An Inconsequential Typo

Got the following email from MediaPost this morning:


Anything catch your eye? I’ll tell you what caught mine: Insurers spending $980 BILLION on online advertising. And if TV ad spend garners two-thirds of the total ad spend, then this $980 billion represents, at best, only one-third of their total ad spend! So let me get this straight: Insurance firms plan to spend, what, $4 TRILLION dollars on advertising this year?

Needless to say, I clicked on the link. Only to find that the article, on the Web site, reported $980 million in online ad spending.

There’s one way to improve your email clickthrough rate.

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Financial Services eBusiness Execs Are Pulling The Wool Over Their Own Eyes

In a recent Forrester report, eBusiness execs from 57 financial services firms were asked what percentage of their firm’s customer service interactions take place online. Half of the execs said more than 25%, the average was 35%.

Unless many of the execs surveyed are from online-centric firms (e.g., ING Direct, E*TRADE), this number seems suspiciously high to me. Especially when you consider that just 23% of this same group of execs said that at least half of their firm’s customers are active online.

And since when do online channel execs in banks have a good handle on how many customer service interactions are taking place in the call centers and branches to be able to estimate the percentage of interactions the online channel accounts for?

In addition, when asked what provided the greatest value from the online channel, the number one response was “incremental sales,” cited by almost one-third of the respondents.

To me, incremental sales implies sales that would not have happened otherwise. How do these online channel execs know that the credit card, checking account, and savings account apps they’re taking online would not have come in through another channel if the online capability didn’t exist?

For firms offering online high-yield savings accounts, I can see my way to the incremental claim. But, by Forrester’s own numbers, direct mail still plays a huge role in driving credit card applicants online, and branch location is the biggest influence on where to open a checking account.

My conclusion: Apps that come in through the online channel seem are more the result of convenience, and not the result of the online channel making a sale that wouldn’t have occurred otherwise.

Don’t get me wrong — I’m not impugning the research. I think that what we’re seeing here is the combination of wishful thinking and undeserved chest thumping on the part of some online banking execs.

I understand their desire to show the success of the channel for which they’re responsible. But while they may be sharing these numbers externally, with firms like Forrester, I hope they’re more honest (make that “accurate”) when reporting and communicating internally.

The need for better tracking of customer activity by channel and for better response attribution is sorely needed to make smarter marketing decisions in the future.

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Who’s Online? It May Surprise You

Speaking on a panel at Forrester’s Finance Forum yesterday, Andrew Salesky, SVP of Client Web Services at Charles Schwab said:

Everyone thinks that the younger the consumer, the more likely they are to be online. We find that the more affluent they are, the more likely they are to go online.”

This is a lesson for a lot of financial firms trying to solidify their [often tenuous] relationships with the older affluent and mass affluent boomers.

Use of the Web is also increasingly important to seniors and new retirees.

Marketers often fall into the trap of thinking that older consumers are set in their ways and habits. That’s true — to a certain extent. But when they retire, many people seek out new experiences and look to develop new skills — like using technologies that they never had time to learn while they were working.

You can teach [us] old dogs new tricks.

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Online Banking Research (Or Reporting) That Makes You Go Huh?

An article in Online Media Daily reports on a research study which found that people who bank online spent more than double the average online shopper’s expenditures during the previous six months. The article concludes that

…an uptick in online banking rates might thus help revive e-commerce”

(Note: It’s not clear if the authors of the study came to that conclusion, or just the author of the article).

My take: A ridiculous conclusion.

Consumers over 30 (if not 40) start off online by surfing the Web, then buying something, and then accessing bank accounts. Younger consumers — for whom online behavior is innate, not acquired — conduct their lives online, and already have sky-high eCommerce and online banking adoption rates.

But even if online banking adoption did lead to eCommerce activity, did it not occur to the study authors that online banking customers might be more affluent than other consumers, and that that might be the reason why they spend more online?

The article goes on to imply that banks’ lack of home page personalization is an obstacle to online banking adoption. According to another study from another researcher, banks were “behind the curve” in home page personalization, product and service promotions, and online recruitment.

