Brett King

Posts Tagged ‘department’

Bank Customer Channel Intensity

In Retail Banking, Strategy, Technology Innovation on April 7, 2010 at 23:43

As I’m speaking to more and more banks about BANK 2.0 a glaring realization is coming together. I think this has to be a core role with the bank moving forward – why? Because this is what someone needs to tell management for them to get it right.

Right now today I believe that in most developed economies if we properly measured Internet as a channel we’d find that it contributes on a par with Branches in respect to revenue. Internet is the primary day-to-day channel for almost half the retail bank’s customers today.

My argument is as follows. Let’s take a product like mortgages – in the USA, UK, Hong Kong, Singapore, Australia, Malaysia or similar with 70-75% internet penetration. Most people would be doing their primary product research on the web before committing to a mortgage. In some cases they might actually apply online, but even if they don’t apply online they are still doing the bulk of their research online then they’d call to make an appointment or use an online enquiry form, etc. The key component of the sales process has really happened outside the branch (i.e. the ‘hook’), but in the end it’s likely that a bunch of sales get recorded as ‘branch’ revenue when actually the lead was generated online. Same with credit cards, life insurance, etc.

Now, internally as a bank we tend to have revenue as a key measure because it directly effects profit and therefore EPS (Earnings per share). What we look from a financial metrics perspective is what Branch A, Product B and Direct Channel C did month-on-month as a comparison of relative performance over time. We look at revenue for product as a whole, we look revenue for the channel as a whole, but I don’t believe banks generally have a clear picture of how customers engage for a product ‘journey’ and where the revenue is really coming from. Additionally, we probably have a fair idea on transaction traffic per channel, but do we know how that traffic has changed over the last 2-3 years? What is the pattern? Can we predict more accurately where customers will be going in the future.

The fact that we’re recording product revenue like mortgage, cards, life policies as ‘branch’ or inbound ‘call centre’ revenue when the lead and initial engagement was likely through the online channel, this results in skewed operational budgets, management strategy, etc. Revenue alone is a poor reflection of the actual customer engagement with the bank from a channel perspective.

You can tell me if I’m wrong here…

What we need to do is inform bank strategy. To understand how to engage customers more efficiently, we need to know what they are doing holistically, not just channel by channel separately. This will better inform organizational strategy, marketing, etc.

Mortgage Journey – Customer Channel Intensity

What triggers a mortgage buy? Normally the initial trigger is when someone finds a property they want to buy. So they have two or three potential contact points before they engage with the bank on a mortgage – a real estate agent, a real estate website and a developer. Then we know that a customer engages with a bank. They’ll probably go to their own bank first, but if they have multiple bank relationships, they’ll make an enquiry through each. How do they do it?

They’ll either ring the call centre, walk into a branch, or go online. Since 2002-2003 that the number of leads that have come through internet and call centre have been increasing relative to branch. This is a trend we need to know about because it tells us where customer behavior is going and where we need to support the customer engagement most efficiently to secure their business. It’s hard to predict when a customer is going to need a mortgage, but we do know that when they are ready to ‘apply’ our ability to close that customer depends on three things, approval time, rate or how competitive the proposition is, and how easy it is to engage with your bank on that product.

Measuring how much revenue we did on mortgage product through Channel A or Channel B and how much it increased from Q409 to Q110 doesn’t help the bank understand effectiveness in engaging the customer through the journey. Revenue could be a function of economic conditions, housing supply and demand, etc. So revenue management doesn’t necessarily inform the bank from a strategic perspective. However, if we know at which points of the journey the customer used which channel, and how that pattern of engagement is changing over time, then we have a winner. This can help Banks more accurately target marketing/media buy, it can help us figure out which partners (real estate, developers, etc) to be targeting, it can help Banks optimize channel experience where it most matters, etc.

Recording mortgage application 'revenue' through the branch is a 'false positive'

The objective is as follows:

1. Help the organization quantify changing behavior in respect to bank contact/engagement
2. Form more productive budgets and targets based on more balanced channel metrics and expectations
3. Help inform organizational strategy so that org/reporting structure can be reformed
4. Help inform marketing and media buy strategy where dollar spend will be most effective (this in itself will help reform marketing too).

