Brett King

Posts Tagged ‘customer experience’

Consumers shun bank marketing in preference for online research

In Customer Experience, Media, Retail Banking on September 13, 2010 at 10:14

At their annual ThinkBanking event last Thursday (Sept 9th) in Sydney, the Google Financial Services Team released their latest behavioral research supported by Global Reviews’ Customer Experience Benchmarking. The results are a shock to those expecting traditional marketing methods to strongly influence customer behavior in respect to product selection in the financial services space. Barney Pierce, the Head of Industry – Finance for Google in Australia articulated that the research “shows a fundamental shift toward the online channel dominating research for financial products and services. A large part of which is search related activity.”

Greg Muller and his team at Global Reviews who assisted with collecting the research explained that the research was conducted across Australia with a sample size of over 900 people from all walks of life – it was directed at all users of financial services products. In the research customers were simply asked to find ether a deposit product, a credit card, or a mortgage and report back on the process they used to find and select a product.

88% of customers research online

Staggeringly when it comes to financial products, 88% of customers today start their journey online. For deposits and credit cards, 78% of time spent researching options overall is done in the digital space for an average of 3 hours and 20 minutes. (that’s up from 58% in 2008) For mortgages and home loans, 62% of their overall research is done online spending upwards of 11 hours and 25 minutes before settling on a product. 77% of those surveyed said that they didn’t know about the product they finally chose before when they started the task.

The data shows a significant shift in behaviour when it comes to the selection process. Traditional marketing theory suggests that brand marketing and campaign marketing are strong influencers of behaviour when customers are selecting products, but this most recent data flies in the face of accepted theory. 51% of customers had a preferred brand when they started, but of those that used search to attack the task, 58% didn’t search for their preferred brand. Of those that started with a preferred brand 1/3rd (31%) ended up selecting a different brand.

What about the branch?

So what about the role of branch, call centre and other channels in the actual application process? 68% of those surveyed prefer to apply online, compared with just 29% who prefer the branch experience. However, 89% of people said they are open to applying online in the future if bank’s and FI’s get their approval processes up to scratch.

The research shows that for poor usability was the primary reason that customers would abandon a website and pick a competitors brand online. The highest % of customers who stay with online throughout are the $100k+ p.a income bracket, in fact, 82% of High Income customers total research is done online today and 74% of these indicate they would prefer to apply online for deposits & credit cards.

Google Finance research shows a big shift to online for finance products

Conclusions

The data indicates the following shift has taken place in the last couple of years:

  1. Consumer behavior has radically shifted in respect to financial products with brand and search being the top 2 mechanisms for product selection/choice these days,
  2. Financial Institutions need to invest big time in Search Engine Optimization, Search Engine Marketing, Social Media Support, and
  3. Financial Institutions need to streamline and produce highly usable web experiences so they don’t lose customers looking for their products.

Based on this data, if you are a FI and you aren’t spending at least half your marketing budget in the online space, you are going to have severe problems with acquisitions moving forward.

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Is Customer Experience innovation too hard for UK banks?

In Customer Experience, Retail Banking, Strategy on July 19, 2010 at 10:59

When you read a definition of Customer Experience you invariably will see two elements – the lifetime experience of the customer, and the total experience of the customer day to day as he engages in transactions with the provider of the goods or services he is utilizing. In meeting continuously with UK banks over the last two weeks I find an almost unhealthy obsession with branch experience as the be all and end all of the customer experience challenge. It is as if a poor customer experience across any other channel can be solved simply by a customer walking into a branch having a great service experience. I just don’t buy that.

Last week when I was interviewed on CNBC the issue of Lord Levene’s “Project NewBank” arose, where his stated goal is to primarily recreate the branch philosophy of the 1960s and 70s where a customer walking into a branch is recognized by the local manager, and given personalize ‘back-to-basics’ service.

“Hopefully we can give them all a proposition this time that is fairly straightforward, where when they go into their local branch they know who they are; if they don’t want to go into their local branch they can go on the internet; if they want to phone up they can speak to someone they know – hopefully not a different person every time they call…” – Lord Levene, Chairman Lloyds of London

Hang on…what is different about this to my bank today? Someone knows me in the branch, or I can get to the same person every time I call?

