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Jan 30 2012

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Kuwait: Customer segmentation key to profits

KUWAIT CITY, Jan 30: The new thinking in global retail banking in search for greater customer-centricity was discussed at a seminar organized by Peppers & Rogers Group at JW Marriot Hotel Monday. John Kirkbright, Chairman of EFMA Banking Advisory Councils, tackled the subject of multi-channel strategy and customer relationship with many examples and case studies of successful banks worldwide. Kirkbright billed the current times in retail banking as 'unprecedented' with customers using an increasing number of channels to engage with banks. However, the chairman noted, more than 70 percent of sales in Europe still takes place through branches. 'It's only the Turkish and Scandinavian banks that conduct between 50 to 70 percent sales via non-branch channels.

'Banks are looking to drive down costs by migrating customers to low cost channels. This is not easy though. In Europe, despite sizeable customer migration to non-branch channels, the bulk of sales are still happening through conventional channels.'

On the subject of social media, Kirkbright said customers have learnt to use Twitter or other social networks to post their complaints as they get almost instant response. He added stressing the growing influence of social media in customer relationship that in future banks will play more of an advisory role, while transactions will take place through other channels. Kirkbirght took the example of Turkey, where banks are coming up with extremely advanced kiosk branches for people to conduct transactions by themselves.'

The key to future profits in retail banking according to the EFMA expert is getting the customer segmentation right: behavioral, psychographics and social, including geo-demographics. 'These will help in putting the existing technology to better use, instead of inventing new technology.'

New entrants in Europe and the Far East are having a big impact on the market, Kirkbright added. 'The impact is not in terms of market share, but customer experience. Superior customer experience brings more profit.'

It has been found, he noted, that banks that use more channels are more profitable.

'Banks like HSBC, Santander and BNP Paribas are top players in the integrated multichannel space.

'The Turkish banks are good in innovation in channel management.' For new entrants who have made an impact, Kirkbright cited the example of Frank in Singapore and Easy in Malaysia.'

Going into case studies, the expert analyzed the innovations made by Che Bank of Italy. 'They are the Mc Donald's of banking.'

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He underlined the Che Bank's paradigm shift in service with changes such as executives sitting alongside the customer while interacting with them, instead of the more traditional across-the-table arrangement which appears less transparent. 'In this case, the customer also gets to see the screen. 'The bank has simpler, easy-to-understand products. After making these changes, Che Bank's deposits increased rapidly.

'You have to change the process and the people to suit the current times.'

Kirkbright then looked at Deutsche Bank, Germany. 'This bank experimented with changing the banking environment by putting retailers in the front to attract shoppers.

'They have lounge areas, separate interview rooms, each designed differently with the customers allowed to choose their rooms.
'They also experimented with videos of products, instead of brochures, which were sold at 10 to 15 Euros.'

BNP Paribas follows an integrated model, Kirkbright said. 'BNP Paribas has been doing this since 1998, for 12 years, trying to perfect the multi-channel approach to fulfilling customer needs.'

Frank in Singapore, a new entrant, is an example of turning a bank into a more customer-friendly retail outlet. 'They studied retail shops to set up Frank. The bank has a mobile-shop ambience, with a resident DJ playing music. You have weird art on the walls, and banking products displayed on colorful screens like brands in a shelf.'

Kirkbright then analyzed the changes the Metro Bank of the UK underwent. 'They changed their working hours from 8 am to 8 pm, as they found that more account opening happened in the evenings between 5-8 pm. They also work on Sundays.'

Metro Bank, he added, enabled a customer to open an account and get all the account activation materials like debit card, credit card so on within 25 minutes. 'Many banks are struggling to finish an account opening process in less than 30 minutes.'

Kirkbright stressed the need to find the right people, 'who don't have to be from the banking industry necessarily. If you have people with the right attitude, you can train them.'

Kirkbright closed his lecture by listing some of the key learnings from the EFMA Congress. 'Integrated channel management takes time, multi-channel approach is more profitable, more contact with customers leads to more profit, the role of branches will increasingly become advisory and pre-heating.'