That might be true — but that has nothing to do with online banking adoption. Inertia (in other words, 30 to 40 years of banking offline) and security fears are today’s predominant hurdles that keep non-online bankers from becoming online bankers. How in the world could personalizing the bank’s public site home page drive online banking adoption?

Unfortunately, the article buries the most important study among the ones it cites. That being a study conducted by IBM and Kana Software that found that financial institutions — not just banks, but insurers and investment firms — are failing to provide adequate online self-service. According to this study, 95% of financial Web sites fail to answer questions about topics like check cancellation fees, making insurance claims, and buying and selling stocks.

Personally, I find the 95% number suspiciously high. But if it’s 95% or 50%, the underlying implication is the critical point: That online banking (and other financial services) adoption is suffering because service functionality is lacking.

And that’s the best reason for a banking exec to be concerned about online banking adoption rates. Not because it might drive more eCommerce spending, but because it might drive high-cost service transactions to lower cost channels like the Web.

And because it improves the perceptions in the minds of customers that the bank is providing a high-quality, convenient customer experience. Which clearly is not common in today’s financial services world — despite the claims that financial firms make.

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Fallacious Thinking On Banking Channels

Alan Gemes, a VP at Booz Allen Hamilton, was quoted in Finextra as saying:

Banks are failing to capitalise on the enormous potential of key growth channels such as online and mobile sales forces, because the performance of these channels does not meet customer needs and expectations.”

What’s wrong with that statement?

No, “capitalise” is not misspelled. Instead, it contains an erroneous assumption about how consumers make financial decisions and the role of various sales and interaction channels in the execution of those decisions.

I don’t doubt for a second that consumers fail to use the Web to apply or get service because of the poor quality of online interactions.

But this online channel avoidance or abandonment has NO MATERIAL ADVERSE EFFECT on the topline results of the bank. There is no inherent growth potential from the online and mobile channels.

Growth opportunities come from some combination of: 1) increasing prices (rates, fees); 2) selling products/services to new customers; and/or 3) selling more products/services to existing customers.

The channel — whether its online , mobile, or call center or branch — does not create the growth, in and of itself. If you have a lousy product or service, improving online application capabilities will not produce growth.

And conversely, if you have a great product or service, you are not losing sales because your online application capability is subpar. Customers simply use the next most convenient channel. Would they liked to have completed the transaction online? Sure. But did they change their selection of product and provider? I have a hard time seeing my way to “yes” on that question.

Bottom line, growth is not a “channel’ issue — it’s a business strategy issue. A firm like ING Direct succeeds by offering superior rates on a narrow set of products, while providing no face-to-face support and limited human support. That works for them. Having superior (or at least acceptable) online application and support capabilities is critical to its success.

Edward Jones, on the other hand, believes (very deeply) that face-to-face interaction is paramount to building and developing deep relationships with its customers. There is no inherent “growth potential” that comes from the online or mobile channels in the context of Edward Jones’ beliefs.

The Finextra article states (in its title) that channel management is a big challenge to banks. It is — it’s because many banks don’t have a coherent business strategy. Not because they don’t have a channel strategy.

Improving the online and mobile channels to better meet customer needs and expectations may impact customer retention and service and processing costs, but in and of itself will not create growth opportunities for banks.

For further discussion of this, see Bankwatch.

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Homepage Politics

One of the silliest games that firms play is

What should we put on the home page?”

In many firms, you would think that home page real estate was more valuable than oceanfront property in Malibu. Product managers and LOB execs often believe that their products have a “right” to be on their company’s home page. How they decide what goes on the home page usually comes down to politics, negotiation, and compromise.

Forrester wrote about how Wells Fargo used Web site metrics, customer survey data, and internal search information to develop its home page. While it’s hard to argue with this approach, it still reflects a potentially erroneous assumption: That site visitors who hit the home page are browsing (i.e., “window shopping”), and open to suggestions about where to go from there.

Some observers equate a home page to a retailer’s store window. The store window contains items (and anatomically appealing mannequins) to entice potential shoppers to come in.