There seems to be a perception today in the UK that all that is needed to fix the poor perception of banks today, is to offer better service through the branch and telephone. But there are a bunch of other issues.

Convenience and expedience are core drivers

When a distribution team in a commercial bank look at the possible locations of a branch for a bank – what are the parameters? Primarily the key concern is being able to maximize traffic through the branch – so the real estate must be in the most convenient location for customers to get to, to park (if they have to drive to get there) and to visit the branch. The other concern is obviously the key segments the bank wants to attract to that branch – i.e. High-Net Worth customers, Mass Affluent, SMEs, etc. The problems associated with decision on branch location today, however, are complicated by the fact that individuals are increasingly less likely to want to take their lunch hour to visit the branch, and that on the weekend or evenings when they have time the branches are closed. Thus, we see banks like Metro Bank seeing their differentiation in opening hours (7 days a week, open late) and the fact that they know your dog’s name.

Metro Bank says opening hours will be a key differentiator

The problem is people aren’t visiting branches as much as they used to because when you look at their core drivers in getting stuff done, namely expedience and convenience, the branch simply is no longer the best choice. In fact, if we offered decent customer experience through web, mobile and call centre, I believe it’s likely that branches would be under even more pressure today. That’s because as a customer when I think about banking I am task oriented – I’m thinking of the quickest, most expedient way I can get something done. I’m not thinking I’ll go down to a ‘branch’ because someone will know my name, my dog’s name or that they are open at 9pm in the evening. The question always is – how do I get this done the fastest most efficient way.

But isn’t it about a rich face-to-face interaction?

There are times when you need to see a human being. I’m told by bankers repeatedly that this is the epitome of the bank-customer relationship, where you meet your banker and have the opportunity to have all your problems solved. This is the core value of the branch customer experience. Where you get that level of service that you can’t get through an ‘electronic’ or ‘alternative’ channel. This is where bankers want you, I’m told, because when you meet with a relationship manager or a teller, there is a cross-sell and up-sell opportunity, which are critical metrics for banks today.

That’s all well and good but let’s look at the reality.

I’m a “Preferred” customer of three different banks, in three different geographies. I have a relationship manager with each of these banks, either as an SME customer, or as a High-Net Worth individual with a core AuM that makes me theoretically of value to the bank as an ongoing relationship. So do I get a better experience face-to-face? Does my preferred status make my banking experience better?

With at least two of the three major banking relationships I have, my relationship manager has changed at least twice in the last 12 months. For one of these banks I’ve had only two contacts from them in the four years that I’ve had a relationship as a ‘preferred’ customer – the first when I joined and the second when my balance slipped below the minimum level and they sent me a warning letter to ask me to top-up my account!

See the reality is this – as a relationship manager for HNWIs in the Mass Affluent or SME space, I probably have somewhere between 200-400 clients assigned to me on average. That means I don’t have time to give my customers advice, let alone invest time in a relationship where I give them good advice. Clients are simply a possible source of monthly sales revenue – which keeps me employed. Keep in mind this is a dedicated ‘relationship manager’ which is what the banks tell me is a source of differentiation in the customer experience.

Then if we talk about face-to-face interactions for the average customer with a teller at a branch – is this really a positive and pleasant experience? The reality is that today most customers are probably just as informed as tellers about the sort of product they are interested in because they already researched it quite heavily before they’ve walked into a branch. It would be hit and miss as to whether a teller or RM would actually be able to give you ‘advice’ or support that would differentiate the experience at the frontline in my humble opinion.

It’s the total customer

The sooner UK banks get over their fascination with branches as the centre of the customer relationship and start to see all channels as equals when it comes to solving the needs of customers today, the better off they and their customers will be.

