Entry No.97c

IT Writers Awards

Standfirst
Customer relationship management has for years been heralded as the customer churn buster. Yet few financial services CRM implementations rarely live up to some lofty expectations. Cameron Tomes asks CRM vendors why this disconnect exists

You can't help but think that within the chaotic and perplexing world of CRM (customer relationship management) a certain disconnect exists between vendor perception and the banks perceived financial services customer reality. Not that this should be viewed as a criticism of what is easily the most crucial example of competitive advantage that any bank or insurance house should aspire to.  But judging by the perception of some of those vendors whose livelihoods depend on CRM sales into financial services, much work still needs to be done to ensure a consistently successful approach to the delivery of customer relationship solutions.  

Most agree that CRM adoption rates in Australia are not on a par with regional penetration rates, although this perception doesn't suggest that local financial services customers are not totally au fait with the concept. These vendors suggest that strategists within financial services organisations have crystal clear intentions of bringing their products and services closer to customers. It's just that banks and insurance houses are trying to push through complex customer relationship solutions whilst simultaneously trying to integrate many disparate systems and decipher just who their customers are. Mark Sellars, the Professional Services director at Point Australia can sympathise with the plight of financial services customers, of which Point's include Commonwealth Bank, Deutsche Bank and Allianz North America. Sellars once worked for Westpac and knows only too well that cumbersome beasts such as major financial services players have much to get their heads around in an increasingly short space of time. "One of the biggest problems these organisations face in deploying CRM solutions is managing massive changes to their internal focus," he said. "Banks and insurance organisations find it incredibly difficult to identify the various relationships a customer may have with different accounts. They have operated under a product silo philosophy for such a long time that overnight changes are difficult." 

And with the constant industry buzz of online efficiencies being shoved down their throats, coupled with the fact that financial services is clearly lengths in front of other industries when it comes to technology innovation - and is therefore expected to constantly break new ground - there's little chance of any short-term respite.

According to Sellars, financial services organisations may be jumping the gun a little in the quest for closer customer ties when he suggested that setting the right technology infrastructure in pace was just as, if not more important, than devising complex business strategies to derive better customer focus. "There are two sides to any CRM implementation. You have to ensure that the right back-end systems are there to begin with. Only then can you integrate business rules and processes. "CRM is not static," Sellars argued. "Organisations must embark on a CRM strategy with the expectation that business rules will be constantly modified to reflect changing business conditions, customer needs and product catalogues and services. "No company comes out of a box so therefore no solution can feasibly come out of a box either," Sellars concluded. 

But before charging out to run the rule over those tired looking infrastructures, or sending a missive to the outsourcer to get cracking on a hardware refresher proposal, financial services organisations must implicitly understand why they want to embark on a major CRM implementation and clearly identify the business benefits.

Bill Brooks, the Asia Pacific vice president and general manager - Clarify eBusiness Applications at Nortel Networks has seen it happen all too often. Word comes down from senior management demanding why the organisation "isn't already doing CRM?" and then business managers and e-commerce strategists churn out a quick-fire solution.  In his opinion, this approach can only lead to disaster and should be avoided at all costs.  "Financial services organisations don't spend enough time scoping and assessing what their business needs are. They all want the CRM big bang," he claimed.  "They all realise that appearing to be customer centric is the way to win the battle and secure that essential competitive advantage.  "But in the quest for quick returns they often fail because they lack that meticulously planned implementation," he said.  Brooks suggested that organisations are doing themselves and, more importantly their customers, a disservice by attempting to frame an implementation budget around a strategy that might stretch far beyond initial expectations. "They want to have everything yesterday at half of quarter of the realistic price. But if you take that approach you'll turn off the customer who won't hesitate to take their business elsewhere," he said.

When asked for a piece of advice to offer those financial services players contemplating or in the midst of a CRM project, Brooks' advice was succinct. "Think of it as a journey, not a race. Everyone wants e-solutions and the latest and greatest yesterday. But you only get one chance with customers now, so improving the customer experience really should be a case of slowly, slowly," he added. 

