Boozos On Banking

Let me be direct and get straight to the point: This blog post is about the absolutely worst presentation about the changing world of banking that I have ever seen.

And I’ve seen (and possibly created) some real losers.

Booz & Co. (a very reputable consulting firm) published a PDF called Next Generation Retail Banking: The Rise of Social Apponomics. Some of the lowlights from this deck include claims regarding:

  • The end of all things. According to the authors, as a result of the financial crisis, corporate cultures have been torn apart, and good and evil have been blurred. The report states that “Arisen from chaos have new views of the world, beliefs, and behaviors that pose significant new challenges to banks.”
  • Digitization of human culture, the key to growth and profitability. The authors believe that a “fundamental paradigm change towards offering a holistic customer experience is required, implying transforming a bank from its core to its periphery.”
  • Customized banking through coordinated networks. To quote the report: “The result of the digital transformation are coordinated banking networks organized by concentrators that work to offer the individually most relevant experience and solutions that maximize value-to-customer across the entire lifecycle.”

And that’s just slide 1.

The second slide attempts to elaborate on the “required paradigm change” and discusses something referred to as “nevolution” — broaden one’s horizon, creating options, preparing for change.

The third slide informs us that the Internet changes everything, and in case we didn’t quite understand that, goes on to mention that Broadband changes everything. And for good measure, the final bullet on the slide lets us know that Mobile changes everything. A little clip picture on the slide contains the label: “Customer expectations are evolving.”

Slide 4 is a word tag chart.

The fifth slide talks about how the “key capabilities” in retail banking  have evolved from technology (the past) to value (the present), and how they will evolve to engagement (emerging).

There are a couple more slides, and if you have a strong constitution and high tolerance for pain, you can read them for yourself.

My take: I’m serious about this: Booz should remove the deck from its website, apologize for publishing crap, and call a do-over.

In addition to being just a bunch of buzzword bingo, what’s really mind-boggingly annoying here is that Booz is trying to create some new term to describe the new environment (social apponomics), but no where — I repeat, NO WHERE — in the deck is there any definition or even further mention of the term past the title slide.

Really, Booz?

[h/t to The Financial Brand for alerting me to this one. Although, maybe I shouldn’t be thanking him :)]

Customer Engagement RIP

I’m a strong believer in the concept of customer engagement — as it relates to measuring relationship strength, that is.

But the term is no longer meaningful in today’s business world.

It was inevitable. Back in the early ’90s, the term “reengineering” devolved from a strategic approach to business process redesign to layoffs. Later in the ’90s, knowledge management devolved from an approach to capture and categorize unstructured data to…well, just about any new project that a firm embarked on.

So it shouldn’t be surprising that customer engagement has…well, jumped the shark. (I was trying real hard not to use that term, but it really does fit well).

It was first used a number of years ago, and began to gain some currency in marketing circles, especially among advertisers. Unfortunately, their definition of the term was ludicrous. Then the web analytics folks glommed onto the term, using it to describe how much time people spent on websites.

What convinced me that the term is now completely unusable was the recent issue of 1:1 magazine from Peppers & Rogers.

On page 10 of the magazine is a full page ad for a webinar sponsored by Campaigner, an email marketing firm. The ad’s headline screams “The email imperative: don’t sell — Engage!” (the improper use of capitalization is enough to tick me off).

On the facing page is an article about search engine marketing that contains a graph with the following title: “Search Engines Promote Customer Engagement.” The data contained in the chart describes “the activities of online service seekers after conducting searches for products.” The most frequent responses: Purchased product online, found store location, bought product from store.

Hmmm… so engagement has gone from “turning on a prospect to a brand idea enhanced by the surrounding context” to “time spent on a website” to “alternatives to selling in an email” to “purchasing a product.”

My take: The term is now completely meaningless.

Which is too bad, because I’ve truly believed that firms could adapt the concept to reflect their own strategies and approaches, and use a combination of attitudinal and behavioral (cross-channel) measures to quantify engagement.

