Christopher Evans, director, at the Collinson Group provides advice to financial institutions on how to maintain long-term customer relationships in the modern world
Today’s consumers are bombarded by an increasing number of marketing campaigns and offers, through the proliferation of communications channels. They are also becoming more discerning and savvy, influenced by and using online reviews and promotions to compare products and brands.
This, coupled with the European Parliament’s attempts to limit credit card interchange fees mean lower run-rate revenues from day-to-day retail banking activities. This has resulted in banks facing an increasingly difficult and disruptive business environment.
Meanwhile, the end of free banking in the UK is being touted as a tactic which could boost competition. At the same time, increased global competition, as well as non-traditional competitors, such as supermarkets, is luring customers away.
In this near-perfect storm, adopting a more customer-centric focus across the organisation by understanding more about your customers will be key to maintaining customer loyalty.
Research commissioned by our global loyalty marketing and CRM specialist ICLP and industry analyst Forrester, identified that out of all the different loyalty programmes available, 68 percent of consumers said they would value a banking loyalty programme the most. However, only 15 percent of this group are actually members of programmes operated by their bank. That the gap between consumer need and bank action is so wide, is clear evidence of untapped potential and strong opportunity for the banking industry.
Over the past two years Grant Thornton’s Insight and Peer Analysis practice has produced an annual customer experience and customer loyalty index. This shows how the top 21 players in retail banks are performing in the eyes of their customers. The latest report demonstrated that the best performers are the ones that can show they are tangibly ‘caring’ for their customers. The four top performers are considered to project this, but the largest players are not yet living up to the expectations of their customers.
Finding an effective way to identify, understand and nurture an organisation’s most valuable customers in the long term has a real impact on the bottom line. In the airline industry, analysis has revealed that the ‘best’ customers are 60 times more valuable in terms of revenue than the least frequent travellers and five times more valuable than those in the mid-tier of its customer database.
Financial institutions need to cultivate and serve their customers at every interaction opportunity, rather than just at key sales times, such as acquisition and renewal.
Below we have outlined some recommendations for financial institutions looking to drive engagement, loyalty and increased value from their customers:
- Understand and adapt to different motivations and passions: being able to understand consumer motivations and intent is as important as understanding the products they buy. Understanding customer needs and preferences will provide the foundation for building stronger customer relationships. In banking, rewards and incentives tend to be largely points-based or focus on material benefits, such as cashback. This can be attractive to some customers, but global research undertaken by Collinson Group has shown that for example, the majority of affluent middle class consumers are motivated by spending time and providing for families, by saving for the future and by experiences.
Creating ways of engaging and rewarding customers, which offer more altruistic benefits, which are shareable between friends and family or which offer unique experiences can be hugely valuable to these consumers. Deriving consumer insight starts with being able to meaningfully analyse data from different interactions and channels.
- ‘Keeping it Relevant and Real’: is a good motto for building customer relationships at brand level, rather than attempting to do so solely with promotions around individual products. By ‘real’ I mean to suggest that banks need to reach out to their customers through new channels where brand engagement is increasingly powerful, such as mobile and social.
Real-time data and predictive analysis can improve the way we offer products and services to consumers – delivering relevance in communications and incentives for loyal behaviour. Consumers are willing to share their data if they trust the communication from that brand will be relevant and the brand will ‘make better decisions’ on their behalf using this information.
- Value is king: it is well proven and documented that there is a direct correlation between high levels of customer engagement and profitability. As loyalty experts we know that engagement is driven by the value a brand can add at the various points of interaction.
It is important to identify value drivers that provide the depth and breadth needed to keep customers locked in for longer and also provide the structure to make your programme sustainable and scalable.
Looking forward, we recognise the viability of ‘self-selected’ loyalty, comprising tailored initiatives driven by the value consumers themselves want to derive from their brand interactions.
- Think beyond your sector: banks have been criticised in recent years for an extreme focus on profit at the expense of customer service, as well as for offering better deals to new rather than existing customers.
We are now seeing shifts in the way they engage with customers, offering benefits and services well beyond their core inventory.