This is not a good analogy. When site visitors hit your home page, they’re already in. The home page should make it as easy as possible for them to get where they’re going — and let the product-specific landing pages do the merchandising and selling.

Conceptually, this is no different from someone walking into a bank branch and sitting down at a manager’s desk. What’s the first thing the manager is going to do? Start pushing product brochures at the customer? No! S/he is going to ASK QUESTIONS to find out why the customer is there.

Few sites do this. Some home pages are like psychedelic concerts from the 60’s. There is so much going on — tabs, navigational choices, boxes, menu options, flashing graphics — the visual stimulation is overwhelming. It’s a wonder anybody can find what they’re looking for.

A few years ago, Charles Schwab’s home page had little on it except a large graphic on the left side of the screen and a pulldown box on the top right with the question: “How can we help you?” Below the pulldown box was a phone number for people to call, and an Investor Center locator. (The Wayback Machine confirms this — it was in November 2002).

That’s what a financial services firm’s home page should do. Ask questions. Get site visitors where they want to go. If your home page does that, not only will you improve the online customer experience, you’ll eliminate a lot of the silly games your firm plays.

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CEO Letter To Web Analytics — Response To Eric Peterson’s Memo

In response to the CEO’s letter to Web analytics, Eric Peterson penned a memo from Web analytics back to the CEO. Take a moment to read his letter, then come back here for my reply back:


To: CMO, CIO, SVP-Ecommerce
From: CEO
Subject: Memo from The Web Analytics Team to “beloved CEO”
Date: May 14, 2007

I don’t know which one of you the Web Analytics team reports to, but whoever it reports to, I want you to find out who wrote that memo — and fire him or her.

But seriously, thanks for commenting, Eric. We’ve never met, but your reputation precedes you, so I truly appreciate that you would even comment on my post. A couple of thoughts in reply to your memo:

1) “Please tell everyone that from this point on we in web analytics are only going to deliver reports that are going to be used.” Nobody — even the CEO — can dictate that “reports will be used”. The good marketing departments that I’ve seen (this is not just a WA issue), know that some reports will get more attention than others, and work to either minimize their efforts in producing those lesser-utilized reports or getting them killed in the first place.

2) “Keep in mind we are “web analytics” not “web reporting.” For many senior execs in many companies that distinction is purely semantics. Remember when the first batch of VPs of IT were renamed CIO? Having the C-level title on a Monday didn’t make them any more strategic than they were on the Friday before when they didn’t have a C-level title. Lots of departments and positions suffer the same problem. If WA (the web analytics team) wants to do more analysis, it has to figure out how to do that without thinking that it can toss the reporting requirement over the wall to someone else.

3) “Many of your senior lieutenants continue to treat their particular channel as if it were the only source of business”. Bingo — you nailed it. If only WA could find a way to communicate that message in a less-smarmy, more politically correct way than the sarcastic guy who wrote the memo in the previous comment, then WA could be seen as the true strategic resource I believe it could be.

4) “Did you get the memo we sent you about deploying technology that will let us run controlled experiments?” Uh, no. It must have been stuck into that book you sent me which is sitting under the pile of books sent by every other department in the company. Careful here, Eric — memos about “controlled experiments” shouldn’t go to the CEO. The bigger issue here, is “marketing’s civil war” — the fact that the CMO him/herself doesn’t even understand the need for the experiments, because they’re too caught up in their branding efforts. But don’t air marketing’s dirty laundry to the CEO. Ever.

5) “We need you to set the tone and create a mandate to use web analytics to drive our business success”. That isn’t going to happen. The onus is on WA to demonstrate how web analytics can be used to drive business success. I’ll admit that this isn’t going to be easy, but WA needs to pick its places and, probably even more importantly, picks its targets. By “targets” I mean the senior execs in the company who can be supporters and agents of change. It’s similar to the efforts that politicians undertakes. You build support with the right people at the grass-roots level first before going national.

Thanks again for commenting, Eric. Good luck with your consulting business.