I’m not optimistic that this is going to happen. On one hand, no one within marketing can agree on what the term means. And on the other hand, it’s likely that everyone in an organization outside of marketing thinks that it’s a YASMB (yet another stupid marketing buzzword) (prounounced “yazem”).

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Customer Engagement: The Agency/Client Perception Gap

cScape recently released the results of its second annual Customer Engagement (CE) survey. They gave me an opportunity to see the data from the study, and I’d like to comment on something I don’t believe the report they published touched on: The gap in perceptions between agency and client-side respondents. These differences in perception show up in questions about:

  • The importance of customer engagement. Only 35% of agency respondents said that online customer engagement is essential to their clients, in contrast to half of client-side respondents. Both groups were aligned, though, in their perception of increasing importance of the concept: About 75% of both groups said that customer engagement had increased in importance to clients over the past 12 months.
  • The impact of customer engagement initiatives. Compared to client-side respondents, agency respondents were more likely to say that CE initiatives improved their clients’ customer loyalty and increased revenue. In fact, twice as many agency respondents said that CE initiatives increased profits than client-side respondents did.
  • What clients use to increase online customer engagement. Forty-one percent of agency respondents think that their clients use blogging sites to increase engagement, but just 19% of clients said that they use these sites. This discrepancy carried over to the use of social networks, video-sharing sites, and image-sharing sites (e.g., Flickr).
  • The future role of the mobile channel. Almost one-third of the agency respondents said that the mobile channel will be essential for customer engagement in the next three years. Just 20% of client-side respondents shared that view, though.
  • The description of an engaged customer. Both groups agree that an engaged customer recommends the product, service, or brand. But the two groups differ in their view to the extent that an engaged customer purchases regularly. Clients were more likely to believe this than agency respondents.
  • How customer engagement is measured. Nearly one-half (49% to be exact) of client-side respondents said that their firm has dedicated metrics for measuring online customer engagement. But just 30% of the agency respondents said that their clients have dedicated metrics.
  • The barriers to cultivating better online engagement. Client-side respondents were half as likely as agency respondents to believe that their own lack of skills and experience are a barrier to better CE. The two groups’ views also diverged regarding the extent to which getting senior management buy-in, dealing with technology problems, and finding supporting agencies were a barrier.

It’s highly unlikely, of course, that the client-side respondents were clients of the agency respondents. But the discrepancies in responses can’t help but make me wonder if many agency people aren’t on the same page with their clients when it comes to customer engagement. A number of factors are driving this discrepancy, specifically the agencies’:

1) Tendency to overstate impact. Often, the agencies aren’t the ones measuring the results, so I’m not sure why they’d think that customer engagement efforts are having such a great impact. Or why any of the branding campaigns they’re involved are having such a great impact, for that matter. But, hey, they’re not going to say that their efforts didn’t pay off, are they?

2) Over-fascination with the new. The client-side people are in the trenches fighting daily battles and fires. Few have time to explore video- and image-sharing sites or to read (and write) blogs. The agency-side, however, with a broader perspective, is out there looking for the next new big thing. So they attribute the involvement they do see out there to a wider range of client-side firms than are actually participating in these sites.

3) Mismatch of definition. A lot of the agency-side discussion of customer engagement has revolved around the concept as a measure of media effectiveness. A lot of marketers on the client-side don’t care about that. They’re looking at customer engagement as a potential way to help them make smarter decisions about investing their marketing dollars, and for helping them gauge their success.

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Guest Post: The Value Of Customer Engagement

cScape recently released the results of its annual Online Customer Engagement Survey. One of its contributors is Theo Papadakis who wrote the following:

Writing in ClickZ, Neil Mason denigrates the value of the concept of customer engagement on the ground that it is impossible to define and therefore useless. Neil proposes an alternative concept with which he seeks to capture what he thinks the proponents of engagement find useful in that concept. I wish to argue that Neil is wrong in thinking that customer engagement is an elusive concept and that his proposed alternative fails to do the task a properly defined concept of customer engagement can carry out.