For example Barclays has introduced ‘Features Store’, so that customers can choose their own benefits, which include mobile broadband access, anti-virus software, a homeowner property database and a range of travel packages.
Lloyds Bank has introduced Club Lloyds, where members can choose a range of value added services. Clearly these ‘choice driven’ services demonstrate thinking beyond sector specific offers and find ways to appeal to the customer’s personal motivations and lifestyles.
- Immediate reward vs long-term gratification: our research highlights different expectations from consumers in terms of when and how they receive promotions and rewards from companies.
A large proportion of middle class affluent consumers are focused on saving for the future and are unlikely to redeem points quickly, opting to save for the higher value rewards. This audience will be far more engaged if they feel companies are helping them achieve their longer term goals.
In contrast, younger generations in the highest income brackets from markets such as China and the United Arab Emirates want to see more immediate, personalised rewards which give them an instant benefit.
Banks need to work harder to know their customers, retain them and drive loyalty and advocacy. They need to develop a deeper level of customer engagement, by gaining more detailed insights about their profitable customers and adding value consistently.
It is especially beneficial for financial institutions (offering multiple products and services to their customers) to establish a single customer data view to capture – and reward – transactional and social behaviours. In so doing, banks will increase their opportunity to upsell and cross sell. Only when we think in terms of brand value to the customer, will we realise the potential of longer customer lifetime value.
Christopher Evans is a Director at Collinson Group. He joined as a Director in 2013 from Coty, a $4.6bn fragrance and cosmetics company with brands such as Calvin Klein, Davidoff, adidas and Rimmel. His career there spanned 17 years and included both Marketing and Managing Director responsibility within teams based in London, Dubai and New York. Christopher is responsible for bringing together the skills and experience across Collinson Group. Christopher is also responsible for Collinson Latitude, which combines advanced earning, redemption and ancillary revenue platforms with global content and e-commerce expertise to drive engagement and revenue for our clients.
 Forrester online survey on behalf of ICLP Plc, August 2012
Reconnecting the retail brain: learning from the octopus
By John Malpass, Retail Consultancy Practice Lead at Teradata
An octopus has nine brains: one for each tentacle and plus one at the centre. Each tentacle can react super-fast to local stimuli to grab opportunity, hide or defend itself and the wider body. Many of these reactions are instinctive. But the central brain is essential, monitoring and analysing information from across the organism, and taking crucial decisions that ensure survival. It controls the whole body, makes strategic decisions, and ensures coordinated action by all the tentacles. The octopus’ seemingly miraculous speed, shape-shifting and camouflage capabilities, controlled by its central brain, are themselves a useful analogy for the future of retail.
Retailers need to adopt a similar approach leveraging enterprise-wide data and analytics not only to react fast at the edge, sensing and responding to changing customer behaviours and local market dynamics in each individual store, whilst also constantly informing strategic and future-focused decision-making.
As we’ve seen, for too many retailers brain and body have become separate, with data informing discrete projects and engagements but not used to transform entire business processes. Disconnects, friction and manual interventions in processes have all been highlighted in the current crisis, but they have been slowing things down and constraining value delivery for decades. To survive, the retailer of the future will have to become agile and able to respond to rapid and constant change. Just like the octopus, some responses will be automated; analytically enabled, managed and executed, while the central brain co-ordinates activities, thinks ahead, constantly learning and adapting to its environment.
The octopus has evolved over millions of years to develop and adapt its highly sensitive response capability. Retailers have had a few weeks to discover the benefits of a similar approach. Siloed solutions and manual processes cannot cope with the speed and scale needed to survive. As many will have experienced over the last few weeks, simply reporting what has happened can involve huge effort for little reward. Data is an asset, but it must be leveraged to deliver business advantage if it is to be valued. In later blogs I’ll demonstrate how data adds value to specific functions within retail, but for now I’ll share one example of how data can transform a process to create value on the shop floor.