John Thompson, the managing director of Point Australia agreed with Brooks' recommendation that CRM implementations must not be rushed, but was not convinced that the concept of repeatable CRM solutions, which has been devised by struggling ERP vendors, would have universal appeal for financial services.  "It's important to take CRM implementations in incremental, measured steps and be able to check and balance that performance to confirm the project's direction," Thompson said.  "Repeatable CRM solutions could be a possibility for insurance organisations. While increased competition from other insurers and banks continues to lower product margins insurers are being forced to consider options, such as CRM, to reduce the costs of building complex customers relationships."  However, Thompson preferred to reserve his judgement on whether repeatable CRM solutions are applicable for banks. "They are much bigger elephants, although the likes of National Australia and Commonwealth Bank are looking seriously at CRM to accommodate their international expansion aspirations," he said.

But while the likes of Com Bank and NAB up the scale ante and focus on juicier global market opportunities, Bruce Quick, the managing director of Sydney-based Pegasystems suspects they could be digging a CRM black hole that's too cavernous to emerge from. "Financial services organisations will always face problems because of the sheer scale of the operations. Their customer and product data is spread over diverse systems which have never been subjected to such integration demands," he said. "As such it is very difficult to amalgamate these systems in a reasonable timeframe."  Quick argued that financial services customers find themselves in the unenviable situation of having to choose between a full-scale CRM deployment across all product lines, customer database and business units or staged, carefully measured rollouts. And the challenge is not made any easier by what Quick described as "a plethora of CRM solution providers" offering CRM cures for everything including cancer, it seems.  "To begin a CRM project is to embark on the tip of the iceberg. It should impact on all customers, all products and all systems," he said.  "Establishing a CRM-enabled call centre is dead easy compared with the job of integrating disparate data sources and services."

In fact, just last month Queensland's Suncorp Metway Group awarded a CRM contract to Pegasystems that the Group hopes will streamline its loans origination processes. "However you can still push customers to the point of defection if you only get half of that integration puzzle right."  Quick suggested that the sheer scale of many financial services operations is redefining the relevance of CRM.  "Currency of data is more critical for financial services customers than any other customer segment because it gives customers the ability to make valued decisions while reducing risk profiles at the back-end.  "Banks and insurance houses own so much data, but they have largely tended to concentrate on specific customer segments and build data warehouses around that segment of customer information," Quick said.  "Once this is achieved their approach is to apply the same philosophy to the wider enterprise."  While this approach could ensure a "reasonably quick deliverable schedule," Quick highlighted the budgetary dangers of rolling out "point solutions" across an entire organisation.  "Just because you solve a short-term problem doesn't mean you will achieve long-term gains. As point solutions get rolled out in stages three, four and five deployment becomes far too expensive because usually business requirements have changed by that stage.  "The costs therefore become astronomical," he warned.  Quick argued that just because CRM was the current "flavour of the month" financial services organisations still need to be realistic about the size of the bang they are prepared to cop for their bucks.  "The cost of some of these solutions is becoming just so prohibitive that good ideas and projects just get put in the too hard box and left for a later date," Quick observed.  "However if you own the right blend of intellectual property then internal CRM development could be a boon for the organisation."

Nortel's Bill Brooks agreed that it's hard to put a dollar figure on financial services CRM rollouts, however he suggested budgeting is possible as long as you plan meticulously. "The cost of these implementations is not something you can pull off the shelf.  "It depends on what the customer wants to realistically achieve. It could be a series of small projects or a massive exercise spanning two or three years".  Ultimately, as much as it might send CFO's into a tailspin, CRM is as much about trial and error as it is about cost savings and efficiencies. Every financial services organisation has an ingrained hatred of its competitor and would like nothing more than to be first to market with a better customer service culture.

But the path each of these organisations takes will be littered with uncertainty, misinformation and setbacks.

In Quick's opinion, the broader definition of CRM can be achieved if financial services organisations and their vendor partners are willing to be flexible and take the good with the bad.  "There will always be confusion and failure but out of failure comes success," he prophesised.  "These institutions have long standing cultures based on the premise that each services the customer better. But if they are considering straight jacketing a software package to deliver business change then that is fraught with danger.  "In fact, it would be awful to contemplate the result," Quick said.

