A Deeper Understanding
Segmentation -- dividing customers into separate groups based on similar characteristics and similar needs -- helps banks anticipate what kind of packages of services that a type of customer would want and what they have been worth to an institution historically, CGI's Duncan explains. It has also become one of the most effective ways to ensure customer satisfaction and a unique customer experience, he notes.
According to TowerGroup, however, traditional demographic segmentation falls short of delivering a superior customer experience. Diversity in the marketplace is growing, and the idea that any group is discrete -- or homogeneous within a specific ethnic group -- is shortsighted and will fail to predict individual purchase behavior, the research and consultancy firm says. A prerequisite to meeting the customer experience challenge is developing a deeper understanding of growing diversity in the marketplace, TowerGroup contends.
To achieve a deeper understanding of its customers, National City divided its customer base into 12 segments. Those segments are based on the customers' current value, potential value, credit risk and attrition risk, according to the bank's Oschmann, who notes that each segment is defined by the way those buckets blend. Based on those classifications, National City develops a strategy for the relationship -- ways to grow the relationship, or whether or not the relationship warrants any attention at all, he adds.
The strategy goes back to a couple of years ago when National City surveyed its customer base as part of its customer advocacy research. "The customer said, 'You need to show that you really know me, as well as look out for me and reward me,'" Oschmann recalls. "That may be theoretical, but it's my job to make it real," he says.
Oschmann is responsible for strategizing, designing, delivering and managing capabilities that differentiate interactions with the customer with the intention of maximizing the value of each relationship, he describes. The capabilities include relationship-based pricing, retention intervention tools and fee-refund guidelines.
The technology behind National City's growth strategy is an outgrowth of an Argo (Richardson, Texas) customer experience management system. "The system did not have a lot of so-called 'CRM' capabilities to leverage, so we've been building on that and improving it," Oschmann relates. "[We've been] adding a lot of analytical CRM capabilities to improve the experience of every interaction."
According to Oschmann, "One of the things we did is bring [customer information] together in a very natural way." He created a relationship summary screen, where the most relevant customer information is gathered together. From that summary, employees can navigate to wherever they need to go without opening multiple systems, Oschmann says. Customer-facing employees also can document contacts and set follow-up actions on the summary screen, he adds.
The system has several triggers, including one that detects an elevated risk of attrition. The triggers include missing direct deposits, change of address or loan turndown, among others. "When the customer gives us the opportunity to react, we don't blow it," Oschmann says. "Now we have a crack at keeping that customer."
Those event triggers, which ideally are indications of customer life events, have been the subject of increased focus by financial institutions in the past five years, points out CGI's Duncan. "The key is to react to the trigger as a need to check in and see what is happening with your customer, focusing on those that are most valuable, highest potential, at risk of attrition -- not as an excuse to cross-sell, but to understand their situation," he notes. "An expanded relationship will be a natural byproduct."