In store bakeries are popular with customers, driving traffic, sales and margin and larger customer baskets. But margin can quickly disappear if too many or too few croissants are baked. One major supermarket, with over 400 in-store bakeries, found it had over 400 different ways of deciding how many items to bake during the day! To reduce waste and increase availability the retailer’s ‘central brain’ built a predictive model using data collected from across the organisation. Running the algorithm for each bakery with local, real-time data on current trading conditions automatically calculates exactly how many croissants bakers should make in each store and when to bake them. This one algorithm has delivered over 10% in additional sales.
This is the sort of transformation that retailers must embrace – not only knowing what customers in each store want but acting on that knowledge by innovating a way to better meet their needs. Growth-orientated retailers tell us they have three strategic priorities: a hyper-personalised, frictionless customer experience across all channels; more relevant localised and personalised Customer value propositions; and agile, cost efficient operations that respond to the demands of the modern digital economy. All demand reliable, trusted and real-time data at every point. The retailer of the future will run more than 50 million queries per day. That scale of data: every product in every store, every customer through every channel, 24/7, 365 days a year, means that automation is the only way to act at the speed needed to compete.
Automating the routine, while managing exceptions and alerts, creates time and space for more strategic analysis so retailers can switch from firefighting to scenario planning and simulation. This literal mind-shift opens the door to more strategic and forward-looking analytics and the use of big data to create new added value activities. Using data to define tomorrow’s opportunities and strategise the best next steps will build an agile business capable of responding to the demands of the modern digital market.
The global pandemic has been a harsh wake-up call for many in retail. Creaking systems, siloed and hard to reach data, and intensive manual processes have all been strained to breaking point. Those that were already set up and using enterprise-wide analytics will have fared better, but even those who have not taken the first steps should now see the urgent need to use data to transform their businesses. Luckily, evolution in retail does not need millions of years, and in the next few weeks I’ll outline how individual roles and functions can rapidly use data to change the way they do business. And you don’t need nine brains to do it.
The rise of nomadic work: how to turn your remote team into a creative force
By Paige Erickson, EMEA MD, Workfront
During the first stage of the lockdown in the spring, almost half of Brits worked remotely, causing businesses to completely rethink their working structures. Employees too have re-examined the traditional working day and now as many as 72 per cent of UK employees want to continue working from home, at least part-time. They state that working remotely helps them increase productivity and offers a better work-life balance. This sentiment from workers coupled with strong financial motivation for companies to continue to support distributed workforces, it seems unlikely we’ll ever return to the office in exactly the same form as before Covid-19.
In fact, for many, the office nine-to-five is already in the past. Instead, the pandemic has accelerated the trend of “nomadic work”, where a healthy percentage of employees can work from absolutely anywhere. This helps workers find the balance that works for them, whether that’s sometimes in the office, a couple of days from home or even working while travelling.
Covid-19 has proved that where we work isn’t as important as we thought. Instead it is how we work, and the outcome of that work, that’s critical.
A moment of shock-change for business
The pandemic has thrown companies into a moment of shock-change, as they have had to determine nearly overnight how to support a now-remote workforce. How, when and where we work changed, making maintaining productivity on the right work in this new environment incredibly difficult.
Realigning on what it means to be productive – and how to measure that productivity – is now essential for companies. The notion of a structured, on-premisis workday where activity could be observed and continually calibrated is a thing of the past. And yet, in order to navigate the current and future state to positive business outcomes, this new distributed workforce must function as an interdependent web that consistently generates not just output, but focused and strategic outcomes.
We need more than just communication tools
For some businesses the move to remote working was a new concept, and they experienced a sudden, greater dependency on technologies they had not typically used before. Zoom, Teams and Slack have become defining tools amid the pandemic, with many individuals using them both to continue business operations and socialise with colleagues they otherwise could not see physically. It was a fast and simple way to connect colleagues who were suddenly working in isolation.
When the pandemic struck, the question most leaders focused on was simply: “how do we keep everyone talking?” And while that was an important first step, the fact that the workforce could communicate didn’t necessarily mean they had the support they needed to engage fully in the right work.
