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E-Strategists Humbler, But No Less Ambitious
The way some financial services executives are talking these days suggests that the Internet has regained some of the status it lost after the dot-com bust.
Of course, nearly everyone prefaces their pro-technology talk with comments like "It's not about the technology. It's about the people," or "the customer," or "the process." But there are signs that Web development is hot again, this time as a mature channel.
Tech chiefs say both C-suite executives and line-of-business managers now recognize the key role e-commerce plays, and that everyone is pretty able to joke now about all the money blown a few years ago on fruitless projects.
There is even a new buzzphrase or two bubbling up to describe next-gen Web services. Concepts like "channel-blending" and "channel- switching" seem to have pushed past last year's professions of faith in plain old "multiple-channel" environments. The belief that a customer's trust was an institution's to lose has been supplanted by the presumption that customer trust is a thing of the past.
Also being kicked around is the term "design persona," referring to how a company might reshape its Web interface with a specific type of consumer's needs in mind.
Merrill Lynch & Co. has done that, by the way, and Morgan Stanley's Discover Financial Services is in the process of doing so, according to a senior analyst at Forrester Research Inc., the Cambridge, Mass., technology research and consulting firm that held a conference on "Winning the Next Financial Services Consumer" in New York this week.
Another sign of the times: One of the conference's marquee speakers was Scott G. McNealy, the chairman, chief executive officer, and president of Sun Microsystems Inc., whose speech was familiar (for him), but whose presence clearly reinforced his company's increased desire to court the broader financial services market -- and not just its higher-tech segments, like securities trading.
Also on hand was Mark A. Ernst, the chairman, president, and CEO of H&R Block Inc., who described his mission to turn half its tax customers into financial services customers within five years. He plans to use financial advice as the central cross-selling tool, offering a new paradigm that gives people more customized guidance and replaces the technology-driven do-it-yourself culture that dominated his company's niches in the late 1990s.
One of Mr. Ernst's messages was that the future lies not in multichannel customer service, but in delivering service through a blended channel that combines technology with advice.
Senior e-commerce executives from major banking companies who spoke on a Tuesday panel described some of the blending going on at their organizations, both internally and in the customer-facing applications.
"On the cross-selling side, it really comes down to proving that it works," said Sanjay Gupta, a senior vice president and the director of online marketing at Bank of America Corp.
In a somewhat surprising revelation, Mr. Gupta said that Bank of America's e-commerce group -- which, like many others, placed large bets on emerging technologies during the dot-com era -- had a "near- death experience" two years ago. In its resuscitated form, the group focuses on supporting the Charlotte company's goals and has learned a lesson: "Don't try to get all the customers" online, he said.
Major initiatives have given way to little things that Mr. Gupta said can make a big difference, such as displaying mortgage rates more prominently on the Web site and providing a link from the home page to online banking. "It's the small things that make it easier for customers to do business."
Dropping the fee for online bill pay, which Bank of America did a year ago, has persuaded more customers to sign up for the service than had been projected, he said. "We are extremely happy with our decision."
When asked to name the big, expensive projects of the dot-com era that failed and went away, Lawrence G. Baxter, the chief e-commerce officer at Wachovia Corp., mentioned e-marketplaces, portals where banks tried to connect consumers and retailers. Today's goals are more realistic and more closely attuned to the needs of the Charlotte banking company's business lines, he said.
"The R&D element has changed, and I think that's indicative of a maturing channel," Mr. Baxter said. "Now what we're doing are pretty heavy implementations," including a single sign-on for the retail and wholesale banks and disaster recovery and risk management projects.
After the dot-com era, "people really do expect to see something long-lasting and serious coming out of e-commerce," he said. "We planned the Web site to be a window to the entire organization."
Michael F. Jackson, the president of e-commerce at Regions Financial Corp. of Birmingham, Ala., said he expects the need for a discrete e-commerce group within his company to evaporate within the next few years.
"E-commerce will just become a natural part of each line of business," he said.
In its Internet offerings, Regions has concentrated on services for business customers, Mr. Jackson said. One project in the works is developing online statements that would reach these customers faster than mailed ones.
