Internet Changes Everything

Why Banks Should Focus Online

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Kimberly Hill, www.crm-daily.com
Most banks think they know who their most profitable customers are. But they are wrong, says Forrester Research's Ron Shevlin. And that error leads them to miss the tremendous opportunity of the online channel.

"Banks think their best customers are those who own the most products," Shevlin told CRM Daily. "But that does not take into account two things: the cost to serve those customers and their future potential with the institution."

Cost vs. Profit

Banks consistently make the mistake of assuming that the customers who buy the most products are making them the most money, Shevlin explained. But their calculations rarely take into account how much it costs to provide them with customer service.

Take, for example, a person who has three separate accounts with a bank, Shevlin said, who presumably would be considered a "best customer." However, what if that individual were to call the time- and resource-intensive contact center once or twice each week? The bank actually might be losing money on those particular accounts.

In addition, certain lifestyle or life-stage factors might make that customer a dead-end prospect. Those three accounts likely would remain static for some period, and the customer might not be likely to purchase any additional products or services from the bank.

Take It Online

By contrast, customers who use the online tools offered by banks are much more attractive cross-sell and upsell prospects, Shevlin's research has found. "Statistically, people who use their bank's Web site are far more likely to consider additional products," he said.

That propensity crosses demographic groups. In the past, the people most likely to use self-service tools through the online channel were the younger, more tech-savvy, and more affluent members of the customer population.

Now, however, those most likely to venture online with a bank are account holders that have been led there by an employee servicing another channel -- such as a teller or a telephone customer-service representative.

Thus, a bank's best customers are those that are cheaper to serve and those that are likely to consider additional products -- and those customers are exactly the ones using online self-service tools.

May 27, 2004 at 08:52 PM in Financial Services | Permalink | TrackBack (49) | Top of page | Blog Home