Across the globe, banks are devising innovative strategies to attain their expected revenue growth. At the same time, the financial services world is focusing on a single-point agenda with regard to boosting their customer acquisition and retention strategies – providing a ‘holistic customer experience’. The kind of continued commitment a customer offers is a great fuel for the growth of a financial institution. Across the globe, financial institutions are working on strategies to improve customer experience, thus creating more satisfied and loyal customers. However, the quest to delight every customer often puts the financial institutions in a trap, where they tend to sacrifice their profitability, while looking for customer satisfaction. This happen mostly, because of disjoined initiatives happening around customer experience and revenue management.
Customer-centricity has become an absolute necessity when it comes to planning new initiatives – be it new channels or products or pricing plans. In order to ensure the profitability of the initiatives planned, what financial institutions need is a holistic view of providing ‘customer experience’, without compromising their revenues or profitability.
Making a holistic view possible
Making such a holistic view possible requires micro level focus into the entire customer life cycle. The life cycle of a customer with the financial institution starts from the prospecting stage goes through onboarding, inducting, trust building and maintaining the relationship. Financial institutions need to re-prospect an existing customer, for up-selling and cross-selling reasons. It is obvious that only happy customers will go through this cycle multiple numbers of times.
Fig 1: Balancing customer experience and revenues through customer life cycle
Achieving the fine balance between customer experience and revenues has become an interesting puzzle for every bank, irrespective of the size and scale of operations. Balancing can be made possible, if and only if, a customer’s value can be rightly assessed, and an optimised experience can be devised to match the value that the customer brings in to the organisation.
The art of measuring and balancing
Now, how can the exact value of a customer be measured? A common but wrong practice in the industry is to assess the value based on one-time purchase volume. However, this may not indicate the right value of the customer, and actual valuable customers who contribute significantly to organisational profitability through their life time may be over looked through such myopic vision. A customer’s life time value is a function of a number of factors, including, but not limited to, total volume of transactions, channel preferences, financial status, life time with the bank and future potential. A financial institution should be able to measure customer value based on the right criteria, and subsequetly offer the right packages.
Customer experience is generated through a combination of a number of factors. This ranges from physical amenities provided, to offering the right products and prices, and rewarding the value with right offers and benefits. The right product bundles and packages, offered at the appropriate personalised price can boost the customer’s experience to a great extent. Moreover, any customer would expect proper rewards for the long term value they offer to a financial institution. There is a lot more to do than traditional loyalty programs in this area. The right financial/non-financial rewards will significantly improve customer satisfaction levels.
Benefits of a balanced proposition
The right experience for the right customer is a proposition that offers endless benefits. Let the customer be at initial prospecting stage or an advanced level upselling stage, continued relationship is always prompted by the way every customer is treated. This ensures improved customer wallet share, as happy customers always spend more. The right experience always varies from customer to customer. Thus, a customer who is at an early stage of their customer life cycle may not expect the same experience that a customer with high long-term customer value gets. When the financial institution ensures right value experience for all customers, the entire process turns profitable for the organisation. Such an approach helps the institution to tap maximum revenue opportunities through attracting more customers, up selling and cross selling to existing customers, and turning the customers profitable through right programs.
Fig 2: Revenue generation from customer centric pricing framework implementation
While the financial institutions want to keep their customers happy and stay with them, their banks rely largely on prompting these customers to spend more. Customer experience has to be enhanced throughout the customer lifecycle. The ‘customer experience’ and ‘revenue generation’ cycles need to be optimised and one needs to complement the other, if the bank expects quicker growth. A dynamic customer-centric pricing framework can help banks achieve the perfect harmony between these cycles, and thus accelerate their growth figures. Such a technology framework can help measuring the customer value in the right way, and balance the customer experience and revenues throughout the customer life cycle.