To that end, I see banks working to put in place direct channel teams, and I see more of a focus on ‘customer experience’. But what I don’t see, is a way for banks to innovate the customer experience across the bank. P&L support for mobile, social media, internet and other such elements of the customer experience is still woefully inadequate because their real-estate based big brother still takes the absolute lions share of $$$. So what’s wrong is that the P&L has not yet caught up with the customer. That’s not a measure of willingness to support innovation, that’s a reality of entrenched structures within the bank that don’t want to lose the piece of the pie that they already have.

Ask a head of branches how he feels about losing 20% of his annual budget to support ‘direct’ channels and you’ll find out very quickly what I mean…

Social Media and Bank Compliance Departments – Eternal Enemies?

In Retail Banking, Social Networking, Strategy, Technology Innovation on July 6, 2010 at 22:50

A consistent theme keeps popping up as I discuss social media innovations with bankers these days. It is increasingly frustrating for innovators who want to use mobile, social media, the web and other such tools to get these past hyper-risk-adverse compliance specialists. It seems as if many of the banker’s I’m meeting are saying that the favorite word of the compliance officer of today is simply “No”.

That needs to change…

Compliance holding up social media adoption

In a recent American Banker’s Association survey they reported that 74% of participating banks confirmed that all ‘social media efforts were to be vetted by compliance first’. In an environment where minutes matter, and the response is key, such a logjam to social media participation is a frustrating mismatch with the realities of dealing with customers in todays uber-connected world.

On Sunday I enjoyed brunch with Matt Dooley who heads up Direct Customer Experience for HSBC’s Commercial team in Asia, and his wife Maria Sit who runs Heath Wallace’s Asia division. Over lunch the issue of culture, compliance, philosophy and the reluctance to experiment to broadly with social media, mobile engagement and other such issues came up.

Matt used a brilliant illustration to identify the problematic compliance hurdles we face today as bank innovators. He asked me whether or not a compliance department of a major financial institution would approve “snail mail” as a new initiative if it was proposed today? Let me explain. If snail mail did not exist today, what would your average compliance officer think if you came along and explained you wanted to use this great new technology for distribution of bank material like statements, new credit cards, PIN #’s, etc. You’d have your PowerPoint deck ready to go explain the process where you stuff an envelope, hand it on to someone you don’t know in the bank (likely a very junior staff member), he then puts it in a bag which is picked up by a truck with another person you don’t know, they take it to a large warehouse and sort it according to Geography, etc, etc…

There just ain’t no way that snail mail would make it through the compliance check list of today’s modern financial institution. The compliance officers would no doubt quote scenarios like this to justify why it would be absolutely impossible for the bank to consider using this new ‘snail mail’ technology.

This is the dilemma. Today there are those of us trying to improve customer experience, knowing full well that compliance departments are citing risk mitigation, regulations and laws, bank policy and procedures, and other such issues as reasons why innovators can’t release a new mobile app, engage in social media conversations in real-time with customers, and so forth. In the meantime, there are existing processes, procedures and systems that are far more riskier than things like social media, but they are immune to the compliance department’s gaze because they are already in place.

Is it riskier to do nothing?

Let’s take Twitter as an example. Today it’s rudimentary to do a Twitter search on major FI brands to see topics trending that in the old days if they were carried by mainstream media would turn a banker’s hair on end. In many cases, however, such interactions are simply ignored because there are no dedicated resources listening and responding to such social media conversations. The processes internally around getting compliance approval for a formal response simply make any such response useless by the time it is approved.

But aren’t social media free form responses risky?

Take for example the very public Twitter faux pas recently committed by a Westpac employee who stated “Oh so very over it today…”. Honestly, this is probably about the worst that it could get on Twitter – and it just isn’t that bad. I hear Compliance departments the world over rejoicing and justifying their stance at the next Social Media strategy review meetings – saying, ‘See, see – we told you so!”. The reality is, that this particular faux pas actually ended up humanizing the Westpac team and probably won them new supporters more than anything else…

It is far more likely that a serious breach of customer trust, a poor service or policy decision, or some other very public social media trending topic could do far worse brand damage if left unanswered out in the social media conversation.