Brooks agreed that CRM vendors and systems integrators face a Herculean task of deploying successful CRM solutions if their financial services customer can't effectively articulate its needs and ideas. Although, in all fairness, nobody ever said that a vendor's life was meant to be easy.  "It's the people who are charged with the responsibility of bridging the gap between reality, expectation and technology that often get pushed behind the eight ball," Brooks argued.  "Our combined focus must be ensuring the customer's survival in a market where customer retention is more important than acquisition.  "That's the differentiator CRM can help provide." 

NOTE: In next month's issue Asia Pacific Banking Technology wants to hear your side of the CRM implementation story. Are the vendors right? Is CRM putting a drain on your already stretched resources? How can you increase your chances of completing a successful CRM implementation?  Drop the Editor a line at cameron.tomes@informa.com.au  

Sidebar
When Citibank's North American and Singapore offices recently moved to grow their online customer bases at the expense of a stuttering branch focus, CRM played an integral role in the restructuring process. Essentially a sales and marketing solution, xChange Dialogue, messaging software from CRM vendor xChange, was deployed to grow the bank's online patronage whilst ensuring that online and call centre customer churn was kept to a minimum.

According to Ian Taverner, managing director at xChange Asia Pacific, the software is designed to assist financial services organisations to personalise their online marketing and sales campaigns for select customer segments. Customer data is also synchronised with back-end systems to provide cross-selling opportunities based on response to each online campaign.  Taverner estimated that an average xChange Dialogue installation lasts roughly three months, after which time banks and insurance houses could integrate online marketing campaigns into their data warehouses.  "Automating a financial services organisation's marketing channels could be done as quickly as two weeks in some instances," Taverner claimed.  "Ours is a smaller, targeted CRM strategy. Deployment timeframes are shorter because we're dealing directly with the individual business unit strategists," he said.  Taverner suggested that banks have traditionally operated in an incentive-based environment designed to promote product individualisation, adding that often separate divisions deployed their own CRM system.  "Culturally it's difficult for them to move away from this strategy where each different division receives incentives to sell more product.  "But, in a CRM environment it is vital that the call centre is closely integrated with the credit card division to enable channel automation," Taverner said.  "Organisations need to treat CRM as a strategic issue rather than an operational one" 

While not making any guarantees, Taverner is confident that xChange's software platform can derive business benefits for financial services customers in the space of six months following deployment. "Every customer we deal with gets a return on investment in six months before gong to the next stage. That ROI has to be delivered before we move on," Taverner explained.  "It's imperative that CRM solutions are built with short, measurable objectives in mind. If a customer wants a big bang approach it could be difficult to fulfil their expectations.  "There's no sense embarking on an 18-month data warehousing project today as the objectives of the project could be dramatically effected by financial markets forces and unforseen customer trends," he said.

sidebar
While the mainstream financial services players battle on with their hair-pulling CRM implementations, further down the food chain implementing customer relationship management systems is almost all in a day's work for many Australian credit unions.

According to Philip Scott, general manager of Prosper Sales Solutions, the small scale of credit unions combined with an entrenched customer service focus are two major explanations for the claimed high success rate of CRM deployments.  "Credit unions are more focused and are not as stretched for resources. Even despite major mergers credit unions seem to have a clear business focus of not trying to be all things to all people," Scott commented.  "They may not offer quite as may corporate banking services as the major banks, but in some instances they are more advanced in integrating different customer access channels."  Scott said that CRM should not just be seen as a technology solution. Rather, It's a whole new way of doing business and involves staff and customers more than technology.  "Many people don't realise the degree of cultural change that results during a CRM rollout and the associated change management strategies that need to be activated to ensure the projects are successful.  "It can get difficult for mainstream banks to integrate many disparate systems, but since credit unions and regional banks generally operate fewer core banking systems the issue isn't as chronic."

Scott understands why there is a "sense of urgency" amongst the major institutions to get CRM systems up and running. Whether the ear-splitting level of CRM vendor noise is driving or competition from direct banks and non-traditional players driving this urgency is debatable, however.  While the major benefits of CRM should be felt at the enterprise level, Scott said effective implementations should be short, high impact, rather than delayed perfection.  "All CRM projects are a success. It's the perceived degree that varies," Scott said. "CRM success is derived by moving with urgency and biting off small chunks with high impact." 

Back to Most Controversial 
Top of page

Content Copyright © the author/publisher listed above

Design Copyright © Consensus Pty Ltd

This web-site uses frames, click here for the full picture