2: Measuring the Customer Experience
From the perspective on business, customers are annoying. They don't follow the procedures that make it convenient for employees to serve them and insist on straying from the fixed menu of services to demand things that are inconvenient to provide. It costs a lot to have to respond to their constant demands, in spite of all that's been done for them already, and it would be more convenient not to have to deal with them at all. Naturally, a bank that takes this perspective provides a miserable customer experience and, if it persists in doing so, it will eventually find itself completely undisturbed by pesky customers.
Realizing this, financial service providers have sought to respond to customer demand by considering the quality of their service, measured by customer satisfaction. However, most metrics gauge satisfaction with a specific transaction, product, or channel - but the customer considers every transaction, for every product, in every channel when they assess their sentiment about the businesses that serve them, and the various metrics for gauging satisfaction are unsuited to measuring the whole of the customer experience.
Channel Silos
A fundamental problem with customer experience is that channels are still in silos, managed in isolation, and there's little flow of information from one to another. Moreover, the organizational structure of many businesses discourages cooperation and frustrates attempts to implement changes across multiple channels.
Meanwhile, customers don't use channels (or products) in isolation from one another. While most customers tend to have a primary or preferred channel, through which they conduct most of their business, it's quite common for a customer to use multiple channels - and have the expectation that they are dealing with the same business, and that their experience will be consistent.
For example, there is an expectation for real-time integration: a debit card purchase or ATM withdrawal should be immediately evident when customers check their account balance on their smart phone. The 24-hour lag of "batch" processing, which was expected in the days of branch banking, is no longer acceptable.
Within the organization, there can be no understanding of customer behavior, and no meaningful planning, if information is not consolidated to provide a complete view of the customer behavior for every product and in every channel, And while much has been done to integrate transactions in a single account, little has been done to share information within an organization - and, in fact, the organization is often managed to create teams that must compete against one another for the customer's attention.
Anecdotal evidence is provided, from a bank where the "gold" and "platinum" credit cards were different teams, in entirely separate locations, and a service rep in one department didn't seem to know even how to contact the other - though it's possible his ignorance was a pretence to retain the customer in the "gold" product because upgrading the account to "platinum" would be detrimental to his team's performance measures.
Another example of a bank where there were separate customer service teams for the various channels, who did not share information. A person in a branch was unaware of a problem reported on the Internet, or a solution that a person at the call center attempted to implement. An e-mail offer may be different than, and perhaps even contradictory to, an offer sent in the mail.
The customer, meanwhile, remains agnostic. He believes that he is dealing with one bank, and expects there to be consistency in the experience. Explanations as to the reasons communications are fractured and inconsistent do not mollify him, but merely underscore the sense that he is dealing with a disorganized and incompetent organization, undermining his confidence in a financial institution (for whom being regarded as responsible is essential to keeping the trust of the customer).
Organization Structure
The cause of this is speculated to be evolution: banks began in a single channel, with a single line of business, and created separate departments as services were added, which created pockets of expertise as well as operational efficiency The older the bank, the more fractured the organizational structure. The practice of outsourcing has also aggravated the problem, with many of the functions of the bank being handled by entirely separate organizations that act as independent service bureaus. Naturally, the fractured operations of banking must be better organized to provide a seamless customer experience.
In many organizations, the organization chart shows that the fracture occurs near the top. Most commonly, the executive in charge of branch operations is a direct-report to the CEO, and the executives in charge of other channels report to two or more levels of management, before reporting to a different executive, who reports to the CEO - they are not merely separated, but lower in status, than the branch channel.
Performance metrics, budget allocations, and decision-making authority for the channels are separate, which leads to conflicts of interest: if the Internet is used to pre-qualify an applicant, information is collected by telephone, and the application is signed in the branch, it's only the branch that receives the "credit" for the sale, which leads to the perception that the branch, alone, generated revenue for the organization. Hence, the perception among senior executives that the branch is the most important banking channel.
If customer experience is considered holistically, it becomes clear that the branch office is often an accounting center that performs largely clerical tasks. The customer who has decided to "buy" a product does so before they step into the physical office, and is generally steered there by other channels. Even so, the author does not accept the suggestion that brick-and-mortar banking is unnecessary or even going away, but it is one of several channels that customers may choose, and which needs to work cooperatively rather than competitively.
