Benefits of CRM to Financial

Posted 13-Jan-2004 11:24 AM
From Pamela Karan [Posted by Teri Robinson]

How would CRM benefit financial companies? What pains would it address?
Would it benefit finance and insurance companies in the same ways?

Teri Robinson
Managing Editor

gautam
Member
Picture of gautam

Posted 15-Jan-2004 09:24 PM
To put it simplistically, CRM is about collecting and using information on sales and especially on individual customers... Here's what some finance cos have actually used CRM for:

1. Campaign Mgmt: By collecting and recording individual customer's preferences and profiles, they know whom to target for which product. Allows them to cut waste in their direct mailers, telesales and rep-visit efforts. Fin-serv cos. that implemented campaign mgmt have seen success rates going from 3% to 20-25% on average. Which means, instead of getting 3 customers from a 100 tries, they get 4 customers from 20 tries. Cuts marketing cost down to 20% (from 100 tries down to 20) and keeps the other 80 customers from receiving irritating mailers that they don't care for.

2. Sales force effectiveness: By automating a few processes—like sending of research reports, portfolio performance reports, account statements etc. fin serv cos. are able to free up their salespeople to concentrate of servicing customers. Also, CRM technology makes it possible for even large companies to track each salesperson's performance, and use it to promptly reward high performers and identify and coach the low performers. Tracking each account lets them identify problem accounts and help the salesperson in charge to solve the problem

3. Cross-selling & up-selling: This area has seen great applications from INSURANCE COS. If an insurance company is part of a diversified financial services group—it can market other financial products (like mutual funds, bank accounts, investment advisory etc) to its client base. This is cross-selling.
Different types of insurance policies give different profits to the company. Term insurance policies give less profits than savings-linked policies like endowment plans. CRM has been used by companies to target their term insurance holders to upgrade to higher plans. As in campaign mgmt, likely candidates for upgrade are identified based on account profiles.

Other than the above, there are the "general benefits" of CRM.
CRM at the basic level is about changing your revenue targets—by aiming for average revenue per customer. B2B cos even set "wallet-share" targets for their salespeople. Each customer's "wallet-size" is known, and each salesperson is supposed to achieve x% of that wallet.
So its not enough to met your overall sales target, you need to meet a per customer sales target. This forces organisations to become "customer" rather than "sales" centric.

What's the benefit? If makes people and organisation focus of ways and means to get more value from existing customers, and as they say "necessity is the mother of invention". This focus itself produces amazing results, as companies finding newer ways to track individual accounts and newer ways to make customer's happy in a way that will add to the bottom-line.

Some proven benefits form this are:

In a nutshell—improved customer relations can increase your customer base radically—as you make newer customers and hold on to old customers. You tap both these groups for revenue growth.

Having said that, CRM is a very tricky field. Getting benefits requires a smart approach, and even then it's often a process of trial and error before you can find that sweet spot.
Plus, there are cultural (Most people, especially in sales, hate changing the way they do things) and technological difficulties. So companies need to have the requisite patience and perseverance. Buy-in from top management is a must, which then enables getting support from middle managers and eventually front-liners.

It helps tremendously to start by defining exactly what customer information you want to capture and how you plan to use it. When doing so, don't be too ambitious; start with building the minimum "must-have" capabilities that will get you clear benefits in the short/medium term.

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All conservatism is based upon the idea that if you leave things alone you leave them as they are. But you do not. If you leave a thing alone you leave it to a torrent of change.—G. K. Chesterton

[This message was edited by gautam on 15-Jan-2004 at 10:54 PM.]

gautam
Member
Picture of gautam

Posted 15-Jan-2004 09:44 PM

Afterthought: Pains it would address:

1. Waste it marketing efforts: Make it more effecient. Either succes rates or time/ no. of visits taken to convert a prospect, too much money spent on prospects that are'nt worth it.
   Tracking success-rates alone produces improvements (If you can't measure it, you can't manage it).

Profiling prospects based on whatever information you have helps you categorise them into A/B/C and tell your sales not to spend too much time and money on the C.

2. Customer churn: Customers defecting often can be a major problem. (Sales to existing customers are more profitable that to strangers, as they typically involve less cost)
3. Unprofitable customers eating into your bottom-line: Often insurance companies have perenially unprofitable customers. Looking at overall and even segment revenues, or average client profitability hides this, as profits from other customers covers up even perenially loss making accounts. If you uncover these accounts, you can either:

   3.1 Try to turn them profitable—by changing rates, moving them to a new plan etc. OR simply

   3.2 "Fire the customer". Typically by cutting service-levels or by increasing charges. Banks often do this by stipulating "minimum account size" for a savings account. If balance falls below, some even levy a penalty or stop servicing the account.
   HOWEVER, you need to make sure that there are no incidental revenues attached (eg: Maybe this person's dad is a major profitable customer. You don't wanna fire him then, even if he's making you lossses)

4. Problems in products/services: CRM helps a co. make products/services relevant to customer needs.

   You can record customer complaints and feedback and run analysis to see which complaints result in revenue loss. So you would where your product/service needs to improve and which concerns are un-important enough to ignore. Better still, customise services for each segment, which may have diff preferences or needs from others.

5. Silent defectors: Sometimes an upset cusotmer won't complain—just stop dealing with you. Tracking software can throw up alerts based on a change in customer's transaction pattern that indicates that she might be defecting.