Banks as Coaches, not Scolds

Banks as Coaches, not Scolds
Soccer season is starting in New England, and I’m resuming my duties as an assistant coach for my daughter’s team. Just as our players strive to improve, so do I try to improve my coaching, and one of my key functions is to try to change player behavior. I do that through a variety of ways: through explaining, through modeling, and through feedback. It’s the last point that I want to focus on, because the way in which a coach gives feedback is critical, not only for the specific point in time, but for future interactions. Very simply, there are two types of feedback: positive and negative. The coach can say, “Great pass to space, Jane,” or, alternatively, “You missed Sarah on her run down the sideline, Jane.” Guess which one Jane reacts better to (and which one her teammates notice)? What does this have to do with banking? Celent (together with many banks) has been talking a lot about the need to improve and solidify the customer relationship. One way to do this is to help the customer be more in control of their finances. This can happen when the bank gives feedback. Personal financial feedback, just like soccer coaching, can be positive or negative, and just like soccer, guess which one is more effective? And yet, most banks focus on providing unpleasant or negative news: “Your account is below the limit you set” is a relatively benign example, while “Your check has been returned for insufficient funds” is a more substantial one. It’s much more rare to see positive reinforcement: “Congratulations, you’re on track for the savings goal you set.” Simple, for one, is on to this, and it, together with a host of other features, led BBVA to buy it. Monitise, too, is touting “cuddle” alerts that seeks positive occasions for bank touchpoints. A bad outcome for banks is that their customers start to ignore them because they simply don’t want to hear more bad news. “Oh, it’s my bank telling me that I’ve done something wrong. I won’t pick up / open the envelope / check the email.” Then the bank has lost almost any opportunity for enhancing the customer relationship. As a quick aside, TD Bank recently hit a home run with a campaign that went viral as it thanked customers in the most personal way possible. 4 minutes, 11.1 million views as of September 1; check it out on Youtube: https://www.youtube.com/watch?v=bUkN7g_bEAI What can your bank do to be a coach instead of a scold?

Reflections on NetFinance 2014: It’s about relationships

Reflections on NetFinance 2014: It’s about relationships
NetFinance 2014 just finished in Miami.  Celent spoke on “Engaging Mobile Customers through Content, Display, Alerts, and More,” which generated a number of follow-on conversations on how to execute on the notion of engaging with customers, and a great question on how long today’s innovation stays differentiated. Our answer: “not very.” I’ve mentioned before that customer-centricity is becoming a key concept that many banks are highlighting as a key point of their retail strategy. What NetFinance crystallized for me is that the necessary follow-on to this customer-centricity is this simple idea: The best defense against continuing commoditization is a solid customer relationship. Technology, clearly, can go a long way to enhancing that relationship. A number of vendors at the show (like AdRoll, Backbase, Domo, EarthIntegrate, Ektron, Epsilon, IgnitionOne, Leadfusion,  Liferay, Message Systems, Message Broadcast, and Personetics, among others) focus on helping banks touch customers at the right times, or giving them an omnichannel view of all customer touch points, or enabling customers to start a transaction in one channel and continue it in another. But for these technologies to be effective, customers need to be receptive.  And they’re going to be more receptive if they think, and feel, and believe in their gut, that their bank is going to do the right thing by them. All the technology in the world can’t replace some very visceral customer feelings. To engender these feelings with their customers, and stop them from transacting with one hand holding their wallet so their pocket doesn’t get picked, banks should consider some potentially radical ideas (simple concepts?):
  • Not every touch needs to be a sale.
  • Foregoing short-term income for longer term gain can (in many instances) make sense
  • Surprising customers on the upside can yield long-term benefits
Now, the natural reaction to this is that it potentially puts banks into a (short-term) revenue hole. And that may be true, but when the real game of ongoing commoditization is long-term, banks need to thinking beyond the next quarter.

Clients or Customers? The distinction makes a difference

Clients or Customers? The distinction makes a difference
We’re all engaged in commercial relationships; sometimes we buy, sometimes we sell. But what roles do the buyers and sellers play? At a host of conference and briefings over the last several weeks, I’ve been struck by the number of times that software and hardware providers (most often “vendors” in analyst-speak) have referred to their buyers as “customers” rather than “clients.” This thought, neither unique nor new (and perhaps pedantic), takes on particular relevance as 1) the bank technology space is being reshaped by a host of new forces, and 2) technology providers enter into new sorts of relationships with their bank buyers. In its purest form, the customer – vendor relationship is transactional, impersonal and zero-sum. It’s built on a series of one-off, individually negotiated exchanges of value. The seller doesn’t take account of the individual buyer’s needs, and could indeed be selling to anyone. And because there’s little give and take, except on price, one party’s loss is the other’s gain – the definition of zero-sum. Selling shrink-wrapped software in the past, or apps today, exemplifies a customer – vendor relationship. At the other end of the spectrum is the client – advisor association. It’s relationship-based, contextual and positive sum. The seller is not in this game to make a single high-margin sale, but instead wants to build a lasting rapport that will generate an on-going stream of revenue in return for a fair provision of value. The advisor develops an understanding of the client’s needs and provides tailored advice or products suited to the situation; there’s no such thing as one size fits all. And finally, when the client wins, the adviser wins; they both do well together. Strategy consulting and legal advice are classic examples of client-advisor relationships. Celent serves two main sorts of clients: financial institutions and technology providers. Depending on what they’re selling, they fall somewhere on the spectrum between the two pure-plays I’ve described. I’d suggest, though, that both types of firms can do a better job serving their “customers” if they start thinking of them as “clients” instead.