Banks urged to be more customer focused

Regional banks should be more focused on individual customer needs and less driven by the need to sell a product, according to Booz Allen Hamilton.

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By  David Ingham Published  January 1, 2004

Regional banks should be more focused on individual customer needs and less driven by the need to sell a product, according to Booz Allen Hamilton. Recent research by the management consultancy concluded that banks could do a much better job of identifying each customer’s circumstances and offering him products and services to match. “Retail banks in the region could achieve better returns from a financial standpoint and in terms of customer satisfaction if they viewed their customers not just as discreet buyers of products, but rather individuals that are seeking relationships with the bank,” explains Peter Vayanos, partner, Booz Allen. “The one [approach] says I have a product, it’s one size fits all and I’m going to put it into the marketplace. The other says that I understand my customers and I understand their needs will change as their life changes.” According to Vayanos, there are “very distinctive and marked events” in people’s lives that have financial implications. Such events, particularly in the Middle East would be leaving school and going to university, marriage and starting a family. Banks need to recognise these key events in people’s lives and suggest products that fit with their needs at the time. “For example, if I was putting a package together for somebody that’s started working, I’m not going to include a mortgage component because they can’t afford a home,” explains Vayanos. “However, I need to focus on their key requirements at that point in time, which is transaction capability: they will need a credit card, they may want access to a loan so they can buy a car,” he adds. Relationships with these customers are maintained throughout their life. So, when a person’s salary goes up, he can be introduced to savings and investment products. “It’s about getting closer to the customer and thinking about him as the entity that I’m serving, rather than just the products that I’m trying to push out of the door,” continues Vayanos. Banks, Booz Allen stresses, need to have IT systems in place that allow employees to see a customer’s entire situation. Many financial institutions in the region are lumbered with separate systems for separate functions such as current accounts, credit cards and savings. “One side of the bank doesn’t know what another side of the bank is doing with the same customer,” observes Vayanos. Think like BMW, Vayanos says. “What is BMW’s entry level model? A 3 Series. What does BMW really want you to do? It wants you to grow up and become a 5 Series. When you’ve made your money and need to show it off, you migrate to the 7 Series. Their strategy is to migrate you from one model to the next, but keep you in the family. Each model is slightly different in the terms of the features it offers.” Abdul Aziz Al Ghurair, CEO of UAE-based Mashreqbank, acknowledges the need to be more customer focused. “It’s easier to become a product manufacturer and push products, but to go to the next level of sophistication you need to really understand the customer’s needs and match it with your offering,” says Al Ghurair. “Yes, banks have to raise the bar so they can start moving to the next level.” Booz Allen’s recommendations to financial institutions are several. In order to avoid too much of a focus on product rather than customer selling, banks have to structure their incentive schemes correctly. Financial institutions are also urged to invest more in their branches, making them more visually engaging and customer friendly, and having them staffed with well trained people. “Banks are increasing the number of branches they’re opening because they realise customers want that personal interaction,” says Vayanos. A third recommendation is to think in terms of product bundles, suited to the individual. “Create the equivalent of the 3 Series for the people entering the financial services market and likewise the 5 and the 7 Series equivalent,” explains Vayanos. “That gives you the opportunity to serve the customer in many different ways and provides the hooks to naturally migrate somebody to the next level.” Booz Allen isn’t, of course, saying that banks are going to lose out wholesale if they fail to be more customer focused. Customer loyalty remains strong, particularly towards local brands. What is more likely is a gradual, but still noticeable, defection towards more customer focused institutions over time. “As people become more educated and more aware of their choices, they discriminate more,” says Vayanos.

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