As Cap Gemini Ernst & Young Canada’s consulting manager with CRM and the financial services industry, Gregory Smith deals almost exclusively with the financial services organizations in Canada and the U.S. He heads up CAP Gemini’s annual report on the financial services industry. This year’s report, the tenth, was still in the works when we interviewed Smith from his Toronto office. What was available was information from their CRM Index, their series of questionnaires sent to senior executives in organizations across industries in North America and administered by Gartner Group.
IT World Canada: How does the application of CRM in the financial services industry compare with that in the retail/wholesale industry?
Gregory Smith: If you think of customer knowledge, and then customer focus, and then resource and process integration, and then within each of those categories, there are different functional activities that a company could be going through. The biggest differences are really in customer knowledge. Banks do a bit better job of capturing that data because of the intimacy of some of the products that are in the household and the length of time — if you think of a mortgage, a line of credit, a car loan even — the time over which the organization is interacting. So, not surprisingly from a value added application, the banks are quite a bit ahead of consumer products, except in terms of the immediate identification of appropriate service level by a phone. That really means that when I phone in, you know who I am and you know that I’m a better customer because of my purchase history and that kind of comes a little bit down the line when you think of comprehensive customer data capture.
The consumer products companies do a much better job of understanding customer service history and the purchase history. I think the banks would love to have the history that the consumer products companies have, but they’re not able to, or they struggle with that because of the number of different products in a financial service organization. All those products needed their own system for accounting and transaction records. To get an integrated view of customer contact is certainly challenging.
If I continue to do a bit of comparison where the banks are lagging and where they’re probably envious of consumer products is the real time decision support. It looks as though from our data that the consumer products companies do a much better job of real time decision support than the financial services industry. That’s a factor of the same sort of touch-point integration. How do I know that you’ve been on the Web site? How do I know that you’ve contacted the call centre? How do I know that you’ve walked into a branch?
When I look at the questions around the adoption of CRM, the banks are ahead of consumer products. Fifty-nine per cent of North American financial services organizations said that they have completed some form of organizational alignment around CRM. Have they completed a CRM initiative in the last 2 years? Seventy-three per cent of financial services organizations in North America have said ‘yes’. Is CRM a top priority or gaining ground? Eighty-three per cent of North American financial services organizations say ‘yes’. You’ve got to have someone accountable; some sponsorship.
Let me compare those stats to consumer products. The answer is 51 per cent around organizational alignment, 65 per cent around the initiative in the past two years, and 70 per cent in gaining ground. So there’s a bit of an edge in terms of adoption of CRM.
IT World Canada: How important is CRM to the financial services industry?
Smith: I think by the nature of banking, and I think that the amount of competition in the financial services industry… if you really think about the kind of erosion of traditional lever points that the banks and the insurance brokerage firms have seen because of technology, because of global competition, because of certainly the Internet and what that does for customer power, CRM has become a very critical issue for banking in particular.
IT World Canada: What are the hurdles to gaining good ground with CRM?
Smith: Some of the hurdles would be a lack of discipline in measuring the return from a CRM initiative. I mean 42 per cent of executives — based on our survey again — did not know their ROI because they did not measure it. If you don’t measure it, how are you going to get it done? How are you going to see the value? And this is important in terms of the organizational commitment to CRM.
So, measure the results, have a final end to this segment of what you’re going to do, and thereby build the momentum and keep people on track. Where some companies are challenged I think is in thinking that they can do it all and do it over three or four or five years. And that can be very discouraging for an organization.
There are going to be benefits to efficiency that will actually save you costs, but there are also benefits to revenue because of the increased loyalty that you’re hopefully going to affect. You’ve got a couple of things that are kind of blurring there and it’s going to be a daunting task to try to measure that. It could be that last year or two years ago you had projects underway that were going to significantly enhance the customer centricity of your organization and the effectiveness of your sales force and the service level that you’re offering. So, maybe they weren’t called CRM, but they sure were supportive of a CRM strategy.
So you can assess the projects that are underway or planned or funded or not funded or proposed and take a filter through that and say ‘we should look at all these customer touching projects with the same sort of objectives in mind and gain consensus.’ The project that was started a couple of years ago that wasn’t called CRM, it probably had a business case associated with it. It’s a matter of having the discipline of following up on that project and seeing whether it met the financial objectives, but also whether it hit the objectives from a CRM standpoint — then using that same sort of discipline going forward.
We still see, in the surveys that we’ve done, that organizations are based on product rather than customer segments. So 41 per cent of organizations across industries, not just financial services, were organized around product groups and 29 per cent were organized around geography. If you think about an enterprise-wide or integrated CRM strategy being rolled out, how can you possibly do that if you’re organized around product silos or geographic regions? Your customers are going to see a completely different thing.
Some of the stuff we’ve seen that differentiates the financial services industry is around having as one of their key goals an integrated branding by taking an enterprise view. Of the financial services industries in North America, 75 per cent indicated that their budgets for CRM initiatives will increase and of those same firms 90 per cent indicated that their budgets will increase more than 10 per cent. Where we see that they still need to make a significant investment is in coming up with the strategy that supports the branding.
The other key hurdle is executive ownership. More than half the executives we interviewed (54 per cent) said their company split this responsibility across multiple executives. So that’s difficult. If you’ve got something called maybe a CRM committee within an organization trying to affect CRM change, you can spend a lot of time gaining consensus. One of the things we recommended was that you spend a really intense and concentrated amount of time agreeing on the principles and then flushing those other principles into a sort of future state. So when we say institutional memory, it means that this is how we’re going to roll that out across lines of business for our product, and how it will look in the different channels, face to face or Web or call centre. If you spend a concentrated amount of time there, then it kind of lays the pathwork and it kind of sets the imperative. Then it would allow a single executive to manage it more effectively than if you’ve got a fragmented leadership team.
IT World Canada: How do the U.S. and Canadian financial services companies’ responses to the CRM Index compare?
Smith: Where there’s a consistent lag is in Canadian financial institutions thinking about CRM in the service functions. Canadian financial institutions do a very good job of sales and marketing but where they need to focus is more on the service. It’s pretty common knowledge that banks are worried about their service levels and so hopefully this sort of message that we’re handing out confirms that.
Think of all of the work that a bank would do to gain a new customer and maybe even ask you to transfer from your existing financial institution, and then once you are a customer, the infrastructures they have in place to make sure that you have the feeling that you’re still very valued and you have different touch points.
It might just be a factor of the kind of proliferation and touch points between wireless and Web and PDA and call centres and IVR and sales forces and service parties. It might just be that there are so many ways to touch a bank that it’s a very daunting task. But it also I think says that they’re thinking of an incomplete CRM picture and they haven’t extended the work that they’ve done on sales and marketing to the services component. From a process and from a people standpoint, they have not aligned everything in an effective way to follow through on their goal as being a sales organization at every point of contact. It seems from the data we’ve got as though other organizations in the States may do a better job at that.