"We don't make any bets anymore" on e-commerce initiatives, he said. "Early on we were all betting."
Throughout the organization, when it comes to the Internet, "everybody has bought in," Mr. Jackson said. "Everybody is part of the decision-making process. We brief the CEO four times a year."
While the e-commerce chiefs described modest and tried-and-true initiatives, John P. Dalton, a senior analyst with Forrester Research, described the more sophisticated approach some companies are using, "design personas," which he defined as "a vivid narrative description of a person who represents a single customer segment."
These descriptions are developed through thorough, open-ended interviews with about a dozen customers. "They have faces, a name, an age, and an occupation," he said. "You want to see them in their environment. What are their pet peeves? What makes these people tick?"
Once a profile is formed, a Web site's navigation, information, and interactive services are redesigned to suit the target person's needs. For example, a Colorado Springs resort hotel, the Broadmoor, used the technique to make it easier for a time-starved father to book reservations for his family.
Discover is in the midst of a "massive redesign of its home page" with a design persona in mind, Mr. Dalton said.
However, he cautioned that "it's not cheap to use this technique" -- implementations cost at least $100,000 to $200,000 -- and that a company has to pick a desirable customer segment to please. "Customer goals and business goals have to come together for this to work."
That can be a challenge. Generally speaking, consumers do not trust how banks will use their personal financial data, said Ron Shevlin, a principal analyst for Forrester Research. Because of corporate scandals and perceptions of greed, consumers are "disillusioned, skeptical, and wary," he said.
To regain their trust, financial institutions will have to become "consumer advocates," and this might involve helping customers avoid fees or get the best deals, Mr. Shevlin said.
James T. Rager, the vice chairman of Royal Bank of Canada, told the conference that it is constantly trying to figure out how to reduce its annual customer defection rate of 9% to 10%.
It divides its customer base into segments, such as "active retirement" and "late retirement," and assigns managers to each segment. People in the late retirement segment tend not to shop a lot but remain relatively profitable for the bank, Mr. Rager said.
Active retirement customers, though, are more mobile and tend to spend about half the year in the United States in retirement homes, he said. They have also told the bank that it is important to treat them the same in the United States as they are treated in Canada.
One retention tool Royal Bank uses is contacting each customer, by phone or by mail, at least once a year, Mr. Rager said. "The mere fact that somebody called them and asked them if they had the right package" gives the customer "a tremendous lift."
A chief way banks lose customers is through poor resolution of complaints, particularly at call centers, he said.
Forrester also documented the difficulty of cross-channel customer service. According to its research, 68% of banks say their branch employees are not aware of product offers made online, 72% said they cannot identify people who research products online and apply offline, and 76% say their call center representatives cannot help customers with online trades or bill payments.
One noteworthy absence from the Forrester conference was Carl F. Pascarella, the president and chief executive officer of Visa U.S.A., who had been scheduled to discuss the changing payment landscape, but was called away on business related to Visa's big decision last week to settle the lawsuit brought by the nation's retail merchants.
Speaking in his stead, Mark Greene, the general manager for the banking industry at International Business Machines Corp., said that IBM's vision for the future of payments is closely aligned with Visa's.
Retailers such as Wal-Mart Stores Inc., the lead plaintiff in the suit against Visa and MasterCard International, are increasingly concerned with having a payment strategy, and banks need to make sure their plans are up-to-date, too, he said. "The challenge facing banks in particular is: Where do you place your bets" in an environment of declining check volumes and increasing debit and electronic payments?
One area where a growing number of U.S. financial services companies are putting their bets is in offshore outsourcing -- mostly of information technology projects and business processes, and mostly to Indian firms.
In the future "accounting, customer service, and sales type activities are going to be done from places all over the world," said John C. McCarthy, the group director at Forrester. "Clearly the offshore trend is not going to abate."
Common mistakes in outsourcing include shopping for vendors on the basis of price alone (which often compromises quality), losing touch with the company doing the work, neglecting to visit the prospective vendor in person, and failing to spell out expectations in advance, he said. Copyright 2003 Thomson Media Inc. All Rights Reserved. |
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