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The Economics Of Online Banking

Colin and Jim at Bankwatch and NetBanker recently commented on Forrester’s new online banking projections. Personally, I don’t care how many people bank online — I care what impact online banking has on a bank’s bottom line.

So I thought I’d share with you the results of an analysis I did using Forrester’s consumer research data. (Note: As a Forrester client, I have access to their data, but can’t cite specific numbers here).

What I discovered is that banking customers still:

  • Prefer human channels. While consumers prefer electronic channels (e.g., Web, IVR, and ATM) for account transactions like checking account balances and transferring funds between accounts, they overwhelmingly prefer human channels for service transactions like problem resolution, fee disputes, and address changes. This is true even among younger consumers who are more likely to use and prefer electronic channels.
  • Tend to use one channel. Although many different channels get used, across a range of common interactions, more than seven of ten consumers used only one channel. And, in general, the older the consumer, the more likely he or she is to use just one channel per type of transaction.

But compared to other consumers with online access, online bankers are:

  • Less branch-centric. Not surprisingly, online bankers are more likely to turn to the Web for the range of account activities. And although they still prefer human channels for service interactions, online bankers are more likely to use the phone for help, rather than going into a branch.
  • More multi-channel. Across a range of activities, online bankers were more likely to use multiple channels, particularly for checking balances, transferring funds, and getting help with account problems.

What’s critical here is that these tendencies hold true for each generation. This suggests that adopting online banking changes a customer’s channel behavior, regardless of age. [That doesn’t seem far-fetched, but it is debatable]. And so I set out to answer:

What impact would an increase in online banking adoption have on a bank’s cost structure if new online bankers had the same channel activity and preferences as today’s online bankers?

To answer that, I made some assumptions regarding:

  • Adoption. For the purpose of the analysis, I assumed a bank had about 1.5 million customers, 67% of whom are online (access to the Internet, that is). I assumed that these customers mirrored the overall online population in terms of age distribution and, by generation, the percent that bank online. I assumed that 10% of the non-online bankers in each generation would become online bankers.
  • Channel costs. I assumed the following channel costs per transaction: $6 in the branch, $3 for the call center and mail, $1.25 for IVR, $1.10 for ATM, and $0.25 for Web transactions (I didn’t pull these out of the air — a bank shared this with me a few years ago). I ignored the costs to build new online functionality and any costs that would be incurred to provide technical support for new online banking customers.
  • Transaction volume. I assumed annual transaction volume of 24 account balance inquiries, 12 funds transfers, 4 general account problems, 1 fee dispute, and 1/2 of an address change.
  • Transaction migration. For each of the activities, I assumed that new online bankers would shift their channel activity to mirror the channel behavior of current online banking customers.

The bottom line: Based on these assumptions, a 10% increase in online banking adoption could reduce support costs by about $4 million, or about $70 per new online banking customer.

Interestingly, potential cost reductions don’t occur equally across all channels or activities. The model forecasts:

  • Significant branch cost reduction. Reduced branch activity accounts for 73% of the potential cost reduction. The lion’s share of that impact comes from the decrease in balance checking, funds transfers, and address changes that come out of the branches.
  • Lower call volume — but not for all activities. Similar to the branches, a shift in account balance inquiries, funds transfers, and address changes from the call center to the Web help bring costs down. But for activities like problem resolution and fee disputes, call center costs actually rise because some new online bankers will shift their activity from branches to the call center.

What does it mean?

Who banks online is more important than how many people bank online.
A bank’s ability to migrate their older customers (i.e., over 40) will have a greater impact on short-term cost reduction than sitting around waiting for the wired youth — who won’t need to be persuaded to bank online — to open bank accounts.

The ROI has to be realized. I recently took Forrester’s Charlene Li to task for her ROI of blogging projections, because, as I argued, unless firms made staffing reductions or eliminated certain market research expenditures, they wouldn’t actually see the ROI of blogging. Same concept applies here. If banks continue to build and staff branches, the cost reduction potential of online banking will never hit the bottom line.

If you email me at, I’ll send you the spreadsheet I used to do the analysis. But you have to include your name, company, and title, and your email has to come from your business — not personal — account. In other words, no Yahoo, Gmail, AOL, MSN, etc. accounts.

