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Customer Relationship Management? Or Customer Relationship Muddle?

September 23, 2010

The 80-20 rule. A bird in hand is worth two in the bush. It costs 5x more to recruit new customers than to retain existing ones. The list goes on with regards to growing business more profitably by engaging and activating one’s current consumer base.

In an age of increasingly fragmented customer engagement channels, there has never been a more critical time to look inwards at one’s most valuable asset i.e. one’s own customer base.

Before looking ahead, let’s first take a brief sojourn into the past.

Looking at the massive volume of credit card advertising in Singapore today, it is hard to imagine that just 15 years ago, credit card advertising in Singapore was limited only to brand advertising showing just general card features with convenience as its main selling point. (Credit Card Advertising in Singapore, 1995). In addition, no advertising that featured spending incentives was permitted. A credit card marketer in 1995 tasked with growing the cardholder base was largely limited to culling its current cardholder base through a series of smart and innovative direct marketing (or as it is known today, customer relationship management) initiatives to attract new card members.

Fast forward to 2010. A recently released study indicated that more than 70% of current bank customers in Singapore would not recommend their main bank to their friends and colleagues.

If the code of advertising for credit cards that existed in 1995 was in force today – can the current breed of bank marketers who have grown up on an unhealthy diet of easy mass media advertising and tactical promotions (win a car/condo) handle the challenge?

Is there financial merit in re-focusing energies on the long-lost discipline of proper customer relationship management / direct marketing that is targeted at existing customer bases to grow business more profitably in the hyper-competitive consumer banking market?

The simple answer is YES. And it lies in the knowledge that more than 80% of Singapore banking customers surveyed would not change their main bank.

But first, there are two elephants in the room:

(1) This 80% is a passive lot and quite disinterested in further engagements with its main bank.

(2) Once new customers are recruited, they either transform into this 80% or are getting ready for their next flirtation with the next bank.

Question remains: Can the 80% be transformed from passive, disinterested customers to active and engaged ones who will buy from and advocate their main bank?

The journey to the answer starts with these 3 questions:

  1. Does top management recognize the financial value of managing and leveraging EXISTING customer relationships? Having a customer call management protocol in place is NOT managing relationships for value.
  2. Is there alignment between product, marketing, IT, legal and compliance to create a sustainable platform to provide a “unified customer” view across a bank’s multiple customer bases? This is not just about an IT architecture framework. It is about constructing a “desired customer knowledge framework” first and then IT to follow.
  3. Does the bank have a customer value building strategy in place? A loyalty program is not the silver bullet here.

The question remains: CRM = Customer relationship management? Customer relationship muddle? Vote now.

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