A bit on the definition of customer engagement

Engagement is a bipartite relation, i.e., X is engaged with Y. Indeed, it denotes the very fact of the relation. Any relation is an engagement and vice versa. The concept of customer engagement however only deals with a particular kind of relationship:

  • Object: A customer’s relationship with a brand, company, product, or consumption topic.
  • Character: A customer’s emotional relationship with the object.
  • Kind: Positive or negative.
  • Content: Engagement is not itself a psychological state but involves psychological states, such as — in the case of positive engagement — sympathy, love, pleasure, pride, happiness, gratitude, empathy, affection etc.
  • Degree: The degree of engagement lies on a continuum that ranges from low engagement, namely, the psychological state of apathy, to high engagement. An engaged customer is a customer with an above average psychological investment/involvement with his or her object of relatedness.

However, given that psychological states are very difficult to measure and, above all, to relate to marketing objectives, publicly observable behaviours that reveal a customer’s object, kind, content and degree of engagement are measured instead.

As there is no simple measurement of emotion, a love or gratitude metric for example, customer engagement needs to be a synthetic concept and metric in order to provide a holistic understanding of a customer’s emotional involvement with an object.

Customer engagement can involve any number of the following token behaviours: word-of-mouth advocacy, provision of feedback, reduced focus on price, increased tolerance of mistakes, willingness to participate in new product development or redevelopment, create fan or anti-fan clubs etc. With the advent of the Internet, the engagement of customers with brands has intensified beyond all expectations and has taken many forms.

As a result, a number of online customer engagement behaviours should be added to the previous list: customers blogging about you, talking about you in forums and social networking sites, writing product reviews on your products on your own and other websites, creating online fan or anti-fan clubs, participating more directly in new product development or redevelopment, creating a wiki customer service or FAQ, creating a product hacking or troubleshooting site, etc.

The reason why frequency and recency of purchase is not in the list, however, is that even a combination of high frequency and recency of purchase is not a telltale sign of customer engagement. Repeat buying might be the result of other factors such as location, lack of competitors, or low price etc. A repeat customer may even be unsatisfied and anxious to defect.

Given the range of all these activities and the value they offer to the organisation, it is indeed very useful to talk about, measure, and try to influence the degree and kind of your target customer’s engagement with your brand.

Secondary value: economy of communication

Of course, we don’t have to use the term ‘customer engagement’. Just like the concept of a ‘car’ is utterly superfluous. We can refer to a car as a human-steered, mechanical-engine-powered, four-wheeled vehicle, but for reasons of economy we call it a car. Is it a car if it has three wheels? Is it a car if the dream of computer-automated steering becomes a reality?

It is important to understand that answering these questions does not require us to identify what the essence of the “car” is. Answering these questions, the business of concept-creation, is based on pragmatist considerations human speakers make in everyday life.

Similarly we don’t have to talk about engagement. We can talk about number of blog posts, forum posts, customer reviews, WOM advocacy, etc. instead, and when your manager asks you about the success of one of your actions in terms of outcomes other than immediate financial impact, you could answer in around as many words as it took to write this post.

Primary value: conceptual value

At this point I can imagine Neil arguing that he agrees with most of the above but objects to calling or, rather, in his own words, ‘dressing up’ these valuable behaviours as ‘customer engagement’. In his article he says:

If we believe there are sets of valuable behaviour that lead to beneficial outcomes, why dress it up and call it ‘engagement’? Why not just have a valuable behaviour index (VBI) instead of an engagement index? At least then we’d know what it is and what it means”.

 

As I hope I have showed that engagement is not an elusive concept as Neil seems to think, the rest of my argument will focus on why I think that:

  1. Using the ‘valuable behaviour index’ to refer to the aforementioned set of behaviours is problematic to say the least.
  2. Aggregating the aforementioned types of behaviour under a single umbrella term is useful.

