Effective implementation of a customer-based marketing and sales strategy requires changes all the way up to the top of a financial institution's organization. In fact, in a 2007 white paper, "How to Build Loyalty with Every Interaction," Forrester Research suggests that reorganizing to create a more customer-based focus should be a priority initiative. Forrester warns that it requires a multi-year commitment and buy-in from the CEO on down to succeed.

Fortunately, getting buy-in from the top may be getting much easier. According to a May 2007 webinar presented by SourceMedia and the IBM Institute for Business Value, 65% of bank CEOs say they realize an extensive change is necessary to keep their organizations competitive. (These bank CEOs admit that most of their past attempts at reorganizing around the customer have failed due to an inability to collaborate beyond a moderate level.)

Collective responsibility

Harvard Business Review concurs. In a June article ("The New Deal at the Top"), Yves L. Doz and Mikko Kosonen describe how the role of CEO needs to evolve to keep companies competitive. Responsibility for corporate performance needs to be collective, rather than by business unit, they argue. They also suggest that companies implement the following practices and tools:

• Have interdependent unit heads integrate a single corporate strategy across all units.
   
• Develop transparent performance metrics that result from the strategic, collective dialogues of the top team, rather than the heads of disparate business units.
   
• Require managers to have overlapping experience and responsibility rather than unit-specific expertise.
   
• Insist on value-oriented rather than results-oriented measurements of optimal outcomes.

More ideas on how to reorganize

In their 2005 book, Managing Customers as Investments, Sunil Gupta and Donald R. Lehmann suggest several additional practices and tools in the effort to become more of a customer-focused organization:

• Requiring more direct customer interaction by the CEO, including spending time on the phones in the call center.
   
• Recognizing customers in terms of their long-term potential and treating them as assets.
   
• Developing metrics that reflect customer value and tie incentives to those metrics.
   
• Initiating customer satisfaction, churn and loyalty scorecards.
   
• Allocating resources according to customer groups rather than product groups. For example, rather than treating marketing dollars as an expense, they can be considered an investment requiring a satisfactory return. And for all funding decisions, the approval process should require an explanation of how the proposed spending will elevate the customer experience.

While it's hard to dispute the wisdom of harnessing collaborative thinking and action, CEOs will likely find it difficult to accept open challenges to their thinking and the subsequent loss of individual power. But it can be done.

At the 7th CRM Summit in February 2006, in Braselton, GA, Kevin Riley, Executive Vice President at KeyBank, described how his bank successfully reorganized around the customer by enlisting the CEO's sponsorship to drive the change.

Chief financial officer has role, too

Other top executives can also play an important role in enhancing an organization's customer focus.

For instance, loyalty experts suggest that the chief financial officer (CFO) should be responsible for measuring customers' lifetime value in dollar terms and using that value as a lens through which all expenses are viewed.

Lifetime value figures provide an alternate way to forecast future cash flow and the overall value of the institution. Interestingly, an article by Joseph McCafferty in the May 2007 edition of CFO magazine discusses the merits of this long-term, return on investment over time approach.

These days, business groups and financial experts like Warren Buffet are exposing the long-term damage done to organizations by short-term thinking.

As does the chief marketing officer ...

Chief marketing officers (CMOs) may have some of the most difficult work to do in the process of reorganizing around the customer. To attain the required intimacy with customers, all departments and customer contacts need to work together, which represents nothing less than a revolution in the compartmentalization culture of most commercial banking operations.

Marketing benchmarks need to elevate beyond the traditional four Ps of product, place, promotion and price to include the return on investment metrics of spend against impact on customer acquisition, retention and loyalty.

... and the customer relationship officer

New acronyms like CRO ("customer relationship officer") are emerging in response to the customer experience culture. KeyBank is just one of the banks implementing high level authority and accountability exclusive to the customer experience, with its appointment of Mr. Riley as the bank's Client Information and Relationship Officer.

Reorganizing around the customer is a major undertaking for most financial institutions, requiring a complete about-face from "business as usual." But for those who make the commitment to achieve a truly customer-focused organization, the financial rewards are significant and enduring.

 
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FPS regularly works with financial services companies to maximize the impact of their client communications, including e-mail and online communications. To find out how we can help you develop effective strategies for communicating with corporate financial executives, contact FPS President Vince DiPaolo at 847-501-4120 or [email protected]. You can also write him at the following address:

Financial Publishing Services Co.
464 Central Avenue
Suite 8
Northfield, IL 60093

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