Classic examples are those of Ann Minch with Bank of America and Citibank with the Fabulis debacle. In observing the Facebook and Twitter effect of such PR nightmares, the lack of timely response by the bank across the social media landscape made these issues far more impactful and damaging than they needed to be. So the real risk is in not responding quickly enough.

The reality is that banks are increasingly likely to face a major PR disaster and have it escalated more rapidly than they can every imagine through social media networks. Take the example of BP and the recent Gulf Oil Spill – their lack of maturity in handling PR issues over social media has absolutely punished their brand. The spill is bad enough, but BP’s response to the social media conversation has simply made it much worse than it had to be.

No amount of brand advertising and traditional PR can ever undo the sort of reputation damage that is possible to your brand in the social media landscape.

Compliance as an enabler

Compliance needs to understand the negative risk of increasing workload on the frontline in respect of customer service perception, and decreasing the ability of the organization to respond to social media events in real time. They need to start thinking about their function as an enabler of the core business with customers, rather than just risk mitigation. They can also be lobbying regulators to help regulators adapt and make their processes more user-friendly, while retaining security of identity and the assets of the customer.

Customer experience is being hampered by compliance heavy processes that look to reduce risk, but make the engagement unnecessarily complex. Translating the Terms and Conditions from a paper application form onto the first 7 pages of a web-based application process might seem legally sound, but is quite ridiculous from a Usability and Customer Experience perspective.

Compliance departments need to learn to stop saying no, and be embedded within social media, customer advocacy and customer experience teams so they understand the implications of ‘risk’ and ‘legal’ decisions that actually hamper the organizations ability to respond to customer needs.

Innovating the customer experience pays dividends – literally

In Customer Experience, Retail Banking, Technology Innovation on May 31, 2010 at 03:07

No one can deny that banks have had a tough time of it when it comes to stock market valuations over the last couple of years. The global financial crisis, massive debt and NPL issues along with punishing public opinion led to a massive collapse in banking stocks and company valuations in recent times. It would be simple to blame the sub-prime and global financial crisis as the sole cause of all the ills of the banking sector, but I have a different theory which explains a large part of the picture.

In the last 5 years the S&P 500 has experienced incredible volatility. On October 9, 2007 the S&P 500 hit its all time record of 1,565.15, but it was followed by the biggest annual loss in the S&P’s history, losing 37% in 2008 (the previous record being -22% in 2002 at the end of the dot com boom). As a result you’d expect any participants in the US market to have suffered similarly, and they have. Volatility, or the range/spread of buy and sell trades in the US markets is at an all time high and according to many analysts this volatility is here to stay. The certainty in the market has largely disappeared, and with it, the status quo in respect to valuations.

In the last 5 or 6 years, however, a new component has come into valuation metrics for listed companies. We still have revenue, we still have market share, branding and so forth, but innovation is clearly an increasingly significant part of the story. Let me illustrate:

Comparative Performance – S&P 500, Tech and Banking Stocks

Below is a graph (source: Yahoo FinanceBloomberg) showing the comparative performance of a selection of key stocks from the US market, the S&P500 Index being the dotted yellow line.

Innovation is being rewarded like never before in market valuations

Clearly Apple and Google have differentiated themselves. What has made the difference? Why have Google and Apple performed so much better over the last 5 years in market terms? Let’s examine the facts and see what conclusions we can draw.

Is it revenue?

Microsoft’s Revenue in 2005 exceeded Apple’s by more than 300%, and Google’s by almost 600%. In the last 5 years Microsoft’s Revenue has increased from$39B in 2005 to close to $60B in 2009, certainly not a bad performance. Google’s revenue certainly has increased, but in the years 2007-2009 it has only jumped from $16.5B to $23.7B. Since 2005 Apple has increased their revenue from $13.9B (2005) to $36.5(2009). Apple has certainly benefited from the popularity of the iPhone (Released June 29th, 2007) and more recently the iPad (Released April, 2010).

But if we compare the top 4 US banks we see that their revenue makes the tech companies look fairly ordinary. If revenue was the key driver, then we’d expect to see that the banks would have better comparative valuations. Given that Microsoft’s revenue is still close to double that of Apple’s revenue, and more than double that of Google – if the answer was that ‘tech’ revenue was valued at a premium then we’d expect Microsoft to be fairing better.