I will use the same arguments to prove both points:

  • Neil’s concept of a valuable behaviour index is in some cases too general, while in others too restrictive and therefore fails to capture the dimension we seek to capture regarding the phenomenon of customer engagement. We are looking for a very particular kind of valuable or, in the case of negative engagement, damaging behaviour — behaviour that has a strong emotional as opposed to any other dimension. According to Neil’s notion of ‘valuable behaviour index’, for example, repeat purchase or frequent purchase must definitely be admitted as valuable behaviours. This is not so with the definition of ‘customer engagement’ cScape proposes. Our definition filters out this kind of certainly valuable behaviour. At the same time Neil’s notion is restrictive enough to be unable to capture negative engagement.
  • Emphasising the behavioural outcomes of customer engagement is actually potentially dangerous. The danger lies in that by giving it such a name we are prone to fetishise the behaviours. Although the ultimate objective of marketing efforts that aim at influencing, stimulating or facilitating customer engagement is to influence behaviour, it is not behaviour that is the immediate target of these efforts. These target behaviours are the indirect outcomes of marketing efforts to engage customers. It is psychological states that are the primary target of customer engagement marketing. Although facilitating the target behaviours is important, merely doing so, say by sticking ‘a recommend to a friend’ option, is utterly useless.
  • The repercussions of the argument from economy reach a lot further. Imagine you ran two campaigns, each of which effected an increase in each of the aforementioned behavioural components of engagement in your target customers. How would you decide which campaign was more successful? As soon as you start weighting each behaviour differentially you are on your way to create a synthetic and holistic engagement metric. In short: if you want to be able to compare the outcomes of your marketing efforts along the aforementioned dimensions you immediately need an umbrella-concept (and metric) of customer engagement. This is not to say that it is possible to standardise the components that constitute a customer’s engagement with an object. They will, of course, vary along the dimensions of object, kind, content and their behavioural manifestations. The possibility of having a concept with different components — another frequently encountered criticism of customer engagement — has been discussed elsewhere.

I hope I have dispelled two arguments commonly leveled against the concept of customer engagement, proven its conceptual value, and supported my dual conclusions that:

1) Customer engagement is not elusive, and therefore does not have to be a nebulous concept.

2) Customer engagement is a useful concept for marketers’ ability to: achieve economy of communication; capture a customer’s emotional relation with a company, brand, etc.; and compare.

Customer Engagement Is Measurable

In a recent post, Avinash claims that engagement is not a metric, and writes:

Engagement is not a metric that anyone understands and even when used it rarely drives the action/improvement on the website….It is nearly impossible to define engagement in a standard way that can be applied across the board.”

My take: I think Avinash is taking an uncharacteristically narrow view of the term engagement, and the ability to measure it.

The biggest issue with the way the term engagement is used in the marketing community is its narrow connection to websites and the online channel. When marketers think of “customer engagement”, they should be thinking about how engaged the customer is with the company, product, or brand. The level of involvement with the website — or with a particular ad (online or offline) — is just one dimension of a customer’s engagement.

Customer engagement encompasses a number of dimensions:

  1. Product involvement. A customer who doesn’t care about the product, is likely to be less committed or emotionally attached to the firm providing the product.
  2. Frequency of purchase. A customer who purchases more frequently may be more engaged than other customers.
  3. Frequency of service interactions. Branding experts like to say that repeated, positive interactions lead to brand affinity. And they’re right to a certain extent, but….
  4. Types of interactions. …not all types of interactions are created equally. Checking account balances is a very different type of interaction than a request to help choose between product or service options.
  5. Online behavior. Time spent on a site might be very important. But, like types of interactions, not all web pages are created equally.
  6. Referral behavior/intention. Customer who are likely to refer a firm to friends/family might be more engaged — a customer who actually does refer the firm, even more engaged.
  7. Velocity. The rate of change in the indicators listed above may be a signal of engagement.

Avinash is on the right track, however when he says that it is nearly impossible to define engagement in a standard way. I would suggest, though, that a standard definition is feasible — but that measuring it in a universally standard way is what’s impossible.

And that’s good.

Who said we need a standard way of measuring engagement? This insistence on a standard definition and approach is to measurement is silly. You don’t hear anyone getting all worked up about the fact that market share can be calculated any number of ways, and that the denominator in that metric is hardly consistent or easily measured.

