Customer Centricity in Banking
Strategic plans for banks and credit unions are replete with references to their superior customer- or member-centricity. Nearly every financial institution says their competitive edge is their customer service. However, when everyone competes on the same thing – and they all claim to be the best – then the only logical conclusion is the vast majority are clearly wrong.
A large majority of banks claim they are customer-centric, even while competing with product-centric business strategies like focusing on rates and fees. Far too many banks today fail to define what customer centricity means, nor do they organize their business strategies around what customers truly want, even developing products or services customers have voiced little demand for.
When it comes to adjusting their strategy, banks have only a handful of options. They can revisit their strategy and define it differently to reflect a product-centric approach – i.e., lowest cost, unique or specialized products, etc. – or they could double-down on customer centricity and practice what they preach. Assuming they are insistent on customer centricity, what should banks do?
Definition of Customer-Centricity
First, we need to level-set with a definition of customer-centricity. According to Forbes, customer-centricity is:
“The ability of people in an organization to understand customers’ situations, perceptions and expectations. The customer should be at the center of all decisions related to delivering products, services and experiences to create customer satisfaction, loyalty and advocacy.”
Customer-centric organizations understand every facet of their customers. Many banks and credit unions measure customer satisfaction just once a year and have call center reports detailing complaints and use that limited analysis to say they understand the customer. Or, worse yet, banking executives often say they know the customers’ needs because they are a customer. There are also variations of, “I know the customer because I’m in the community,” or, “I understand millennials because my children are millennials.”
A true customer-centric organization holds the customer as the single most important point when making decisions that will affect the customer. Most publicly-traded organizations are likely to fail this test as revenue, income, cost or overall financial impact most often trump customer needs or wants. Similar attitudes abound in privately-held organizations and even credit unions, which are member owned.
If the first question when presenting a business case to the executive team isn’t “How will this affect our customers?” then the organization is not likely to be customer centric.
Characteristics of a Customer-Centric Organization
Merely saying that an organization is customer-centric and having a pithy tagline doesn’t make an organization so. Organizations that are customer-centric exhibit the following characteristics:
1. Strong Leadership and Strategy. An organization’s focus begins with their leadership and a well-defined strategy. Customer-centric organizations rally around a customer value strategy, often one that extends beyond their product or service. For example, Warby Parker’s mission is “to inspire and impact the work with vision, purpose, and style.” The mission is just a start. It translates to “we believe that buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket. We also believe that everyone has the right to see.”
Do those banks who claim they are customer-centric have a similar vision for the well-being of their customers? They should.
2. Clear Goals and Feedback. With the objective of being customer-centric, organizations must have goals that define how well they are doing. When banks attempt to measure their customer-centricity, they likely use Net Promoter Score (NPS) or some sort of customer satisfaction (CSAT) metric. While these metrics are helpful, they don’t capture the entirety of customer centricity.
NPS captures a single dimension of loyalty – likelihood to endorse. It fails to capture the action of recommending the service. Customer-centered organizations track and report referrals to get a better picture of loyalty, or, in the case of Costco renewal rates, a significantly better metric for loyalty.
Similarly, CSAT scores capture a point in time satisfaction, not one that ebbs and flows throughout a relationship. The skincare company Glossier tracks customer sentiment from their social media channels and uses comments to improve their products.
Customer-centric organizations also measure advocacy. For example, Ritz-Carlton Hotel is known for their Ritz-Carlton Mystique, an emphasis on customer service above all. Every customer accommodation is noted in their global CRM for all to see and to report from.
For a bank that wants to claim its strategy as being customer-centric, it’s important to be tracking toward relevant, impactful metrics, and to make those metrics accessible throughout the organization.
3. Organization. Merely having a vision, mission and values is not enough to ensure that the organization is set up to serve the customer. Customer-centric organizations empower their employees to do their best for customers. In a bank setting that means, for example, that a contact center representative can waive any and all fees. It can also mean that a branch staff member has all the tools available to serve the customer without having to find someone else to help.
Years ago, my brother was getting married and asked me to be his best man. I didn’t have appropriate shoes to wear to the wedding. I went to the Zappos website and couldn’t find a nice pair of vegan dress shoes. I called them in the hope that they could help me. After searching together, the Zappos representative told me about a website he had heard about. We went together to the website and chose a pair of shoes that fit the bill. This was a competitor, not a Zappos website. The representative liked the shoes so much, he said he ordered a pair, too. A week later, the Zappos representative called to check because his pair had been delivered and he wanted to see what I thought. More than a decade later, I still go to Zappos first for any kind of shoes. If banks can demonstrate a similar level of commitment to their customers, they have a genuine opportunity to differentiate themselves from their competitors and keep their customers satisfied.
Employee empowerment also means that customer-facing employees are well-trained, well-tooled, and most of all, well-paid. It is unfathomable that a bank can claim they are customer-centric while contact center, branch personnel and other frontline workers are usually some of the worst paid employees in the organization.
Value of Customer Centricity
Since most executives in financial services believe that they are customer-centric already, what would they gain from emulating the characteristics described above? Well for starters, they gain an upper hand when it comes to generating revenue. Simply put, there’s more value in a long-term, ongoing relationship with a customer than there is through a single transaction.
As noted above, I’ve returned to Zappos for nearly every pair of shoes I’ve needed to purchase since that one experience. And as evidenced, loyal customers are far more likely to become advocates and ambassadors, willing to speak of their own experience with the brand and bring others onboard. In other words, satisfied customers can help differentiate a brand from its competitors and can help play a part in driving revenue growth.
It Starts with a Clear Vision for Your Strategy
After years of working with financial service companies around strategy, I find muddled strategy to be a very common problem. Usually, it manifests as an organization that says it is aiming to be customer-centric but doesn’t follow through on execution. Does your organization say it is customer-centric? If so, could your organization be described as the Zappos or Ritz-Carlton of banking? If not, it is high time to revisit your strategy.