Banks to Offer Customers More Channels of Communication but Less Choice

Margaret Holden, EMEA North Marketing Manager for Cincom Systems, said: “The results of our survey confirm that banks need to realign their priorities if they want to attract new customers and retain profitable customers. By increasing the number of channels, financial institutions can satisfy a widely diverse clientele but the shift away from integration of channels could be a risky strategy in a climate where consumers demand an easy and convenient service, with the opportunity to choose how they communicate with their bank.”

Key findings of the survey include:

· Pricing is not an important differentiation priority with it rating as the lowest priority behind advertising, developing the brand and strong product communications which all received low priority

· The highest priorities for the future are to reduce costs in both the front and back office. In second place is the company’s reputation (corporate image) as well as the development of new products and services

· In terms of distribution strategies, expanding the Internet is clearly given the highest priority, perhaps because the web could be a means of ensuring greater transparency. Banks will expand their internet strategy by as much as 47% by the year 2010.

· Development of affinity marketing increase to 24% by 2010

· The trend is towards differentiation through value. 95% of companies which were expanding the value strategy in 2005 will continue to do so in 2010

· 23% stated that differentiation through branding was key today, compared to just 9% in the future

· Geographical variations were not significant. However, the UK market is clearly more mature: branding and quality strategies were more prevalent in the UK, and the UK appears to be completely on top of its infrastructure goals

· The multi-channel strategy appears to be taking off, moving from 30% to 40%. This strategy focuses on using all channels independently of each other to cover a broadly diverse market

· The cross-channel strategy loses favour: by 2010 one third of companies pursuing this will have changed strategies. The cross channel strategy combines both physical and virtual networks, integrating all channels to offer customers more options for method of communication

Holden continues: “In an industry where marketing and branding play a major role, it is interesting that the research indicates that the financial sector no longer considers corporate image to be a strategy that sets them apart sufficiently from the competition.”

The research revealed three key aspects to customer management policies: implementation of true relationship marketing, enhanced portfolio management with a cross-selling and loyalty building focus and a desire for more accurate targeting.

“All these aspects encourage a far greater degree of selectivity. Currently, financial institutions are not paying enough attention to understanding the real values sought by the different categories of customers. If companies merely imitate others without personally trying to determine what these values are, this can only work against them. The financial sector will need to increase their emphasis on customer lifetime value (CLV) priorities, sophisticated segmentation and enhanced customer relationships in order to compete in the market place,” concludes Holden.

For the full report Financial Service Providers in the Year 2010: Perspectives and Strategies of their Distribution Policies.call +44(0) 1628 542302. The study, which was conducted jointly with the Université de Pau and the University of Hanover, provides an in-depth analysis of the competitive and distribution strategies of European retail banks and insurance companies.