recommends services to fit their needs.

Using thin clients, the marketing group connects to a relational database populated with customer data and performs ad hoc queries to gain insight into their behavior. The analytical approach is helping BB&T strengthen customer loyalty.

"BB&T continues to use CRM to learn how to better utilize information we have to make customer relationships more effective," said John Hubich, senior vice president and manager of client strategy at BB&T.

"Part of the BB&T business model is asking our clients lots of questions," he continued. "We always look for ways to better understand their needs, and based on their answers coupled with technology, we refer clients to other folks in the company, and help with their current and future needs."

The key to evolving CRM into a BI role, experts say, is to make CRM part of the corporate culture, then learn how to apply it across all customer touchpoints.

"By giving all bank divisions access to this customer data, CRM can improve information flow and business processes to customers and within the company," said Jorge Reyes, director of financial services solutions at Mercator Software. "By creating a more strategic approach to cross-selling, upselling and managing their clients' needs, banks can increase their bottom line."

SUCCESS BREEDS SUCCESS
Two years after installing the Siebel Finance platform from Siebel Systems, Fleet Bank continues to extend the system enterprise-wide. At the beginning of the project, the platform was rolled out to 500 employees within six divisions, among them capital markets, lending and cash management. The goal was to "demonstrate it would work across our organization," said Jim Eardley, managing director of development and strategy at Fleet.

"We have been expanding ever since," he added. "By connecting the institution on the same system, you begin to gain a whole greater than the sum of its parts."

In Fleet's Corporate Client Services division, Siebel Finance handles approximately 40,000 monthly customer contacts by telephone, fax, e-mail, and snail mail.

"The tool is providing a wealth of information that helps us identify cross-sell opportunities, enhance product development, identify service trends, and drive to root cause analysis," according to Charles R. Pierce, director of corporate client services at Fleet.

Siebel Finance forms an integral part of Fleet's Business Advisor platform, used by more than 1,700 relationship managers. In one year, the number of products sold per customer has increased by 24 percent, and Fleet's cross-sell efforts have increased by 15 percent.

Another institution that's mastered the knack of CRM is Dallas-based Credit Union of Texas. What started as a CRM project in 1999 has evolved into a BI project, with a CRM subset.

"We initiated it as a marketing project, but a year later, with more than three years of customer data collected, we started using the CRM tool and demographic data for other things," said Jerry Thompson, senior vice president and CIO of $500 million CU of Texas. "Then we realized we had a much more powerful tool than simply CRM."

Using IBM's Enterprise Performance Suite plus a DB2 data warehouse, CU of Texas is delivering customized one-to-one marketing through all delivery channels, including the branch, call center and online banking. The system tracks all customer contacts and ranks the bank's 109 products and services in order of importance to the customer, as measured by historical transaction data and existing accounts.

The system has eliminated the costly shotgun approach of 150,000-item mass mailings that rang up between $1 and $1.25 per item.

"We were happy if a mass mailing produced between 1 and 2 percent response rates," Thompson said. "Now we can mail 15,000 pieces and achieve between 6 and 12 percent response rates."

The system has proved effective in other ways, such as persuading state officials to grant CU of Texas an application for a community charter in the Dallas-Ft. Worth area, which would expand its membership base from 150,000 to 3 million.

"We used the suite's analysis tools to map out our vision for the state, then overlayed our field of membership and branch structures to illustrate how we proposed to support new branches," Thompson said. "The state looked at our reports and within 30 days granted the change."

The system has taken the guesswork out of planning and staffing branch locations.

"By merging customer transaction data with traffic flow at existing branches, we get a profile of member needs," Thompson said. "We overlay this data onto a special map analysis tool that shows the traffic flow for a geographic location. We planned our last five branches this way."

A SINGLE VISION
At larger banks, CRM projects might span several years. Huntington National Bank, for example, has spent the last five years fashioning an enterprise-wide CRM system to gain a single view of customers.

"The only way to be an essential partner with the customer is to have information available so we can sit with them, understand their needs and provide services and options that they perceive as quality," said J.A. (Joe) Gottron II, executive vice president and CIO at Columbus, Ohio-based Huntington National. "Meanwhile, our IT group needs to be a partner with the company's business units. The common theme is using integration as our strategy."

The bank employs the technology of Columbus-based e-Bank, a data integration company that Huntington helped found two years ago. "By interconnecting all disparate systems, customer information can be funneled into a centralized location that gives us a single vision," said Gottron. "For the last decade many decisions were made in a decentralized mode, but to take advantage of CRM and make informed decisions, integration was a necessary first step."

Other pieces were added along the way, including a new teller system from Argo Data Research, and a new, faster network. The bank also upgraded its call center and sales system, as well as its online banking platform. All of these systems' back-end integration have been completed, and all are working from a single flow of data. Huntington Bank has plans and business cases underway for even more integration projects.

Still, CRM is not a panacea. According to the 2002 Mid-Size Bank Study, which benchmarks organizations between $1 billion and $20 billion in total assets, mid-sized banks have not improved productivity in key sales and delivery processes, despite investments in technologies like CRM.

But coupled with a clear business plan, CRM systems can yield high returns. "We will continue to see progress in CRM rollouts, yet companies need to realize that rollouts take longer than they might expect," said Gottron. "This is not going to provide a big bang payback, due to its complexity. Companies should break CRM into manageable chunks, and that's how they should anticipate returns."