We all recognize that a total channel, total relationship, total profitability view of the customer is essential moving forward for retail banking. So the question becomes how to collate that data organizationally. Until you lift the hood and see all this data, then it’s just too hard to really know where revenue lies.

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Banking’s biggest challenge – Marketing 2.0 (HuffPost Blog)

In Blogs, Media, Retail Banking, Social Networking, Strategy, Technology Innovation, Twitter on February 11, 2010 at 13:09

See the original entry on Huffington Post

Point-of-impact MMS offer

A location-based offer at the retail point-of-sale is 550% more effective than Direct Mail 3 weeks before

There are some massive changes occurring in the banking space today, but none so dramatic as what is happening in marketing and advertising.

Direct mail offerings have been declining rapidly since 2006. In 2009, less direct mail was sent by banks than in the year 2000. Direct mail has declined 32 per cent since 2007 alone.

In 2008 the Internet surpassed all media except television as the primary source for national and international news; this has taken its toll. In March 2009, the Seattle Post-Intelligencier or the “PI” as it was known, a 146-year old newspaper, closed down, citing rising costs, falling revenues and declining circulation. Since just January 2008, at last count, 55 regional newspapers in Britain have folded. Of the top 25 newspapers in the U.S. in 1990 (the year newspaper employment peaked), 20 of those newspapers have seen declines (on average reporting circulation down by more than 30per cent), and two have been closed down or declared bankrupt. New York Times reported a 30 per cent fall in advertising revenue, resulting in a $35.6 million loss for the 2009 third quarter alone.

In 2009 TV advertising revenues in Australia fell by more than 12.6 per cent in the first half of the year. In the first quarter of 2009, the U.S. recorded losses of more than 14 per cent in TV ad revenues in normally stable locations such as the Bay Area and New York, and is expected to suffer a total decline of 22 per cent for the year. Declines of 27 per cent and more were recorded in radio ad spend for the U.S. for the first half, even worse than the decline in TVCs. Yet, in a recent report commissioned by UK’s OFCOM forecast the value of TV ads in the U.K. could fall from £3.16bn in 2007 to just £520m in 12 years’ time. That’s an 83 per cent decline.

Bank’s are finding their brands are no longer able to just get by with brand marketing, after all BofA and Citibank have great brand marketing, but are being hammered by customers on Twitter, YouTube and elsewhere. Thus I find it amusing that ‘digital’ or interactive marketing still makes up only a fraction of marketing budgets for banks in 2010. The very fact that banks separate ‘digital’ in respect to budget or spend, signifies the challenges of changing a culture that is so dependent on direct mail, print, radio and TV – all broadcast mechanisms.

Let’s play Devil’s advocate for a moment. What will the advertising space look like in 5-10 years? It’s more than likely that TVCs will be gone – with declines in revenue we’ll have to find another way to pay for TV either through subscription or download, but there is no business model that indicates Free-to-air TV can survive with out Ad revenue. Direct Mail will be relegated to very specific segments, and then only for loyalty promotions. Newspapers will be on iThingys with paywalls – we’ll subscribe to newspapers and virtually every newspaper will be digital. Billboards will be all digital, but not based on TVCs – they have to be even more efficient. Physical magazines will be a luxury item, most magazines will be digital. In this space nearly ALL advertising will be digital within 10 years..

TiVo already strips out TVCs. SPAM filters on our phones and email ensure the eDM ain’t going to work. We need something more. In my book BANK 2.0 I call this “Point-of-Impact” marketing. Banks need to insert their ‘value’ message into the transaction where it will have an effect, not send out millions of messages hoping for ‘brand recall’. Brand marketing will still exist, but campaign marketing needs to shift to point-of-impact. To illustrate, when you are on BA.com, United.com or CathayPacific.com and I’m booking a flight, that is where you need to sell me travel insurance. When I’m on a real-estate website, that is where you can target me with mortgage deals. When I walk into Bloomingdales, Marks and Spencer, or Armani Exchange send me a location-based MMS coupon on my mobile offering me a discount using a specific card. Get me when I’m interested, when I need it.

But this requires a complete rethink of the structure of the marketing department, and a complete new set of tools. This is the biggest fundamental change to the marketing department of the bank…well ever. I’m not surprised that quite a few of the banks I’m talking to are not sure how to make this transition, but that doesn’t make it any less likely.