Are CRM strategies within a community bank's reach

Technology

As bankers are aware, customer relationship management (CRM) has been widely prescribed as an antidote for diminishing market share and sluggish growth. What CRM actually involves, though, is the subject of much misunderstanding.

The most common perception is that CRM is a

In the fullest sense, CRM is a holistic concept that affects everything about a financial institution ... its technology, its business processes, its customer base, its market and its people. CRM encompasses the totality of how financial institutions approach their business and their interactions with customers, not just a piece of new technology or a one-time initiative to improve service or sales.

Its all-encompassing nature is probably why CRM has been misrepresented and misunderstood. It seems too big to grasp, so some people have tried to deconstruct it. That's why you might see a sales training seminar for front-line personnel advertised as CRM. Or you might read an article about a bank's CRM strategy that consists entirely of a customer calling program.

Efforts like these are bound to do some good, at least for a while. Eventually the benefits of isolated solutions tend to fade, leaving bank management to doubt the effectiveness of the CRM concept and to ponder: What next?

Unless you address every variable that affects how you serve your customers, the elements that remain unchanged - cumbersome businesses processes, for example - will compromise your results. It doesn't help to have front-line personnel trained to sell if they routinely get bogged down in paperwork. At best, your sales results will be short-lived.

What's the answer? Rather than reject CRM methods as too complex or deconstruct CRM into its component parts, community bankers should realize that a CRM philosophy of doing business can be adopted incrementally throughout an organization. Community financial institutions can enrich and expand their profitable customer relationships by pursuing a series of coordinated steps that redirect the entire organization - its people, processes and technologies - toward a greater understanding of its market and a more complete and profitable response to its customers' needs.

BREAKING IT DOWN

Although the specific solutions for each community bank will be unique, a true CRM strategy should generally encompass a broad scope of initiatives:

* Developing an individualized CRM strategy;

* Implementing appropriate technology;

* Building sales management systems and developing sales skills;

* Matching product and service offerings to the market; and

* Optimizing branch performance.

As this list suggests, CRM reaches into every aspect of a financial institution's business.

1. Developing an individualized CRM strategy. Each community bank has its own set of circumstances that puts it somewhere along the CRM continuum. A bank that recently converted to a new core data processing system may already have the requisite technology to mine its customer data for sales and prospecting information. Another bank's technology might not be robust enough to support a CRM strategy, but it has an experienced sales manager who has created a sound business development plan. Yet another bank might have a good customer feedback mechanism through which it collects useful information about its products and services.

The point is that few banks have to start from scratch. An initial review will tell you where you stand, and how much additional effort will be involved in developing a CRM strategy. The initial review looks both inside and outside the institution for clues about your market opportunities, organizational strengths and weaknesses, business processes, technology status and human resources.

* Market opportunities. Focus groups with customers and non-customers can give a bank insights into perceptions about its products and services and the manner in which they are delivered. This subjective and anecdotal information combined with objective customer, competitor and demographic data - provide a balanced perspective on the market expansion and customer retention opportunities that are present in the bank's communities.

* Organization and business processes. Action teams composed of bank managers and staff can quickly hone in on the sources of waste, redundancy, administrative burdens and other faults in the bank's organization and internal procedures. Action team deliberations have the additional benefit of promoting a sense of ownership in the CRM strategy that emerges. Technology status. A technology effectiveness review looks at the institution's present computer systems, software programs and interfaces to determine whether they will support a CRM business strategy, whether the technologies are being used optimally, and whether unused capacity is available. A technology effectiveness review also answers questions about costs, future expandability and whether additional or replacement technologies may be needed. Of particular importance in the context of CRM strategies is the bank's marketing customer information file (MCIF) and/or its CRM system. To provide information and tracking support to your sales team, your MCIF/CRM system should have robust capabilities for searching, sorting and matching customer information with market and demographic data. Many of today's CRM systems also incorporate contact management functionality, referral and pipeline tracking, incentive compensation calculations and "what-if" pricing scenarios. Human resources. The skills and attitude of the bank's people are instrumental in the success of a CRM strategy. Training needs should be identified during the strategy development phase. Other HR issues that come into play include hiring the right people, redirecting people who resist change, providing meaningful incentives and rewards to support sales efforts, instituting effective referral mechanisms, and identifying managers and staff with special aptitude for sales and customer service. The CRM strategy that emerges from this evaluative process will be unique, depending on the bank's asset size, market, staff, products and customers.

2. Implementing appropriate technology. Technology is not the sum total of a CRM strategy, but it is a core component. The bank's operating system must be capable of supporting new types of product structures and fee arrangements. In addition, the telecommunications infrastructure must be able to support a variety of customer touchpoints, including electronic and telephone communications. Through technology action planning, banks are bringing more rationality to their technology acquisition decisions. Through smart vendor selection strategies, they are saving money and making better decisions about suitable technology partners.

Similarly a telecommunications review helps find flaws in a bank's allimportant lines of communication with customers. Most bankers are surprised to learn that the systems they use to communicate with customers are often overlapping, incompatible or overly expensive. Inadequate and costly communications channels, including poorly designed websites or busy phone signals, impede banks' efforts to attract and retain customers.

