We sent a Quant to a CX conference and all we got were these 6 insights.
We just wrapped up the Customer Experience for Financial Services (CXFS) conference in Charlotte, NC. Many key players in the banking and insurance industries came out to share their insights and successes around customer experience (CX). If you were able to make our luncheon on Tuesday, you got to hear some of our research around “The Gap of Discontent” and our approach to shrinking that gap.
Overall, the conference provided greater visibility into the state of CX within Financial Services (FS). FS companies seem to be capturing survey data and monitoring social spaces well. However, many financial services organizations are not utilizing the full extent of business intelligence (BI), and seem to be narrowly focused on providing a better CX through customer service (CS).
As customer preferences continue to shift toward a desire to interact with FS companies in ways that better fit their lifestyle (like mobile, social and data driven), CS on its own will no longer provide a sufficient CX – FS companies will need to shift their focus toward providing better CX through innovation. If FS companies do not act now, new competitors will fill the CX void, leading to ever increasing runoffs in customer volume.
Below, you will find six CXFS takeaways that will help FS companies understand their current state, as well as how it can be measured, enhanced and monitored through use of BI. These core areas will help drive innovation, helping FS companies provide a better CX.
1. Overall Conference Observations
For our first takeaway, I wanted to highlight a couple key observations from the CXFS conference to help identify the current state of FS companies. Ultimately, the main focus was on how FS companies act to provide a best in class service to their customers. Here are the highlights that caught my eye:
1. The main focus seemed to be on voice of customer (VOC) programs, which is a method for capturing customer insights and perceptions to help determine how to drive the appropriate change. Many attendees seemed to use survey based feedback paired with social monitoring tools as their VOC. A couple questions I pondered were:
a. Can this feedback drive enough meaningful change to remain competitive?
b. For the limited feedback gathered, is it being used to its full potential?
While I could not definitively answer question one, I can argue that many of the FS companies are using the results of VOC in a limited capacity. It seemed that many of these organizations were using VOC to react to customer service issues (i.e. how would you rate your experience at our branch or with our call center representative), as well as internal service issues (i.e. employee engagement scores from 360 degree reviews).
This leads me to two more “headache” questions that I think CXperts in the FS sector need to consider:
a. How much stock are you willing to put into the source, collection method and quality of data you’re capturing?
b. How sure are you that the data you’re collecting is fit to drive the level of change in experience that actually matters to your customers?
2. Through use of NPS (net promoter score), these financial institutions gauged performance as an indicator of company growth. While this is an important factor and should not be ignored, there comes a time when you have exhausted efforts on net promoter methodology, driving a need for Net New Innovations (NNI) to drive customer satisfaction, growth and revenue.
So, what does NNI mean? Simply put, NNI is the creation of new products or services. In the context of our discussion, financial institutions should deploy NNI as a method to meet their targeted customer segment’s expectation.
It was not too long ago, a customer needed to visit a physical branch location in order to deposit a check. Banks realized the discontent of certain customer segments with the process of driving all the way to the branch, just to stand in line waiting to hear “I can help the next customer.”
From this, they put NNI into action through multiple phases.
First, banks allowed customers to deposit their checks after hours at the ATM by way of envelope. And, while certain segments were satisfied with this process, younger segments, such as the Upwardly Mobile, were still unsatisfied. Knowing this, NNI was put into action again – banks got rid of envelopes, and even printed a picture of the checks on the deposit receipt.
But this continuously evolving segment still had unmet needs. Finally, banks made a powerful play at NNI that lead to a rise in customer experience – they implemented mobile check depositing. All a customer needed to do was take a picture of the check with their mobile device, and the bank would immediately deposit it.
2. The Gap of Discontent
For our second takeaway, we discuss a better approach to measure and manage customer experience. Almost all of the FS companies at the CXFS conference used VOC to gauge CX. However, they seemed to aggregate data by problem type and service area. This type of aggregation tends to treat all of our customers the same, and does not allow us to selectively target customer areas that we want to grow. It completely abandons the power of segmentation and relies on a homogenized approach to dealing with problems for one archetypical customer.
