BEYOND TECHNOLOGY

Why Do Many CRM Initiatives Fail?

For years, financial services providers developed relationships “the old-fashioned way,” through one-on-one contact with individual customers. But as channel alternatives and profitability concerns grew, technology vendors quickly responded to the need for customer management solutions by developing “CRM in a box,” products they claimed to be an elixir capable of delivering magical, quick-hitting profitability enhancements.

Luckily for shareholders, shrewd bank executives have asked why a large number of these CRM programs fail even when companies have the most sophisticated technology at their disposal. From our experience, we know the answer is that some marketers simply believe technology is a cure-all; they implement technology solutions without first addressing fundamental business management issues.

Secure Support

The first hurdle in developing a successful program is securing executive support and guidance as program objectives and scope are determined. Although vendor marketing materials would make one believe that a successful program will ride the wave of cross-sell to incredible financial returns, the truth is that most programs gain their initial success only through the retention of high-value customers.

Rather than driving profitability through the execution of “next likely product to buy” leads, successful firms are finding that improving the balance and profitability retention of high-value customers will lead to long-term financial gains.

However, gains in customer loyalty and retention generally require that the bank engage in counseling high-value customers about more appropriate (read: “higher earning/lower net interest margin”) products and services. Consequently, many lower-earning deposits are converted to higher-earning accounts.

Doing this requires that executives and managers from different parts of the business be comfortable and supportive of the fact that product and portfolio profitability will initially decline as customer deposits are re-priced, and will take roughly 18 months to recoup via improved retention of balances.

Secondly, effective CRM programs require executives and line-of-business group managers to support and coordinate cross-silo marketing tactics. For example, deposit and investment line-of-business managers must create rules of engagement that ensure the most appropriate services are being offered to individual customers based on the customer's need rather than the business line's need. Not only is it important that these rules be followed, but they must also guide all communications, ensuring that customers receive consistent — rather than conflicting — messages.

Training Programs

Next, a successful customer management program requires that the firm develop training programs for their own sales representatives to improve their skills for a customer-driven environment.

Many doomed programs find their roots in asking sales professionals to perform tasks they are neither prepared nor given incentives to do — or involve duties that they have no desire to perform. This can be in the form of the traditional challenge, getting long-time service staff to perform proactive sales, or an emerging challenge of finding sales professionals capable of addressing customers' disparate financial challenges with a broad array of individualized financial solutions.

In the latter case, effective needs-based customer management may require a relationship officer to be able to recommend complete solutions that employ credit, investment and insurance solutions.

For example, a customer who is facing the challenges of putting children through college and helping aging parents may require a solution that includes investment, life and long-term care insurance recommendations.

In these instances, training programs must instill sales and financial advice skills that provide relationship managers with the ability to be flexible with solutions based upon the unique needs of customers. This is no longer queuing up an auto-dialer with several thousand prospects to sell a certificate of deposit (CD).

Enhance Support

Even with improved skills, sales management and sales support functions need to be bolstered.

Management must be able to assess the skill set of branches and call center professionals and to allocate tasks to individuals according to their ability to retain customers, acquire new business and perform needs-based selling. For example, branch service reps are frequently excellent at retaining older, branch-wed customers, such as CD owners. On the other hand, more aggressive call center sales staff are often better suited to discussing expanded business with customers, such as retirement plans and insurance.

The Right Tools

Finally, before a company can effectively develop a broad CRM tech-driven strategy and tactical solutions, it must take stock of its current marketing technology as well as new capabilities available in the market.

An effective CRM environment will include tools that span from the front office to the back office, including data warehouse or datamart containing pertinent customer information, appended demographic data, account or policy data, and transaction and interaction history; campaign management tools to analyze customer data and create customer needs-based outbound marketing communications; and interactive marketing tools to analyze transactions and interactions as they occur.

TIMOTHY M. WALZ is the Allink Agent business director at Harte-Hanks, in San Antonio, TX.