Strategic work needs more than just communication, it requires constant connection between the day-to-day work (wherever it happens), and the prioritised objectives of the business.
Keep working towards the same outcome
Present and future work requires that companies meet employees where they are, with the right processes and technologies to support them in becoming, and staying, engaged with both each other, and on work aligned to strategic objectives.
Collaboration technologies have seen a huge surge in uptake as leaders look for ways to keep their newly nomadic workforce productive. And while most collaboration tools can help teams coordinate and complete tasks and projects, without broader connectivity to systems, teams and departments across the rest of the business their impact is limited.
Tasks and projects themselves do not exist on islands. They require budget and personnel data from financial and human capital management systems to properly allocate and manage resources. Many projects require compliance oversight from legal and regulatory departments. Work also happens in specialised applications such as Jira, ServiceNow and Adobe.
Unless collaboration tools can integrate with the data, and processes happening in those and other applications, work stays siloed, and employees and leaders have limited context and visibility into why and how work is – or is not – progressing toward the right outcomes.
Work management engages your team, wherever they are
Work management practices and platforms are fundamentally different to collaboration applications. Instead of focusing solely on connecting people and teams, they are designed to connect strategy to delivery. This shift in approach absolutely requires that nomadic workers are outfitted with the right communication and collaboration support, and then goes several steps further.
Enterprise work management platforms also integrate work and data across people, systems and departments, providing context and connection for frontline workers, and visibility and navigation for leaders. Wherever they’re working, each person has what they need to do their best work, and the assurance that their work is making an essential contribution to a larger whole.
Harness the creative spark of your nomadic workforce
The pandemic meant businesses had to take a deep look at the way they work and operate to support their workforce from home. Now that we know nomadic working is here to stay, organisations must think beyond just the digital systems they need to get staff talking. It’s time to rethink the best way to build a truly nomadic working structure for your enterprise.
We’re in a time of workplace transition. ERP systems previously transformed how enterprises manage corporate resources and CRM solutions helped businesses find value in customer data. Now, work management platforms are set to transform how companies manage work — including nomadic workers — to become creative forces and give enterprises a competitive advantage.
Consumers in the COVID era can learn to embrace strong customer authentication
By Ed Whitehead, Signifyd managing director, EMEA
The changes that COVID-19 has caused in rapid succession make it hard to slow down and think about just how to approach the retail and payments landscape and a world that will never be the same.
But it is important for retailers and financial institutions to take a breath, think about where consumers are headed and come up with a strategy to take your enterprises there in time to meet them when they arrive. Granted, all this is going on in the midst of great disruption in the world of online payments.
First, ecommerce sales have accelerated at an unprecedented rate. When the World Health Organisation in March declared a global pandemic and government began ordering non-essential stores closed, consumers turned to online shopping for necessities and nice-to-have items.
Ecommerce sales in Europe peaked at 70% year-over-year at the height of online buying during the pandemic, according to Signifyd Ecommerce Pulse data. With non-essential stores reopening and with consumers less inclined to stockpile, online buying has cooled, but ecommerce spending in September remained at double their year-ago figures in some key verticals, according to Signifyd Ecommerce Pulse data.
That shift was unforeseen before the pandemic hit. But another disruption was long-anticipated and human-made. By the end of the year in most of Europe, merchants and banks will be required to adhere to the payment regulation known as PSD2 and it’s requirement for Strong Customer Authentication.
And while the UK has pushed enforcement of the regulations into 2021, the earlier enforcement deadline will apply to UK merchants who want to sell into the rest of Europe.
Interestingly enough, most of the worry over SCA has focused on whether merchants were ready for the change. But financial institutions also have work to do to prepare for SCA, both to serve their consumer account holders and to process transactions from their commercial customers, such as retailers. And while conventional wisdom has dictated that financial institutions are in a better position to offer SCA than are many retailers, a recent survey by Signifyd indicates that assessment might be overly sanguine.
Survey shows financial institutions need to reach out to customers
The September survey of 1,500 UK consumers found that 41% of respondents had encountered extra steps and complications while accessing their banking accounts in the past year. More than 37% said they had been unable to complete a financial transaction in the past year due to new security factors and 46.5% said they were very or somewhat likely to give up on a transaction that requires two-factor authentication.
