Capabilities overview. Retail Banking: A Transformational Model for Growth Using a Customer-Centric Approach

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1 Capabilities overview Retail Banking: A Transformational Model for Growth Using a Customer-Centric Approach

2 Capabilities Overview It s a New World The retail banking industry is in the midst of a seismic shift. But it s not the ups and downs of the markets that cause the shift. It s the rising power of the customers and changing regulatory conditions across the globe. Customers now hold the power in their relationships with banks. They are more connected, vocal, and on the lookout for stronger relationships than ever before. They don t just want a place to put their money. Today s consumers want to be understood as people. They are looking for financial advice and guidance, as well as transparency and trust in these turbulent times. And if they don t find that in one bank, they simply move on to another. It s much easier for consumers to switch banks or use multiple banks for their monetary needs than it was in the past. This newly empowered customer base makes for an uncertain future for many banks, which in the past were primarily focused inward. In a time of volatility and unpredictability among financial services companies, the one constant is customers. Regulators are also defining new rules for banks about controlling leverage of individuals, limiting the amount of fees and commissions levied by banks and reinforcing more transparent communication. This time of uncertainty is also a time of opportunity. Consumers will reward banks with their loyalty and recommendations if they meet their needs and help them as advisors. Banks can increase their profitability by balancing their customers needs and expectations with the costs of doing business. This means providing better products, services, and prices, while also improving cross-sell ratios and internal efficiencies. This makes being relevant more important than ever. Customer management became one of the most critical components to economic survival and sustainable growth. In this time of volatility and unpredictability among financial services companies, the one constant is customers. Changing Environment The financial crisis, the advent of new technologies and the increasing usage of social media are effecting a power shift within the retail banking industry. Lead or Lose Ground New realities have emerged. Retail banks are no longer just one cog in a giant financial services wheel. They are expected to be profitable and solvent on their own. Couple this with the fact that the financial services industry has shifted from a supply-driven market, where the focus is on maximizing the value created by each product, to a demand-driven market, which focuses on maximizing the value of each customer relationship. Source: Peppers & Rogers Group Companies that have aligned their businesses to get, keep, and grow customers have weathered the recent economic turmoil. Banks such as Santander, BBVA, Garanti Bank, TD Bank, Nordea, Wells Fargo, SEB and Credit Agricole, which have strong retail businesses, all came out of the crisis with higher ranks among the most profitable banks. The connection between customer centricity and economic strength is no coincidence. The retail banking space is shifting to focus on building relationships with existing customers 2011 Peppers & Rogers Group. All rights protected and reserved. 2

3 through customer-focused operating models. Done right, they will increase revenue while decreasing costs, creating sustainable growth. The following chart shows that customer-centric activities around acquisition, retention, attrition prevention, and share-of-customer programs can have a positive impact on revenue and long-term strength. Customer Centricity Leads to Business Benefits Customer-centric activities around acquisition, retention, attrition prevention, and share-of-customer programs can have a positive impact on revenue and long-term strength. Increased Revenues Customer Acquisition: 5-25%^ % Customer Retention: 45-65%^ Customer Reactivation: 20-40%^ Increased Profitability Before After Decreased Costs Revenue per product: 20-40%^ Cross-sell: 60-80%^ % Marketing Effectiveness: 60-80%^ Process efficiency: 40-70%^ Before After CAPEX utilization levels 5-15%^ * Illustrative figures from Peppers & Rogers Group clients. Peppers & Rogers Group s High-Level Approach We believe that customer management is essential for banks to build and maintain strong relationships and a healthy bottom line. Within the concept of customer management, three priorities emerge as the best opportunities to achieve these goals: 1. Generate customer insight by leveraging analytics Learn as much as possible about your customers before deciding how to best serve them. 2. Understand the different needs and characteristics of customers, and manage them accordingly Create customer segments based on value, needs and behavior, then develop customized marketing, sales, and service plans that are relevant and valuable to these groups. 3. Manage the customer relationship in the most appropriate channels Find efficient and effective channels that customers prefer and create customer experiences that are consistent across those channels, whether it is in the branch, online, the call center, or elsewhere. This requires investment in the right people, processes, and technologies. We believe that customer management is essential for a healthy bottom line. Banks and other firms taking a customer-centric approach to growth should develop a framework for managing the customer experience around these priorities Peppers & Rogers Group. All rights protected and reserved. 3