2009 data Assets ($B) Revenue ($B)
Bank of America (BAC) $2,300 $113
J P Morgan Chase (JPM) $2,000 $101
Citigroup (C) $1,800 $106
Wells Fargo (WFC) $1,200 $51.7

On this basis, revenue, while a critical component of a company’s valuation, would seem to not correlate cleanly with the exceptional performance of Apple and Google recently. Well before the GFC started to impact company valuations, they were already being hurt by something…

So is it future revenue potential?

P/E Ratios show somewhat the expectation of the market in respect to future revenue potential. For the ‘blue chip’ performers like Microsoft, JP Morgan Chase, Wells Fargo – P/E Ratio (Price/Earnings Ratio) are all performing in the range of 15-17, whereas Apple and Google are at 21.8 and 22.1 respectively. Certainly expectations are that Google and Apple have not yet hit their peak in earnings capability because their valuations show a higher multiple. Indeed, the S&P 500 typically tracks at around 15 – so Google’s and Apple’s performances are something special.

Future earnings might account for a higher valuation today, but this is not necessarily the sole factor in their comparative performance which, over the last 5 years, has been much better than Microsoft, the top banks and industrials. In fact, you have to look very hard globally to find better performing stocks in respect to either new or established companies in terms of growth in both revenue and share price over the last 5 years.

So future revenue is a factor, but not the sole factor. If it was, then you’d expect Microsoft would get some of the joy too as part of the ‘tech’ clique, but they’ve not received as much optimism as their tech buddies have.

What differentiates Apple and Google’s revenue from the rest of the pack?

You might attribute Apple’s success in respect to valuations from their great products. But if you compare market share both Google and Apple really still are minority players when compared with Microsoft, purely from a product perspective. While Google’s Android and Apple’s OS-X are taking some share of the mobile market, Windows is still a force to be reckoned with.

So where is the differentiation? Google’s strength to date, and Apple’s more recent success with great new device technologies has centered around one key area. Their ability to create great, but simple and intuitive, propositions.

Google.com as a search engine is the perfect representation of search (at least for now). When Google launched their search engine in 1997, there was really no one that could touch them in terms of simplicity of experience and validity of results, and today, although many have attempted to copy Google’s formula, (read Bing.com) we still see Google maintaining a 65.6% market share of the SE space. What Google bought to the table, their foundation or core, was innovating the customer experience and making technology really simple to use.

The simplicity and user experience differentiate Apple devices

Apple has done the same. User Experience is at the heart of why the iPod, iPhone and iPad have captured not only the imagination of the consumer market, but why Apple and its products are increasingly part of the common vernacular. Sure Apple’s stuff looks great, cool and is about as aspirational as branded products get in the Y-Gen/Digital Natives space today. But this stuff just works.

Innovating the customer experience is the ‘secret sauce’

Innovating the customer experience is at the heart of why Apple and Google are outperforming the market today. It’s also at the heart of why traditional banks are suffering. As market analysts, consumers and as media commentators we just see more of the same.

While there has been pressure on the banking market, bankers seem content to ‘wait it out’ until more sane, normal times return. Banking is an old and traditional industry and it doesn’t take kindly to change. But that is problematic – because right now their lack of adaptability is hurting bank valuations significantly. There’s nowhere for banks to go from here if they can’t innovate around the customer. The lack of innovation means less future revenue and earnings potential.

In fact, as of today it’s more likely that a Google, Apple, PayPal or new start up like Square will innovate the customer experience in banking, rather than banks themselves. This is where banks need to take a good hard look at themselves. The lack of capability to innovate the customer experience is costing them, and it’s only going to get worse.

Digital versus Traditional Advertising? Wrong Question

In Media, Retail Banking, Strategy on May 5, 2010 at 05:15

There is a debate that has been raging in Advertising quarters for almost a decade now – which is better Digital Media or Traditional Advertising. The fact that this question is being asked at all shows that most advertisers and institutions don’t get consumer behavior in the interconnected world. Considering that agencies are in advertising, you’d think they would get it right? Considering the declining ROI in traditional marketing approaches, you’d think marketing staffers would get it too right?