To provide you with a solution that does, let’s review the Gap of Discontent using the below visualization. In this, we can see two main factors of discontent.
- Customer experience
- Customer expectation
The variance between these two values provides the Gap of Discontent. Since we have segmented our customer pool by Nielsen P$ycle segments, we have normalized each segment’s expectation to equal 100.
The lower a segment’s customer experience rating, the larger the gap of discontent, and the greater the need for NNI.
When we can visualize that gap of discontent by segment, we can determine which of our customers need the majority of our focus. We can then further determine if these are the types of customers that we want to grow our business. And with this information, we can develop NNI to provide a better CX to that segment.
Ultimately, this concept of narrowing the gap, is about obtaining the best cost benefit through targeted segment innovation management. For example, if it will cost more to innovate with the Upwardly Mobile segment than you can anticipate earning back, this should tell you something about cost versus benefit.
And after deploying NNI, we can see the incremental lift in CX while shrinking the gap of discontent, which can be attributed to a positive effect on profitability—if you’re measuring the right things.
3. Banks, Funding Cycles and Moving at the Speed of the Customer
For our third takeaway, we noticed that two main blockers almost always exist within FS companies. The first deals with the cost of innovation, while the second deals with the funding of these innovations. Harley Manning, from Forrester Research, provided some simple, but extremely powerful, insights into how to receive buy-in to the potentially high cost solutions of NNI.
- First, lead with the benefits of NNI, not the costs.
- Second, frame benefits in terms the business cares about (i.e. dollars).
- Third, address the emotional hot buttons of decision makers.
- And, fourth, before making a big pitch, establish your credibility on CX.
You might be thinking: duh! But, the surprising fact is that most individuals open with cost, ultimately leading to the demise of their idea. Some might argue that cost will almost always be the ultimate decision factor, regardless of where you start your pitch. Even if you start with the potential increase in value from the specific innovation, executives will want to know the projected ROI, which will include cost. I would argue one simple point: it’s solely about keeping our executives interested and willing to invest intelligently.
If you have kept executives interested, and received buy-in, you now need to wait for funding. And, when do most FS companies create their budgets? That’s right, annually. Imagine you have all the steps in place to monitor your gap of discontent. In doing so, you recognize the need for NNI, and you believe you have identified the perfect innovation to close the gap of discontent for the Upwardly Mobile segment.
Unfortunately, you just missed the budget deadline – 345 days until you can seek consideration for this innovation. The time passes, you pitch your idea, and you receive funding. The project takes about one year to complete, and is rolled out to the market successfully two years later from when you first identified the opportunity.
Since then, the gap of discontent has grown, and the impact of your two-year old NNI has not had the powerful effect you had hoped. On top of that, numerous non-banking competitors have moved into your market space, bringing massive NNI to the marketplace at a much faster rate. How can you keep up? Well, the unfortunate answer is, you probably can’t. Well, definitely not without serious changes to your organization, to your supporting processes, and the overall culture. And, more specific to this example, a change in your budgeting process.
The bottom line with this takeaway is that new innovators move at the speed and convenience of the evolved customer, not in the least encumbered by banker’s hours and annual innovation or quarterly site enhancement push cycles.
4. Where’s Business Intelligence?
Four our fourth takeaway, let’s focus on what I believe to be one of the key missing elements within many FS companies—that’s BI (business intelligence). Don’t get me wrong, I know all the FS companies have robust BI departments, but they’re almost always silo’d off and focused on growing margin for existing products.
First, while we see FS companies aggregating their feedback data by issue type and service area, it seems that most are treating customers the same, which works effectively when improving on operational issues at the branch, call center or other already existing channels and processes.
But, it does not allow for a significant improvement in customer experience, since we need to understand that our customers are at different points in their life, want different things, and interact with us in different ways.
Without segmenting our customer data, we cannot define focus areas for innovation – very rarely will the same innovation be able to resolve your gap of discontent for all segments.
This is why prioritization and cost benefit are key – basically, who are the customers that we want or need, and what innovation has the best cost benefit in closing the gap of discontent for that segment in the shortest amount of time.
To help illustrate the missing elements of BI in financial services, we have developed an “Old School” versus “New School” comparison.