4 The Journey to Customer Centricity As companies move from a product focus to a customer focus, there are many opportunities to improve operations and build engagement. Product Focus Insight Customer Data Customer Segmentation Customer Behavior Prediction Customer Lifetime Value Analysis Retention Analysis and Prevention Strategies Campaign Analytics Segment Investment Planning Corporate and Business Unit Strategies Customer Centricity Roadmap Portfolio Contact Center Business Planning and Feasibility Studies (Business Case Development) Business Design Customer Experience Sales and Service Model Channel Distribution Network Sales Force Campaign and Marketing Programs Loyalty Programs Capabilities Development Organizational Structuring Customer-Centric Processes Business Requirements Gathering Performance Customer Centricity Metrics Cultural Change Business Change Deployment Program Office Deployment Organizational Transformation and Alignment Training and Empowerment Customer Focus Source: Peppers & Rogers Group Our Retail Banking Portfolio of Services We have developed a five-stage roadmap to customer centricity. Financial services firms often have knowledge about customers at a product level, but there s little effort made by them to understand customer needs, behaviors, and expectations across the enterprise. Once firms gain that understanding, they can start creating and delivering differentiated customer experiences and aligning business models with customer segments. The following graphic illustrates Peppers & Rogers Group s capabilities along the path to customer centricity, from the first steps of insight through execution and deployment. Each bank has its own unique customer base, and therefore, its own unique challenges and goals. Peppers & Rogers Group works with individual clients to customize the most appropriate initiatives in each stage of the customer-centric roadmap. Whether it s gathering insight about certain customers, aligning sales and service models, developing a change management program or executing a strategy across the enterprise, Peppers & Rogers Group works with clients to guide them along their journey to customer centricity, seeing business benefits all along the way. Banks can create and deliver differentiated customer experiences and align business models with customer segments. Using our unique tools and frameworks, we help financial institutions formulate strategies to increase revenues, manage different customer portfolios better and increase sales and service effectiveness. Better customer experience management is an overarching enabler that increases the effectiveness and ROI of all other customer-centric initiatives Peppers & Rogers Group. All rights protected and reserved. 4

5 How Are We Unique? We bring the best-in-class strategic and in-depth thinking about customer centricity. We shaped the development for customer centricity with more than 10 books and thousands of papers and research studies in the last 20 years. We are one of the few management consulting companies that combines thought leadership with industry expertise. Our global team for financial institutions comprises experienced consultants with consulting know-how and also practical experience about execution of the theory. Our targeted tools and frameworks are developed by hundreds of projects where we not only designed the strategy but also helped our clients implement these strategies. We not only design the strategies, but help implement and analyze them. We combine our advanced analytical models with innovative market research techniques to define the best solutions for our clients. Our global analytical center of excellence developed advanced analytical models for banks which we use as a foundation for customization shaped by strategic direction. Align Your Bank Around Customers Our Customer Experience Framework: A sample of programs that benefit customer relationships and the bottom line: Revenue Enhancement Programs that drive growth Comprehensive revenue uplift programs via effective marketing and sales Alternate strategies to gain share in mass segment and affluent banking Products, features and fees rationalization Customer lifecycle programs (cross/up-sell, onboarding, retention, churn) Total relationship banking loyalty Product bundling to accelerate acquisition and cross-sell Insight Customer intelligence fuels impactful decision-making Value, behavior and needs-based segmentation Enhanced customer value management framework Reorganization and redesign around customer segments Proactive attrition prediction and customer retention programs Predictive modeling to boost product penetration in a targeted manner KPI s and metrics for segment, channel and products alignment Redefining HR, training and culture in a customer-centric model Effectiveness Creating efficient and valuable customer relationships Multichannel strategy around customer segments, product processes and channel capabilities Sales micro-management and increasing sales effectiveness in the branches Sales and marketing enhancement in digital channels Customer experience value map and building the path for a better experience Revenue performance and cost-driven transaction migration strategy Customer onboarding and multichannel usability programs 2011 Peppers & Rogers Group. All rights protected and reserved. 5

6 Peppers & Rogers Group Financial Services Practice: Driving Increases in Customer Lifetime Value Peppers & Rogers Group offers a full range of consulting offerings for the financial services industry. Our dedicated team of more than 150 industry veterans and subject matter experts bring proprietary frameworks and approaches to Retail and Transactional Banking, SME Banking, Wealth and Asset, and Insurance and Retirement. We work with our financial services clients as partners and approach each project through the customer lens integrating strategy, analytics, operations, technology and program management to deliver results that drive long-term increases in customer lifetime value. Contact information: Dietrich Chen, Director [email protected] Phone: Financial Services Industry Coverage Retail & Transactional Banking SME & Commercial Banking Wealth & Asset Insurance & Retirement Customer-centric Portfolio & Analytics Organization & Processes Operations & Technology Program & Transformation Key Offerings Partial list of financial services clients About Peppers & Rogers Group Peppers & Rogers Group is dedicated to helping its clients improve business performance by shifting focus from transactions to managing relationships. As products or services become commodities and globalization picks up speed, customers have become more demanding and harder to satisfy. They hold the keys to higher profit today and stronger enterprise value tomorrow. We help clients achieve these goals by building the right relationships with the right customers over the right channels. By delivering a superior customer-based business strategy, we remove the organizational barriers that stand in the way of profitable customer relationships. We show clients where to focus resources and efforts to optimize customer experiences, reduce attrition, increase loyalty, create customer advocacy and mitigate risks. For more information, visit Peppers & Rogers Group. All rights protected and reserved. 6