Another factor that prevents banks from providing better customer service is risk-aversion. The labyrinth of procedures banks follow in order to protect themselves from fraud and comply with government regulations is well-established in the meatspace channel of face-to-face encounters and paper documents. There is some trepidation that the electronic channel would be less secure, so customers are often herded to physical branches for tasks that could as easily be performed online.
However, the notion that branch banking is bulletproof was undermined by the financial meltdown of 2008, which arose primarily due to homeowners, en mass, defaulting on mortgage loans. Many of these loans were executed at the branch level, where credit was extended to those who had no ability to meet their obligations even when the paperwork was signed.
As an aside, the various misconduct of banks that contributed to the crisis, or were undertaken in the panic that followed, have undermined public confidence in the banking industry and caused more customers to move to smaller banks and credit unions, who played upon the notion that "big" banks have lost touch with reality and did not care about customers - for which there was ample evidence. The bankers who, for years, adopted an attitude of "[customers] need us more than we need them" soon found themselves scrambling to keep customers - and while the exodus of customers was not the cause of the crisis, it contributed to preventing some of the largest banks from being able to recover.
The author refers to an emerging field in customer experience research called "value innovation," an approach to strategic planning that is driven by the desire to create value to the customer (as opposed to operational efficiencies) as a method of gaining competitive advantage. This notion was driven by new technology companies, and is a concern in new organizations that seek to define the value of their proposed services to the customer, but is being increasingly adopted by more established industries who have taken their value proposition (and their customers) for granted.
Value innovation is transformative in nature. Whereas innovations that improve efficiency often involve minor, internal changes to streamline operations, value innovation questions the core goals and practices. Efficiency takes the output for granted and seeks a better way to achieve it, whereas value innovation questions the output itself - and chances "what" the business does, not merely "how" it does it.
This gets back to the need to measure customer experience: a business must seek to understand how the organization, as a whole, currently serves the needs of the customers, in order to define ways in which to better serve those needs (or to serve additional needs).
Customers? Who are They Again?
Traditional approaches to examining the customer are indirect: database marketing, customer intelligence, demographic analysis, and the like all hail from an era when it was largely impossible or at least impractical to obtain accurate information directly from the customer. However, the electronic channel provides methods to collect, observe, record, and access a vast amount of data contributed by the individual consumer - which is far more accurate - and to consider customers as individuals with particular behaviors rather than as a mass that is (incorrectly) presumed to be homogeneous. And further, technology enables us to consider the behavior of a given customer in a given product and a given channel.
One key question is: which product "works" best on which channel? It is not as simple as a count of sales, as customers engage on multiple channels: before walking into a branch to speak to a loan officer, an individual may have visited your Web site to gather information, called for rates, engaged in discussions with peers, visited a third-party site for additional information, and so on. While the purchase was made in a branch, the factors that created the desire to buy (and to buy from you) took place in other channels, and the interaction in the branch was not at all influential on the buying decision, but was merely a place to perform the clerical tasks.
Therefore, being able to positively influence the buying decision requires understanding the various channels used by a customer in making the buying decision, the degree of influence each had to the outcome of their decision to purchase, and the ability of the organization to reach the customer in those channels. Some of this information can be obtained by observation - but in many cases, there's a need simply to ask.
As an aside, the products that most customers seek to acquire through the online channel are: credit cards (20%); time deposits (18%), Deposit accounts (14%), stock investments (12%), insurance (11%), foreign exchange and currency (9%), bonds or mutual funds (10%), and loans (4%). (EN: I beleive this is skewed to the British market - highly unlikely Americans have quite so much need for currency exchange, and the American "certificate of deposit" is slightly different than the British "time deposit" product.)
The author goes off on a tangent about industry jargon and the alphabet soup of acronyms commonly used in financial services, which they often use to disempower the customer. Given the option to speak in terms the customer can understand, or force the customer to learn the industry jargon, financial service institutions opt for the latter.
In the Internet channel, the theories of human interaction design are geared toward making computer interfaces usable - the principle theory of which is to "think like a user" and design the interface to be usable by a layman. The author also sites the 1:10 principle - that $1 spent on making design user-friendly saves $10 in support (or lost sales) after the system is released. The financial services industry would do well to adopt these two principles -as well as the notion of usability testing, bringing actual customers in to participate in the design process.
Conclusion
The author's conclusion reiterates his main points: that customer service is essential to competitiveness, and it's something that must be considered holistically. He refers to it as the "Holy Grail" of retail financial services - and given that products are highly commoditized, the company that gets customer service "right" has a significant advantage over competitors.