To satisfy the customer is the mission and the purpose of every business. - Peter Drucker
As marketers, we've heard it said a thousand times in a thousand different ways: "Treat different customers differently." The virtues of this mantra have been extolled by management thought leaders ranging from Peter Drucker to Don Peppers and Martha Rogers, yet it is still a difficult concept for many firms to put into practice. There is tremendous potential waiting to be unlocked from the customers you already have. Not only is it imperative to keep customers, but also to provide as many relevant products and services based on their needs and your capabilities. To do this, you must evaluate each customer's perspective.
If you followed James Cameron's recent expedition to the bottom of the Mariana Trench, you may be aware that we know more about the surface of the moon than we do about the oceans which cover 71 percent of the Earth's surface. More than 95 percent of our oceans remain unexplored, which means that more than 68 percent of Earth remains unexplored! Think of the customers you don't have as the moon and your existing customer base as the Earth. While it is critical to keep reaching outwards, you cannot afford to ignore the unexplored portions of your existing customer base.
It's important to focus on learning more about the customers you already have. What they reveal to you will help you to capture more of their wallet share as well as show you how to attract customers with similar profiles. Drucker noted that business must start out with the needs, realities, and values of the customer in order to increase customer satisfaction. Why chase after a potential customer when you already have real customers who may offer a more direct way for value extraction if you address their needs? Why limit yourself to satisfying only one need of a customer, when you could satisfy several needs?
Instead of asking, "What do we want to sell?" a smart firm will ask, "What does the customer want to buy?" When firms look at their customers from this perspective, they will unlock the ability to increase customer wallet share through cross-sell and up-sell.
The goal of a customer-based business strategy is to optimize the value of every customer relationship. There are just two ways to accomplish that - either cut costs by serving customers more efficiently or grow their revenue. Cross-selling and up-selling addresses the second objective. Not only does it grow revenue, but research always shows that customers who buy multiple products (especially if they do it across channels) are more loyal as well. By addressing the wants and needs of each customer, they will buy more products and feel a greater sense of loyalty to you since you have met more of their needs.
In order to maximize the likelihood of a successful cross- or up-sell, you need to understand your customers through segmentation, manage them as customer portfolios, and make the right product offer, through the right channel at the right time. This approach is particularly important in banking. Consumers almost always have multiple banks for their mortgage, deposits, credit cards, wealth management, etc., so the opportunity is there. And currently, there is tremendous downward economic pressure on the industry. Legislation has limited revenue opportunities through fees; more reserves are required as a result of new regulations. So, it's vitally important to drive more value from customers - or again reduce their cost to serve.
We believe that firms can build customer value through three strategic initiatives:
• Data Analytics
• Point of Sales Analysis
• Service Modeling
Data analytics begins by identifying which customers are most likely to buy based on their previous interactions with a firm and their segmentation profile. Once this data has been collected, it is determined which products they are more likely to buy next based on this profile. This information will allow a firm to address the right customers at the right time, through the right channels. For example, a high value client seeking portfolio management would respond to upfront investment options that reflect her needs and values.
The benefits of a successful data analytics program will be two-fold: the firm will benefit by increasing value from its existing customer base while the customer base will benefit because they will feel like they have gotten real value for their money. Customers will appreciate the fact that you take an interest in them.
Point of Sales Analysis allows a firm to utilize its data analytics to determine which products could be bundled for customers at the outset of a new relationship, thus increasing the value of a newly acquired customer. For established customers, Point of Sales analysis will help guide a firm to see which customer segments respond to next best offers, and the moments in a customer relationship that such an offer would be valued. Bundles and Next Best Offers can be tested through market research to determine which combinations and offers are best received.
These product strategies tie back into Drucker's advice that a successful customer interaction is determined by learning what the customer wants to buy. Stop boxing yourself in to the explored portions of your customer base and branch out. Successful firms will look beyond their past successes and utilize point of sales analysis to address customer needs in ways that are innovative and targeted.
Finally, none of this will work if you fail to foster a culture that supports the vision of the enterprise.
Service Modeling must be implemented to ensure that each employee within a firm prioritizes the needs of the customer. Performances that lead to higher customer cross-sell and up-sell must be recognized and rewarded. Firms must plan for this in advance and focus on establishing a structure that supports a stronger focus on customer needs.
For example, branch managers should be rewarded when they demonstrate their ability to drive cross-sell and up-sell. Rewards and recognition will encourage employees to buy into and sustain the new ideas proposed by management.
By heeding Drucker's advice and listening to the needs of your customers, you take the first step to increasing your wallet share over the long term.
About the authors: This article was written by members of Peppers & Rogers Group financial services practice. Learn more about the practice.