NETTING IT OUT

For years, financial services firms--including banks and investment firms--have been leaders in analyzing customer information, in segmenting customers, and in scoring them on a variety of profitability dimensions. Today’s best practitioners are now going to the next step. They are studying the most common scenarios for each group of customers and determining the critical elements in each scenario. By addressing, measuring, and monitoring the things that aggravate each group of customers the most, these leaders are reaping rewards in terms of increased revenues per customer, increased customer loyalty, and lower costs to serve.

LAYING THE FOUNDATION FOR PROFITABILITY: CUSTOMER DATA ANALYSIS

Financial services firms tend to lead the pack when it comes to analyzing their customers to address customers’ needs better and to increase customer profitability. Over the years, we’ve chronicled a number of financial firms’ data warehousing and data mining initiatives[1]. Institutions as diverse as Bankers Trust Australia, Citibank, Royal Bank of Canada, Charles Schwab, and Fidelity Investments--and many others like them--have invested in sophisticated data warehousing and analytics to enable them to group customers into segments based on demographics, psychographics, income, financial holdings, interaction and transaction histories, emotional motivation, and behavior. Analysts are then able to use these segments to predict, with great accuracy, the likely behavior of customers.

Financial services executives use these detailed customer analytics to discover patterns of behavior that give them new product ideas, to predict the likely success of new products and services, to develop and test marketing campaigns, and to detect potential defections in order to prevent them. Each customer segment is scored in terms of its current and potential profitability and risk for the firm. Product and marketing plans are drawn up for each segment to ensure that the firm maintains a balanced and ever-growing portfolio of profitable customers across the segments it has targeted.

What’s the benefit to customers? One size doesn’t fit all, and customers are more likely to find the products and services that are the best fit for their own particular circumstances from financial services providers whose product planners and marketers have performed detailed analyses of customers’ transaction and investment histories.

LIFE-EVENT-BASED MARKETING AND PRODUCT DEVELOPMENT

In addition to segmenting customers by background and behavior, financial services marketers also focus on the life events that cause customers to take action. Customer behavior is often triggered by life events: a move, a marriage, the birth of a child, changing jobs, retiring, and so forth.

Marketers and product planners generally use the intersection of life events and customer segments to develop highly targeted marketing campaigns and product offerings. Examples of life events that are often used as marketing triggers in financial services include:

* Going away to college
* Moving into a first apartment
* Buying a first home
* Remodeling a home
* Buying a car
* Putting kids through college
* Saving for retirement
* Retiring

Consumers with similar backgrounds who find themselves in similar contexts will often react to life events in a similar manner. We would say that they share the same Customer Scenarios. They find themselves in similar contexts, they are looking for a similar outcome, and they tend to have the same conditions of satisfaction. So the ways in which they would approach their situations--the steps they’d like to take, the offers they would appreciate, the kinds of information and resources they need at each step--will be very similar.

DAY-TO-DAY SCENARIOS

In addition to the life-event-based opportunities that financial services firms have to market to customers, note that consumers also have many different sorts of scenarios they need to accomplish. These scenarios include:

* Getting by on the income they have month to month

* Paying routine monthly bills

* Handling an unexpected expense or splurging for a special occasion

* Reducing debt

* Saving money

* Making financial trade-offs: Should I use this bonus check to help reduce our mortgage or to make a down payment on a new car?

Companies that excel in maximizing customers’ loyalty and profits per customer do so by identifying the customer-critical scenarios for each target customer segment and fully understanding each scenario from their customers’ points of view. They streamline the end-to-end customer experience for each scenario, ensuring that their internal processes, employee training, and technology enablers are aligned to help the customer at each step of the way. Then they measure and continuously improve how they handle those steps that are most critical to customers in each scenario.

IDENTIFY CUSTOMERS’ MOMENTS OF TRUTH

Within each customer scenario lurks a set of customer experience landmines that often go unnoticed by product planners, marketing managers, and even relationship managers. These are the landmines that will make or break the customer experience ...