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CRM in the Financial Services Market

In uncertain times, managing relationship with customers - understanding, attracting and keeping them - matters as never before. Nowhere is this more important than in the financial services sector.

Monday, December 3rd 2001, 11:33AM

Deregulation and globalisation has seen a wave of mergers and acquisitions taking place as financial institutions strive for scale of operation to drive cost ratios down and profit margins up - and the trend is set to continue.

The net result of this consolidation across banks, insurance and investment institutions is the creation of 'all finance institutions' - and along with this creation, fierce competition amongst the survivors.

Thanks to deregulation, globalisation and increased competition, consumers are now being offered broader product choice with fewer barriers to change their provider. The web is providing many institutions with a way of bringing transaction costs down, but it's also increased the ability for customers to switch providers. Shopping around has been made easier, and loyalty is a thing of the past.

The challenge for all Financial Services organisations is how to increase revenue, reduce costs, keep existing customers and attract new customers. With margins being squeezed on products offered by financial service providers, the hunt is on to identify and maximise the share of profitable customers and bring transaction costs down.

Enter Customer Relationship Management (CRM).

To better understand their customers and service them more effectively, many institutions have turned to CRM to provide the solution, using interaction and collaboration opportunities (whether that is by person, phone, fax, or email) as a means to broaden the product profile with that customer.

For example the opportunity of extending the sale of comprehensive insurance to a customer who is applying for a car loan is a chance that shouldn't be missed by any lending institution. With an integrated CRM solution, having visibility of the customer reduces the silos of information, and enables institutions to take advantage of opportunities that may have been lost without having the right information at employees' fingertips.

Whatever the business, it is all about knowing the customer and capitalising on the data the CRM solution is providing, and this is where analytic tools are the keys to unlocking the value in any CRM strategy. A CRM solution with a huge customer database is never going to be as effective as it should be without analytic tools.

Analytics tools aren't only for identifying cross-selling opportunities but they are key in enabling an institution to know which customer is profitable and which is not. Why spend marketing dollars trying to reach customers with a product that they will never buy?

Analytic tools are able to manipulate the data to show insights such as the performance measurement of marketing campaigns and activities based on leads generated and qualified, the profiles of respondents; performance to service level agreements; measurement of key performance indicators for measuring the effectiveness of CRM activities in achieving customer satisfaction goals.

There's no doubt CRM is hot and for financial institutions it does have a big role to play in increasing revenues while driving down transactional costs by allowing the organisation to understand the customer, anticipate and respond to his or her needs accordingly and cost effectively. But understanding why it's needed and how it's going to be used is a key factor in its success, as well as having the right analytical tools to ensure the data produced can actually be managed in a competitive and cost-effective way.

Ray Kloss is the Product Marketing Manager Customer Solutions for PeopleSoft

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