CRM in the financial services sector

Richard Smith, CRM Practice Director at Green Beacon Solutions, shares his firm’s experience of CRM in the financial services sector.

FST. What is Green Beacon’s relationship with the financial services market?
RS. Green Beacon was founded shortly after September 11th, and our first customer was a financial services firm in mid-town Manhattan. Our partners and senior staff had worked throughout the late 1990’s with investor services, private equity, mortgage, and banking customers, and we were able to leverage that experience in building Green Beacon. We’re happy to say that client number one is still actively working with us, while we have expanded our relationships into the investment and portfolio management, private equity, and retail banking sectors.

The hallmark of our organization has been helping our financial services customers to identify the key drivers for their business. There is a wide array of CRM solutions in the market, and some are much better suited to specific financial services business models than others. In our experience, organizations are successful when they focus not on the technology, but on the fact-based insights generated from CRM about their business. Our customers that have internalized this strategic process have seen unparalleled success in user adoption, customer satisfaction, and corporate profitability.

FST. Interesting. So what are the questions financial services organizations should be asking to better manage their business against these key performance indicators?
RS. It is important for financial services organizations to define the indicators specific to their customers, market segments, and business services that gauge business performance. There are three steps to this process: (1) Distilling the insights that enable the right business indicators to be defined in a way that can be tracked and managed; (2) Developing reports and other tools that facilitate tracking the indicators; and (3) Analyzing the indicators and changing the business in reaction to the insight it provides. This sounds simple, but it is typically the most difficult and rewarding process our clients undertake with us.

The process starts by developing a model of our clients’ top customers. This is an investigative process of working through complex questions that define what makes each organization unique. At the foundation are questions like:

• What customer segments are the most profitable? Is the customer base growing?
• What is the cause and impact of customer attrition? What are the early warning-signs that one or more of these accounts is in trouble?
• What marketing channels result in the highest response rates? Highest profitability? Are they the same?
• Which customers are the most resource intensive to serve? Is the contribution from these customers commensurate with the cost of providing service?
• Which products/ market segments/ customers/ regions are going to deliver the organizations growth targets? How? What are the metrics to know this is on track?

These questions are easier asked than answered, and the strategic process involved is both challenging and rewarding for our clients. Through the process, organizations come to depend on measurable facts over anecdotal evidence about their customers and their business. Defining the business customer relationships indicators makes managing the business toward those ends more tangible.

The indicators are only the start, and must be supported by analytical tools that enable organizations to track performance against indicators. Traditionally this was difficult, because reports were manually developed by experienced database administrators. Technology has come a long way. New products in the market like Cognos’ ReportNet and Microsoft’s SQL Reporting Services are making it possible for business users to create their own reports to analyze data and measure business performance against indicators. These tools are allowing our financial services customers to challenge the long-held anecdotal beliefs regarding who their best and most profitable customers really are, and are enabling their sales and marketing organizations to actually target individuals and organizations that are most likely to become profitable customers.

Ultimately, the indicators and analytics are worthless unless the organization is committed to reviewing performance in light of the results, and making the appropriate course corrections. Simply put, knowing who the most profitable customers are is not much help if that information is not used by sales and marketing to generate new relationships that match that profile. This may seem at the outset to be a labor intensive proposition. Considering what our financial services customers spend to develop new customer relationships and retain existing customers, this process quite literally impacts the bottom line in terms of spending on lead and customer generation and overall business profitability.

FST. There have been a lot of changes in the CRM market, from the rise of Salesforce.com to Oracle’s acquisitions of Siebel and PeopleSoft. How are these changes affecting your financial services customers?
RS. It used to be simple to purchase CRM. The upper market used Siebel, SAP, PeopleSoft, or Oracle; the mid-market used Onyx, Pivotal, or Sales Logix; and small business used ACT!, Goldmine, or Outlook. Those distinctions are gone. We are working with large customers - greater than 1,500 users - that are implementing solutions like Salesforce.com, and smaller customers - less than 300 users - that are opting for traditionally enterprise solutions like Siebel. Everyone predicted consolidation in the CRM market, but there are few that could have predicted the market changing as it has today.

The financial service sector is marked by two key characteristics: Risk Aversion and Business Flexibility. Specifically, financial services customers shy away from newer solutions, opting for experienced vendors with proven vertical expertise. To remain relevant, and profitable, financial services organizations need technology solutions to be flexible enough to adapt to evolving market opportunities.

FST. Given acquisition and maintenance costs, are firms opting for the hosted options over the on-premises solutions?
RS. Not really.

Salesforce.com is definitely a key player, and its no hassle, quick implementation approach is attractive to a lot of customers. There is no question that products like Salesforce.com and Microsoft Dynamics – on-site and hosted - have made great inroads with customers that are looking for a highly-configurable platform that can be up and running with a minimal amount of effort. Time-honored on-premises vendors like Siebel and Onyx continue to bring a host of vertical solutions for the financial services market evolved over the last decade, along with powerful integration, reporting and analytics, and business process management (workflow) solutions.