When implementing technology to support a CRM strategy, bankers should also keep their eye on the future. E-commerce activities will undoubtedly proliferate as more consumers become conversant with technology. Banks that have expanded their horizons by pursuing CRM strategies now will be poised to further extend their market share by providing financial and financially related products and services to customers through emerging e-commerce channels.

3. Building sales management systems and developing sales skills. A community bank's transformation to a sales organization starts by teaching executive, branch and line managers how to manage, track and motivate sales. Many of them did not "grow up" in a sales culture and need to learn how to create and manage sales plans.

Sales management training involves introducing bankers to the attitude and tools of selling - how to prospect, plan a sales call, orchestrate a solution and close a deal - and the elements of effective sales management. The most effective sales-management programs blend training techniques with on-the-job behavior modifications, new techniques and procedures, and self-evaluation.

Be careful of canned sales-management programs. To be useful in the context of CRM strategies, the sales-- management training process should be tailored to each bank, depending on the personalities involved, how entrenched the non-sales culture is and how ready the managers are to leave their comfort zones.

Start with a blank piece of paper and hammer out specific sales goals and marketing plans as part of the sales-management training process. The learning process is enhanced when bank managers and the trainer collaborate during hands-on work sessions. The most effective sales-- management training programs also give managers a chance to try out their sales and marketing plans in the field before coming back to the next work session to evaluate their progress. In contrast, classroom training on its own generally is not effective in inducing the kind of managerial behavior changes a CRM strategy demands.

Besides imparting sales management skills, the training program should teach managers how to track, recognize and reward sales activities. In many cases, this part of the training process involves learning to use sales tracking software. Managers also begin to recognize that their own attitudes are infectious and that, if they enthusiastically adopt a CRM mantle, the bank's employees will more readily do the same.

The other element of sales training - sales training for bank employees - should be kept separate from sales-- management training. Typically it involves the presentation of selling techniques for customer-contact staff. Trainees should learn and be able to practice their roles in selling the institution's products and services, including listening, probing for customer needs, effectively handling objections and complaints, crossselling and making referrals.

Another important purpose of sales training for employees is to indoctrinate them in the CRM philosophy of doing business and to encourage their full and enthusiastic participation.

4. Matching products and prices to your market. To promote broader relationships with their most profitable customers, banks must offer a range of products and services at competitive rates and fees. An integral part of a CRM strategy is using your institution's product structure to court high-value customers, increase noninterest income and reflect the true cost of providing financial services.

A product audit is an excellent tool for measuring your current products and services against market demand and price sensitivity. Employing such tools as product benchmarking, price analysis, delivery channel evaluation, market penetration analysis and profitability measurements, you can determine the product lines that will best meet your customers' current and future needs.

Among other things, a comprehensive product audit yields product bundling and pricing options for your consideration, as well as models showing you the effect on revenues of new fees or fee collection policies. Benchmarking and revenue information will provide a basis for setting market-based fees. With these advanced analytical tools, you can be sure you are offering the right products at the right prices to maximize sales.

5. Optimizing branch performance. A bank's branch offices is where CRM actually meets the customers. Through the branches, products are sold, relationships are courted, and customers come to identify with the bank as their primary financial services provider.

The branches of a bank, though, are not identical. Each branch has its own micromarket, demographics and transactional history. Imposing identical sales and performance expectations on each branch means that some branches will pursue sales goals that are misaligned with their markets. Inevitably some will underachieve.

Through branch-optimization techniques, banks can measure the available market opportunity and current financial performance of each branch. Using those figures, each branch can be ranked, revealing which ones are performing optimally, which ones need performance improvement or expansion, and which ones may be too costly to operate as full-service branches.

One of the purposes of a branch-- optimization program is maximizing branch delivery channels. Transactional and competitive mapping methodologies allow you to understand how a particular branch's customers prefer to do business. With that information, you can facilitate customer interactions by expanding or facilitating selected delivery channels.

CRM strategies can also be customized for each branch. For example, after examining the transactional and competitive map for one of its branches located in a retirement area, a bank might post a full-time trust and investment management officer in the branch. The market data for a suburban branch might suggest that an automated loan application kiosk will stimulate loan demand. Whatever actions are ultimately pursued, the branch optimization process allows you to base your business decisions on an objective assessment of the unique potential of each branch within its own market.

CONCLUSION

For a community bank to succeed in adopting a CRM philosophy of doing business, bank management must first understand CRM as a holistic concept that involves multiple, interlocking disciplines, including market knowledge, strategic planning, business process improvement, product design and pricing analysis, technology implementation, human resources management, customer retention, and sales management and training.

Great results - more loans, higher deposits, higher returns, better shareholder value, motivated staff, and improved profits and customer satisfaction - are achievable. But does a community bank have the wherewithal to do it? With seasoned guidance, a good project plan and proceeding one step at a time, the answer is, emphatically, yes.