Over the last couple of years the debate on Advertising spend has centered on where the money is going. In March 2008 General Motors shocked the traditional advertising world when they announced they were shifting US$1.5Bn of ad spend to the digital space and while some shift towards digital has been hailed as ‘game changing’ most advertising spend is still heavily biased towards traditional media. Susan Wojcicki, Google’s vice president of public policy and communications, was quoted in Digital Media Buzz as arguing that Ad spending has not caught up with consumer behavior.

“U.S. users spend 12 hours per week online, which represents about 32 percent of their media time. However, online advertising makes up only 13.6 percent of advertising spend in the U.S.”
Susan Wojcicki, VP – Public Policy and Communications, Google

This is accurate, but what is holding back the shift? Long entrenched marketing behaviors, lack of digital skills in-house, lack of agency drive away from traditional media buy, or lack of understanding of changing consumer behavior…

It’s probably a combination of all of these. The fact that most financial institutions, for example, have minimal social media or mobile advertising spend today shows either a complete lack of understanding of consumer behavior, a lag in internal adaptation of ‘digital’ or organizational inertia that is just too hard to shift?

I think all of the above contribute, but the real problem lies in the ‘campaign’ mentality. Brand marketing is very well suited to traditional media, because it is about creating a ubiquitous recognition of your brand, logo, image or message. To fit broadcast mediums for product ROI advertisers created the campaign – really mini product or service branding initiatives designed to create recall at a time when customers are compiling their ‘evoked’ set of purchase alternatives. But while the campaign worked in the 70-90s utilizing broadcast, this is no longer the case in the digital world.

The question over Digital or Traditional is the wrong question. The question should be, how do we better engage customers today so that they are compelled to buy?

Campaigns on traditional media are struggling in the one area that digital is increasingly effective – measuring ROI. Measurability is a strong advantage in the new world because the ability to understand why, when and where customers need a product or service should be considered the Holy Grail. But traditional broadcast methods such as TVC, Radio, Newspaper, Direct Mail, and static outdoor, only work efficiently when it is a static message directed at a wide audience that doesn’t need to change.

It was for this reason that Pepsi started its shift to Direct Response Marketing this year as they moved their entire SuperBowl TVC budget to online and social media. At the Sears Annual General Meeting Edward Lampert explained that even a major retailer is having to conceptualize a shift away from broadcast methods to much more targeted conversations with customers, something that static media can’t deliver.

“It’s not just us broadcasting to customers any more, he said. “It has to be interactive, and it has to be relevant.”
Edward Lampert, Chairman of Sears

Retail organizations, whether banks, financial institutions, or retailers like Sears need to understand that Brand advertising can survive and thrive with traditional media, but campaigns are effectively dead in the IP-conversation space. Companies need to re-gear their marketing teams toward conversations, not just telling their customers a message and hoping for brand recall at purchase time.

In the next 5-7 years TVCs will largely disappear because consumers aren’t watching them, why? Because we’ll either be downloading or TiVo’ing and Ads won’t be a part of the experience. Newspaper will shift to digital format so that ads in that space will go from static to just like web banner Ads. Radio will survive, but perhaps be delivered differently based on subscription feed models. Billboards just like Newspaper will move to digital format also. The question over Digital versus Traditional is kind of redundant. The way media is morphing everything is going digital, even traditional.

What marketers and advertisers need to work on is the conversation, not broadcast. It takes a lot more competency internally, and initially the cost of delivering conversation marketing is alot more expensive than traditional broadcast production. However, the ROI in direct response, permission or conversation marketing blows anything in the traditional media measurability space away. We have the technology now to target messages at customers at the right time, across the right channel, but we’re not using it because we can’t fit campaigns into this model. It’s tough – but reengineering our approach to customer engagement is the only way through this discussion.

Bank marketing staffers better go back to school, and fast…