Not very heartening results for institutions facing a requirement that customers be authenticated by two of three factors:
- Something the customer has (such as device ID).
- Something the customer knows (such as a one-time password).
- Something the customer is (such as a fingerprint or other biometric trait).
Part of the problem could be customer education and communication — or the lack of it. According to the September survey, 74.3% of consumers said they were either not entirely sure how SCA will affect them (34.3%) or that they were not at all aware of SCA and how it will change transactions (39.1%).
These worrisome findings actually point to an opportunity for financial institutions and retailers. JP Morgan notes that with ecommerce sales rising so dramatically, an increasing number of consumers are becoming familiar with two-factor authentication.
Signifyd’s own data shows a sharp increase in the number of online shoppers who had never or rarely shopped online before. The number of new customers buying from merchants on Signifyd’s Commerce Network, for instance, more than doubled in May, compared to pre-pandemic figures. (Signifyd defines a new online shopper as a customer who has not made a purchase from the more than 10,000 merchants on its global network for at least a year.)
The increase in the number of new shoppers arriving online has slowed, but it is still well above a-year-ago figures. And about half the new users trying online shopping return for multiple purchases within 30 days, indicating they are developing new digital habits.
That means banks and merchants have an opportunity to help these new consumers become accustomed to security safeguards like SCA even as they are getting used to shopping online in general. When done right, this early consumer education will ensure that these new shoppers and bank customers will be comfortable with SCA, given that it’s the way they’ve shopped and banked online since the beginning.
New online customers create new opportunities for merchants and financial institutions
So, online transactions are exploding. Consumers who eschewed ecommerce shopping before are becoming regular online shoppers. All good news. But what should retailers and financial institutions be doing to take advantage of the good news — and to make sure that those new online users become loyal customers.
Getting customers comfortable with transacting in the SCA era, of course, is just the beginning. Retailers and bankers want customers to be delighted with their online experience, a standard that is a few notches above “comfort.”
SCA requirements present an opportunity for retailers to fortify their fraud protection with state-of-the-art, machine-learning systems that will provide a better customer experience today and position them to accommodate future changes to payments regulations.
The trick will be to offer a friction-free customer experience while still protecting the enterprise — a feat that will require merchants and financial institutions to look at state-of-the-art technology to power their SCA systems. Consultancy CMSPI predicted that merchants could lose £108.1 billion in annual sales because of new SCA rules.
CMSPI says the new 3D-Secure version 2.0 that provides the infrastructure for SCA transactions will kill 35% of transactions because of technical problems, declined orders and delays that frustrate customers.
But that assumes retailers don’t turn to innovative solutions that improve the performance of 3D-Secure-powered payments systems. The tools are out there as technology companies have been developing solutions to streamline SCA and make the process far more efficient.
Long-term steps for building loyalty among existing and new customers alike
The pandemic and its disruption feel like they will never end. But they will. Retailers will want to be in a position to build on the relationships they’ve initiated with customers before and during the lockdowns and social distancing.
Some of that will be redoubling efforts they’ve made all along. They’ll want to build flawless online experiences. They’ll want to provide intuitive navigation and enhance the customer experience with engaging content, precise personalisation, invaluable customer support, seamless checkout and instant order confirmation.
Beyond that, it will be important that financial institutions and retailers to clearly communicate with their customers so that they know the rationale for SCA and understand that it protects all parties involved in a transaction.
Automated systems can help with many of the initiatives that lead to improved customer experience. AI-powered content management systems, personalization engines and automated inventory control can advance discovery and fulfillment performance. Fraud and automated order management systems that instantly determine the most efficient way to comply with SCA requirements can speed checkout and reduce the chance of cart abandonment.
No question, the COVID-induced upheaval can make planning for the future seem a little overwhelming at times. But retailers that find the mental space to plot the future step-by-step will find themselves in a strong position today and in the post-pandemic future that we all look forward to.
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