One other key component is the “home-grown” point solution. No CRM application ever addresses 100% of the functional needs of the business, and most of our customers have complex, custom systems. Examples include “Customer Master” databases for managing corporate site, location, and contact hierarchies, and “Customer Entitlement” and/or “Customer Portfolio” solutions for managing customer accounts, account relationships, and access to financial data. These systems include critical information for our customers, and this data needs to be integrated with the CRM solution. While it is not impossible to integrate these types of systems with the hosted solutions, most of our customers – because of integration and data security concerns – opt for the on-premises solutions as the most cost effective.

FST. One of the newest buzzwords in the CRM sector is “Business Process Management.” Is this a new technology, or simply a re-branding?
RS. BPM overall is a new technology. What is confusing about this new functionality is that there are enterprise BPM solutions independent of CRM that have been evolving over the last several years. CRM vendors began to incorporate BPM functionality into their products over the last couple of years, though the older solutions may have incorporated this sooner.

But we’re putting the cart before the horse. Business Process Management is the unification of an organization’s core business practices and the underlying systems that are used to support those systems. This is a truly revolutionary step forward for business systems because it enables organizations to radically change their processes to incorporate new business opportunities or to address changes in compliance regulations.

Most of our customers have a process for approving relationships with new customers, for example. Traditionally our clients have developed complex Visio diagrams of their business process, and their internal IT staff was charged with implementing the process. There were always gaps in understanding, and after years of changes, the code and the business process have little in common. BPM solutions enable the business to document their workflow process, and IT can develop the supporting code attached to the workflow elements. Need to change a new task or introduce a new step? No problem: simply add the new task, and link it in the workflow. These solutions are not limited to the CRM application, offering the ability to access data or even initiate activities in remote applications. Furthermore, the workflows can be versioned, and, over time, the code and the process remain unified.

Financial services organizations have been quick to adopt BPM technologies because of the return on investment. Unifying business process and technology reduces the cost of supporting and maintaining the application. More importantly, BPM is enabling financial services organizations to identify evolving market opportunities ahead of competitors or react to compliance regulations in a fraction of the time.

FST. It seems everyone these days has a Blackberry or a Treo. How is CRM taking these devices into account?
RS. Mobile CRM has evolved greatly over the last few years. The first solutions were relatively basic – synchronizing contacts and reminders to the PDAs. The CRM vendors then started to develop full-fledged client versions of their desktop and web applications for the PDAs. While powerful, the devices were slow and had limited storage capacity, and users quickly realized that while it was great to be able to access data on the PDA, the challenges with data entry limited what could actually be accomplished from the client.

Today, the PDAs are smaller, faster, with more storage and better usability. Most CRM vendors have taken the cue from the users and have now opted for more targeted solutions that enable users to interact with CRM in a way that makes sense from a PDA. They have streamlined the PDA versions of their applications into smaller components – almost mini-portals – focused on sales, marketing, and customer service functionality.

We’ve been even more excited by the advent of truly optimized solutions for the financial services sector. Leaders in financial services PDA solutions like Pyxis Mobile, for example, developed suites of targeted applications for the institutional, wholesale, hedge fund, analyst, and advisor markets. These solutions are simple to implement, integrate directly with CRM and legacy applications, and pinpoint the functionality that financial services users want on their Blackberries and Treos.

FST. What advice would you give financial services organizations considering the implementation of a CRM solution?
RS. CRM is ultimately about relationships and not technology. Improving data integrity, management level reporting, and even employee productivity, while important, are secondary benefits of a well thought-out CRM process. The focus has to start with prospects and customers (e.g. clients). It is critical that the organization be able to provide a single face to clients and be able to address their needs. Improving the relationship the client has with the organization is the shortest path to developing prospects into customers and customers into repeat customers, thereby increasing revenues, return on investment, and productivity – the “critical goals” most organizations cite as the reasons for implementing a CRM strategy.

For organizations considering an initial implementation or an upgrade of their CRM application, start by defining the strategic vision for the organization. Streamlined business operation in financial services requires that each department define their own key processes, and the interaction points with other departments. Incredibly effective account managers can be stymied by roadblocks in the account opening approval process in Finance. Developing the high level goals and objectives with key stakeholders helps to later prioritize any number of mission critical projects according to the ability of each to impact client loyalty and revenue generation.

Business strategy development does not need to be time consuming or costly. With a skilled facilitator and an active commitment from the participants, the process can be completed in a matter of weeks. Studies have even suggested that the strategy will not be successful unless the organizations executives both actively participate in the discussion and empower their employees to lead the charge of the CRM project.

Richard Smith is a founding partner and CRM Practice Director with Green Beacon Solutions, a leading provider of business strategy and implementation professional services to the financial services market. More information is available at Green Beacon’s website, www.greenbeacon.com.