How can banks institutionalize their customer relationships?

In the wake of rising default rates, creditworthy accounts are in much demand. Since several banks are competing hard for business from the same limited set of customers, their success depends upon how well they leverage their customer knowledge to create and manage customer-centric relationships.

Broadly, this is a 3 step process: one, re-examine segmentation strategy; two, convert customer information into wisdom; three, institutionalize this wisdom so that it can be leveraged by the entire organization.

For instance, a bank that groups customers by net worth should adjust its definition of mass market, mass affluent, high net worth and ultra high net worth segments depending on the market, and identify the products and services that it will target at customers within each. However, if the bank does not possess adequate customer information which can be turned into knowledge and wisdom, it will not succeed in its segmentation objectives.

In that case, it must first create a customer data repository and gradually upgrade its data management and analysis skills to convert data into information, then into knowledge and finally into wisdom.

At every stage, the bank must have a plan for how it will make best use of available information (or knowledge) to develop customer relationships across the organization. The current situation at most banks is that every customer relationship is vested in an account manager – this means that only one bank executive possesses insight about a particular customer, which is lost to the organization when he or she moves out. Therefore, the ultimate goal should be to institutionalize customer wisdom to make it equally available to all customer-facing staff across all channels as and when required, permanently. When a unified view of the customer relationship is available to the bank’s employees across all channels, it erases the knowledge inequality within the organization, and enables all frontline staff to deliver a consistent and high quality experience to the customer.

No doubt, all of this calls for expenditure of time, energy and other resources towards harmonization of processes, alignment of internal customers and automation. However, this investment is justified in the long run by the benefits accruing from institutionalizing customer relationships.