key to better performance: Customer relationship management, The

Northwestern Financial Review, Jul 15-Jul 31, 2002 by Gerstner, Diane

As bankers are well aware, customer relationship management - CRM -- has been widely prescribed as an antidote for diminishing market share and sluggish growth. What CRM actually involves, though, is the subject of much misunderstanding.

The most common perception is that CRM is a piece of technology for mining customer data. CRM uses the perceptive abilities of information technology to identify customers whose personal and business needs make them a potential source of profitable business. But that's only a part of the story.

In the fullest sense, CRM is a holistic concept that affects everything about a financial institution: its technology, its business processes, its customer base, its market and its people. CRM encompasses the totality of how financial institutions approach their business and their interactions with customers, not just a piece of new technology or a one-time initiative to improve service or sales.

Indeed, its all-encompassing nature is probably why CRM has been misrepresented and misunderstood. It seems too big to grasp, so some people have tried to deconstruct it. That's why you might see a sales training seminar for front-line personnel advertised as CRM. Or you might read an article about a bank's CRM strategy that consists entirely of a customer calling program.

Efforts like these are bound to do some good, at least for a while. Eventually, though, the benefits of isolated solutions tend to fade, leaving bank management to doubt the effectiveness of the CRM concept and to ponder: what next?

Unless you address every variable that affects how you serve your customers, the elements that remain unchanged cumbersome business processes, for example - will compromise your results. It doesn't help much to have front-line personnel trained to sell if they routinely get bogged down in paperwork. At best, your sales results will be short-lived.

So what's the answer? Rather than reject CRM methods as too complex or to deconstruct CRM into its component parts, community bankers should realize that a CRM philosophy of doing business can be adopted incrementally throughout an organization. Community financial institutions can enrich and expand their profitable customer relationships by pursuing a series of coordinated steps that redirect the entire organization - its people, processes and technologies - toward a greater understanding of its market and a more complete and profitable response to its customers' needs.

Although the specific solutions for each community bank will be unique, a true CRM strategy should generally encompass a scope of five initiatives.

Developing an Individualized CRM strategy

Each community bank has its own unique set of circumstances that puts it somewhere along the CRM continuum. A bank that recently converted to a new core data processing system may already have the requisite technology to mine its customer data for sales and prospecting information. Another bank's technology might not be robust enough to support a CRM strategy, but it has an experienced sales manager who has created a sound business development plan. Yet another bank might have a good customer feedback mechanism through which it collects useful information about its products and services.

The point is that few banks have to start completely from scratch. An initial review will tell you where you stand and how much additional effort will be involved in developing a CRM strategy The initial review looks both inside and outside the institution for clues about your market opportunities, organizational strengths and weaknesses, business processes, technology status and human resources.

* Market opportunities. Focus groups with customers and non-customers can give a bank insights into perceptions about its products and services and the manner in which they are delivered. This subjective and anecdotal information, combined with objective customer, competitor and demographic data, provide a balanced perspective on the market expansion and customer retention opportunities that are present in the bank's communities.

* Organization and business processes. Action teams composed of bank managers and staff can quickly hone in on the sources of waste, redundancy, administrative burdens and other faults in the bank's organization and internal procedures. Action team deliberations have the additional benefit of promoting a sense of ownership in the CRM strategy that emerges.

* Technology status. A technology effectiveness review looks at the institution's present computer systems, software programs and interfaces to determine whether they will support a CRM business strategy, whether the technologies are being used optimally, and whether unused capacity is available. Importantly, a technology effectiveness review also answers questions about costs, future expandability and whether additional or replacement technologies may be needed.

Of particular importance in the context of CRM strategies is the bank's MCIF (management customer information file) and/or its CRM system. To provide information and tracking support to your sales team, your MCIF/CRM system should have robust capabilities for searching, sorting and matching customer information with market and demographic data. Many of today's CRM systems also incorporate contact management functionality, referral and pipeline tracking, incentive compensation calculations and "what-if" pricing scenarios.