Measuring engagement needs to be done in the context of a firm’s strategy and it’s own theory of the customer — that is, what behaviors the firm believes constitutes an engaged customer.

Measured correctly, engagement meets one of Avinash’s golden rules — to me instantly useful. Using market research data, I measured customer engagement with their banks using the attributes described above.

I then segmented the respondents into four categories, based on their level of engagement, and the breadth of their relationship with their banks (based on the number of products owned). The result: A metric that is immediately useful in helping marketers address some strategic questions about their marketing and customer strategy.

engagement2.jpg

Marketers need to stop getting their knickers in a knot trying to boil engagement down to a single metric that relates to a web site or the online channel. It’s a descriptor of a customer’s attitudes, not a channel’s performance.

A metric, when used appropriately, can help execs make decisions and manage. But considering the way engagement is being defined and measured today, it’s no wonder Avinash has come to the conclusions that he has.

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Denigrating Customer Engagement

A recent article in Ad Age claimed that:

New research from Omnicom Group’s OMD may move the seemingly fuzzy concept of engagement beyond the realm of academic debate by proving it really does move sales. The research indicated that not only does consumer engagement with media and advertising drive sales, but it also can drive sales more than media spending levels.”

The study, which covered three unnamed financial services brands, found three drivers of consumer brand preference: 1) how engaged consumers were with the ad itself, with a weighting of 49%; 2) how engaged consumers were with the media where the ad appeared, weighted at 31%; and 3) how much consumers like the brand at the outset, with a 20% weighting.

My take: The problem with these conclusions start at the beginning — with the definition of customer engagement as time spent viewing an ad.

A few months ago, I proposed a definition of customer engagement:

Repeated — and satisfying — interactions that strengthen the emotional connection a consumer has with a brand (or product, or company).”

According to Wikipedia, this definition “has gained currency and was used in the first international Annual Online Customer Engagement Survey“, conducted by British consultancy Cscape (which built upon, and improved, my definition).

But OMD (and, for the most part, the rest of the advertising industry) ignores this definition. It reduces the concept of engagement to the level of interaction a consumer has with an ad, and then equates time spent viewing an ad with driving “brand preference.” These findings are hard to swallow. They ignore:

1) Customer experiences.
The extent to which a consumer’s experiences — sales experiences, support and service experiences, and experiences using the product or service — impact brand preference is either completely ignored or buried in the concept of “how much a consumer likes the brand at the outset” before viewing an ad.

2) Direct marketing. Financial services marketers are active direct marketers, extensively using direct mail and email. How OMD can tie ad “engagement” directly to sales, without incorporating the impact of these other marketing channels, was not explained. Increasingly, financial services marketers are adopting net measurement techniques, and developing uplift models to predict and measure the incremental impact of specific marketing actions. Yet OMD apparently has no problem directly attributing sales to time spent viewing ads, without factoring in the impact of other influences.

3) Sales effectiveness. If the OMD study had linked its measure of engagement to brand affinity, I might not have such an issue with it. But taking the impact to ROI (i.e., a sale), the study ignores the fact that many financial product sales are intermediated by a sales person. An ad may drive response, but to simply assume that that response produces a sale is wrong. Many a bank branch or mortgage rep has blown a sale due to poor salesmanship.

The question the study attempts to answer — “what impact does ad viewing have on sales?” — is simply not an answerable question.

The questions that need to be answered are “how do consumers buy?” and “what is the appropriate role and impact of various media and touchpoints in the consumer’s decision process?”

To address these questions, financial services marketers need to develop a “theory of the customer” — what kinds of relationships do they want, what does it mean to be engaged given different types of relationships, and how to measure and drive those forms of engagement. Reducing the concept of customer engagement down to “time spent viewing an ad” denigrates a potentially important strategic concept.

Unfortunately, financial services marketers looking for help answering those questions and addressing these issues are going to have to wait while the advertising industry plays its “my metric is better than your metric” games.

