New TowerGroup Analyst in the Financial Strategies and IT Investments Service Explores the Value of One-to-One Customer Experience
Facing tighter competition and mature, savvy markets, financial services institutions must find new ways to differentiate themselves to achieve organic growth. New research from TowerGroup finds that institutions that provide a superior, one-to-one customer experience will be able to reduce customer attrition and see their asset growth outpace the competition by 30% - representing more than $360 billion dollars in assets.
The author of the research is senior analyst Rodney Nelsestuen, the newest member of TowerGroup's Financial Services Strategies & IT Investments research practice.
"Many financial institutions put the customer in the center of their organizational structure, touched by discrete processes, people and technologies. Although such an approach may be appropriate for internal communication and operations, it is not how a true customer experience works and can be both narrow and limiting," says Nelsestuen. "Customers are increasingly engaging with institutions across all elements of people, process, and technology. Taking a more holistic approach, viewed from the outside-in as the customer sees it, is what will enable institutions to differentiate themselves and maintain their client base."
Highlights of the research include:
- The degree of customer-focus has proven to be a significantly more important decision factor in which institution a customer chooses to do business with, compared to product or service features alone. However, as customers' lifestyles vary and life-stages change, their needs and wants also change. TowerGroup believes institutions that understand and anticipate these changes will increase customer retention and profitability compared to simply reacting to change as the customer drives it.
- Traditional demographic segmentation falls short of delivering superior customer experience. Diversity in the marketplace is growing and the idea that any group is discrete - or homogeneous within a specific ethnic group - is short-sighted and will fail to predict individual purchase behavior. TowerGroup believes that a prerequisite to meeting the customer experience challenge is developing a deeper understanding of growing diversity in the marketplace.
A chart illustrating this can be viewed and downloaded at
http://www.towergroup.com/research/content/page.jsp?pageId=802.
- Becoming a leader in customer experience must be important throughout the business from the corner office to the janitor's closet. Just as a customer's experience is based on every interaction and connection he or she has with a financial institution, the approach to addressing customer experience must be holistic - involving all points along the continuum of process, people
and technology.
- Trading customers with the competition is a zero-sum game. The ability to lower customer attrition rates makes a dramatic difference in overall market share and growth rate. TowerGroup estimates that by cutting the customer churn rate in half, institutions will net a 6.8% asset growth rate compared to 5.2% net for competitors unable to reduce churn. This 30% difference in growth rate represents more than $360 billion in assets across insurance, banking, and brokerage. Nelsestuen added, "To enable a true one-to-one customer experience, the enterprise architecture deployed by an institution must also be addressed and each module, application and system coordinated in a seamless fashion. Institutions should employ predictive analytics to anticipate customer moves and manage the knowledge gained, provide multi-channel integration and deploy collaboration tools."
With more than two decades experience in financial services, Nelsestuen has served in diverse finance, marketing, credit, operations, and technology roles at both the operational and executive levels. He spent more than eight years as CEO of an affiliate bank of AgriBank, FCB and six years as the enterprise-level CIO. He received his Bachelor of Art's degree from the University of Wisconsin and holds an MBA and a Graduate Certificate in information systems management from Keller Graduate School of Management of DeVry University.
At TowerGroup, Nelsestuen covers the following topics: improving customer experience; business process management; outsourcing; risk management; and cultivating ethnic and other emerging markets. The TowerGroup research report titled "Customer Experience: Winning on the Front Lines," is available to qualified members of the press for review. Those interested in purchasing a copy of any TowerGroup report or subscribing to a TowerGroup research service may call +1.781.292.5200 or email service-info@towergroup.com.
About TowerGroup: TowerGroup is the leading advisory research and consulting firm focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America, Europe, and the Asia-Pacific region, TowerGroup serves a global client base. Visit www.towergroup.com for more information.