So, how do we gain the attention and interest of our analytics team to help us move away from old school methodologies and onto the new? We can start by asking one really powerful question:
How can we identify the data we need to intelligently drive innovation with the goal of creating a better experience for our target customers?
Everything starts with data and a goal. I often hear individuals use the “garbage in; garbage out” line. Basically, if we don’t have the data we need, and we are not storing it in a way that is easily accessible, we can not effectively measure customer experience, therefore we will struggle to develop innovations, and cannot significantly impact customer experience.
The takeaway: collaborate with your BI teams. Not only to request data, but to redesign process in a way that creates efficiency and promotes intelligent innovation.
5. Have You Tried a Center of Excellence?
For our fifth takeaway, we discuss how departmental silos have a negative effect on innovation and CX.
To paint this in a CX type of way, on a scale from one to ten, what is your level of satisfaction with communication between departments throughout your company? (Where 1 equals “We didn’t even know they existed!” and 10 equals “We corporately married!”)
How many times in the past month have you heard of a project that someone was working on that you thought you or your team should have been involved in?
The point I am trying to make is that silos block communication – one of the ways we try to resolve this issue is through Centers of Excellence (CoE). If these questions resonate or you’re thinking along the same lines, you might consider looking into a BI CoE. The primary value of a BI CoE is to bring the organization’s people, thinking, tools, processes and data into a central area allowing much tighter collaborative focus on new ways to harness BI and achieve the quickest wins possible.
Now, apply this thinking to data architecture. Or, the centralization of data within a warehouse.
By centralizing the information, we all understand the same issues, report the same numbers, and drive towards the same goals. We reduce the time it takes to produce effective reporting, and we improve the confidence in our numbers – no longer do we see three different reports of the same statistic with different values – or, at least at a significantly lower rate. And, when we pull this all together, we can react quicker to current or predicted customer segment shifts with targeted segment NNI to dampen the negative effect of a widening Gap of Discontent, which should lead to growth within your targeted customer base.
For our sixth and final takeaway, we want to discuss a BI application that when implemented correctly will drastically reduce the amount of time spent manually monitoring information – it will allow us to increase our innovation efforts and act on them while trends are still hot. This application is known as an alert system. To my surprise, I did not hear this mentioned in any capacity at the CXFS conference.
You probably notice that I have structured this at the bottom of my BI comparison chart (figure 2). However, these systems can be established all throughout the BI lifecycle. We can use them to automatically alert us of significant predictive or sudden economic shifts that will also lead to changes in customer expectation – this will help with NII prioritization.
Even in the feedback loop area, you can create a cue based alert system, where certain feedback is automatically routed to certain individuals based on score, or other metrics you are monitoring.
For success measurement, you can set up benchmarks, hurdles and goals, which you can measure at various checkpoints, while applying alert notifications to certain variance levels. To use the Gap of Discontent as an example, if a segment falls below 75 percent of their expectation, an alert will automatically be sent to the appropriate parties.
Overall, we really enjoyed the CXFS conference in Charlotte, NC. It gave us insight into the current state of CX within the FS industry by allowing us to identify areas of improvement. We see much opportunity to further advance CX through knowledge of the above mentioned takeaways, but we feel you cannot do this without the collaboration of three main factors. They are: Customer Experience + Business Intelligence + Innovation Management. (shown in figure 3 below)
Ultimately, we use business intelligence as a measurement tool to give us both sight and confidence. Sight, which allows us to understand our customer through segmenting and understanding how each segment reacts to relating environments. Confidence, through eliminating underperforming options and allowing us to focus on alternatives that make measureable sense.
Through measuring our customers experiences and expectations, we can set our focus, or targets, as well as prioritize our innovations through cost benefit analysis and innovation management.
We use innovation management to get the most from our efforts with NNI. And, when we manage our innovations in this manner, we can shrink the Gap of Discontent to provide a better customer experience.
If you are interested in modernizing the way you perform CX, or just want to discuss this topic further, please reach out to me. CX is something we are passionate about, and we love helping companies of all industries find powerful ways to grab the competitive edge they seek.