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Even More Thoughts On Customer Lifetime Value

Adelino started the discussion with a post on customer lifetime value modeling. Jim Novo continued it here. I’ll add a few thoughts. In measuring or modeling customer lifetime value, marketers need to:

1) Incorporate measures of risk. As Adelino states, CLV boils down to a single number. But there are a number of variables and assumptions that feed that number — variables whose values: a) are estimated at the time of calculation, and b) change over time.

Channel behavior is a good example of this. In banking, a customer who requires a lot of branch service is more expensive to serve (and thus less profitable, all other things equal) than a customer who relies heavily on the online channel for service. But this behavior can change over time — and in both directions. Younger consumers, who may rely heavily on the online channel today, may have more sophisticated needs in the future, and change the channel mix of their interactions over time. And older consumers can be trained and incented to use the online channel, even if they don’t today.

The key point is that CLV — which Jim rightly notes is a calculation at a certain point in time — incorporates assumptions about future behavior. The “risk” that this behavior could change should be built into the CLV calculation.

2) Use activity-based costing.
I used channel behavior as an example of a factor impacting customer profitability. But understanding actual channel behavior is a challenge for most firm, as is understanding the true cost of serving customers.

Without ABC, costs are often allocated based on product ownership because service behavior is accepted as an unknown. In some firms — even where service activity is incorporated into CLV estimates — differences in the costs of providing service across channels and even the differences in costs of different types of services is washed over.

Without ABC, marketers cannot get an actionable estimate of CLV.

3) Use CLV to drive customer relationship strategies. Somewhere along the line, it became fashionable to say that firms should “fire” unprofitable customers. Although Adelino mentions “dropping” unprofitable customers, his prescriptions lean more towards “managing” their behavior — through support charges or restocking fees, for example.

Firing unprofitable customers is a flawed concept. As I alluded to in point #2, few marketers can be 100% sure that their CLV calculation is accurate in the first place. But a customer — unprofitable or not — contributes to meeting fixed costs. If you drop unprofitable customers, you (negatively) affect the profitability of other customers — potentially pushing them in front of the “firing squad.” And the cycle continues. A ridiculous notion.

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In the end, marketers cannot simply use the CLV calculation as the only dimension upon which they segment customers. Even good-old RFM metrics can help better segment customers in order to drive marketing strategies. In the financial services world (where purchase frequency is low), I advocate using customer engagement measures to help provide a qualitative perspective on customer behavior and strategic directions.

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Lazy Money

Announcing his firm’s new high-yield checking account, Charles Schwab said:

The financial world lives off lazy money. There is inertia, and in some respects that’s exactly why we decided we had to make this a very powerful offering.”

Chuck’s right on. (If the firm is going to run ads that say “Talk to Chuck”, then I can call him Chuck). Nearly 80% of consumers are rate-insensitive — they won’t move their money for less than two percentage points better than what they get today or aren’t interested in moving money to get higher rates at all.

This implies that once you’ve got a customer putting money into an account, it’s unlikely that they’ll pull it out for higher rates across the street.

But financial firms can’t survive in the long-term on lazy money. Renegades (like Schwab and BECU with its high-yield offering) will succeed — not just with the rate-sensitive minority of today, but with the rate-insensitive majority in the long-run — by:

  • Educating consumers. Renegades are raising awareness of their superior rates with offline, as well as online, advertising. This is changing the rate-insensitive’s perceptions that “it’s not worth moving my money”, “it’s too hard for me to move money”, and “I’ll have to pay more fees if I move money.”
  • Being easy to do business with. Most banks make it easy for customers to move money in — but expensive to move it out. Not so with the renegades. They’re showing consumers how easy it is to do business with them — an important driver of choice of firms with Gen X and Gen Y consumers.
  • Impugning other firms’ customer advocacy. Renegades alert consumers when rates reach a certain level — firms relying on lazy money would never do this. This opens the door for renegades to claim that the other firms don’t have their customers’ best interests in mind.

For many consumers, passive decision making drives their choices. They don’t want to think about who has the best rates, whose service is better, etc. So they make the easy choice — the bank on the nearest corner.

Lazy money — or financial apathy — is one of the biggest enemies of many financial firms. Smart marketers will help create this new breed of financial activist — and not simply try to compete on rates and fees.

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Banks (And Credit Unions) Have To Earn The Right To Cross-Sell

If you’re a bank marketer, what can you do to improve your cross-selling success? The answer, although easier said than done, is still ignored by most firms: Engage your customers before cross-selling them.

On the Verity Credit Union blog, Joe wrote (with some editing on my part):

One of my job responsibilities is to make service calls to members who have recently opened an account. The first call usually happens about 2 weeks after the account is opened. After having reviewed their accounts, I offer the member other products or services that may fit their needs. This call is always well received. The member realizes that we are following up on the new account and they’re appreciative that we want to make sure they’ve received their checks or debit card.

A second call is placed about a month later, without the guise of a check up, to offer other products. Again, having reviewed their accounts, I determine the products that are advantageous for them and explain how they can profit from them. While these calls are solicitations, and beneficial for the credit union, we have the member’s best interest at heart.

These second calls aren’t as well received, and sometimes people are stand-offish, especially those who don’t understand our cooperative nature.”

Before I describe what’s wrong with both the assumptions and actions described above, let me just say that I’m not criticizing Verity specifically. I think it’s commendable of both Joe and Verity to even post this in the first place (would this have passed the “brand voice” edits at Wells Fargo, Ed?). I’m citing this example because I believe it’s representative of what goes on in many banks and credit unions.

So what’s wrong with Verity’s approach?

1) It doesn’t know “the products advantageous for them.” Few consumers have all, let alone a majority of their financial products with one provider. So, in trying to determine what products to offer, a financial provider is at a serious disadvantage — it doesn’t have a complete picture of what any one customer owns and doesn’t own. YOU might think a credit card is “advantageous” for someone, but what you don’t know is that she already has five cards — and resents you calling to sell her something she doesn’t “need.”

2) The timing is all wrong. Yes, I’ve seen the BAI study that says 95% (or whatever) of all additional products are cross-sold in the first six months after a new account is opened. But nobody ever asks why that’s the case. I’ll tell you — because that’s the window in which the customer is still in the honeymoon period, and their bank (or credit union) hasn’t done enough to piss them off yet. But the reality of the matter is that it’s incredibly unlikely that someone’s financial situation has changed that much one month after opening a particular account (which is when Verity is making its second call). If you were to call me a month after I opened an account and tried to pitch another, I’d ask you why your firm was so incompetent as to NOT tell me about this a month ago.

Successfully cross-selling products requires a relationship. And relationships do NOT get built overnight. Not in the real world (our personal lives), and not in the business world. Relationships require trust, and it takes time to build trust with customers.

And, as I’ve written about before, that means different things to different people. For us Crankys it means: Don’t Screw Up. For other consumers, trust is built by providing objective advice and guidance. And for some, it means have friendly, helpful people to talk to and interact with.

So when is the right time to cross-sell? After one of two things happen:

1) You’ve sufficiently engaged a customer. Don’t listen to the advertising folks when they blather about “customer engagement”. Engagement isn’t about how long you watch a commercial. It’s about the level of emotional connection a customer has with you — and that connection can be measured by the types of interactions and transactions he or she conducts with you. When a customer starts moving up the emotional scale of transactions from simply checking balances to asking for help on making financial decisions, you’re getting closer to the point when you can cross-sell.

2) A customer has a successful high-emotion interaction. I’m sure you have at least one friend who you originally bonded with because of some memorable shared experience. (I can think of a few, and if you buy a few drinks someday, maybe I’d share those stories with you). It’s the same with a business relationship. Helping customers through stressful situations creates bonds. [Screwing up these situations works in the opposite direction]

Not only are these criteria for determining when to cross-sell, they’re indicators of a growing relationship. Which implies that trust is building, and in turn, implies that a customer is willing to share more information with you — information about their financial lives, needs, etc. Which helps you make smarter decisions about what products really are “advantageous” for them.

Despite the sincere belief of many credit unions that they “have the member’s best interest at heart”, they still have to prove it. And that proof comes from first building trust and a relationship.

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