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Right-Channeling Isn’t Rocket Science…But You’ve Got To Do It Right

In a recent 1:1 magazine article, experts debated whether or not firms should try to change their customers’ channel behavior. One was quoted as saying:

“If you asked me two years ago if we should push customers to specific channels I would have answered yes….but I see some emergent behavior in the online world that shows me that customers are much more mercenary than they used to be. They won’t go to the channels you want them to go to….to say we can have relationships that are so strong we can influence channel behavior is tough right now.”

That’s not stopping firms from trying, however. On his Rattling The Kettle blog, the author shared an email he received from his bank, which tried to persuade him to stop getting paper statements and receive them online. The benefit it tried to sell him on? “Live the clutter-free life by replacing your regular statement with an electronic one.” The blogger’s reaction:

What a GREAT DEAL!!! I can’t believe [my bank] is willing to give me paperless statements for FREE! What a great bank, not charging me to receive my statements via email!

Seriously, if you want me to authorize you to stop sending me paper statements, as required by federal law, PAY ME.

You want to cut costs, fine. But, please, stop treating me like a f*ing idiot who will jump up and down and salivate when you dangle a shiny email in front of me. You want me to waive one of my legal rights in order to benefit your bottom line? Give me something in return. [My] credit union gave me $5 to end paper statements. Since you’re not as nice as them, I’ll need you to at least double that. You can just deposit directly in my account. Thanks.”

My take: You can change your customers’ channel behavior, but there’s a right way and time to do it and a wrong way and time to do it. The bank cited in the story above must have smoking something when it sent out that email. What will consumers who have been receiving paper statements for the past 20 or 30 years do when they get their first statement through email? PRINT IT OUT. End result: No reduction in clutter. Just one less envelope in the mail box.

The blogger (a fellow Cranky, no doubt) was absolutely right — the bank needed to provide a financial incentive. Ingrained behavior is hard to change — even if there’s a better way to do something.

But it’s not the only way — getting something faster as a result of doing it online can be a compelling benefit. If an interaction or transaction will take three days to be resolved, but can be done immediately online, then some consumers will change their channel behavior. But there are two considerations here:

1) There may be a good reason why the customer is transacting offline. Firms should be cautious about trying to right-channel an interaction in the middle of that transaction. I recently called a firm I do business with for some information and was told — before being given my information — that I could have done this online. My reaction: “Yes, I know — and if I was somewhere where I could have logged on and avoided wasting MY time talking to you, I would have.” (OK, I didn’t really say that).

2) You set future expectations. If a customer can perform a transaction and have it completed in real-time, then why can’t other transactions be done immediately. For a good example, see the post that talks about the 30-day hold that Alain’s bank put on his online account opening.

The lesson: Right-channeling is a feasible and smart strategy, but — like any good strategy — it must be beneficial for both the customer and the firm. It just needs to be deployed at the right time with the right customers.

Done right, right-channeling won’t negatively impact customer loyalty. After all, wouldn’t you want the firms you do business with to provide you with easier and faster ways to do business with them (and to make sure you know those ways exist)?

Done right, right-channeling is about customer advocacy. Not “the customer advocates for the firm”, but advocacy as in “the firm acts in the customer’s best interest, and not just its own bottom line, and the expense of the customer.” (A big reason why I hate the NPS, Denise).

Done right, right-channeling is about improving the customer experience.

It’s not rocket science.

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Loyalty Programs’ Impact On Online Sales — Part 2

John Dawson commented on the last post, wondering if the greater online sales activity on the part of loyalty program members was due more to their underlying demographics than to their program membership.

While more affluent consumers are more active online, even within income bands, loyalty members are more likely to have shopped online this past holiday season than non-loyalty program members.


So why would this be the case? My theory:

1) Loyalty members are more engaged with the firms whose loyalty programs they’re enrolled in. And as a result, they interact with those firms more often, and in more channels.

2) Firms right-channel their loyalty members’ behavior. Through frequent communications, retailers with reward programs communicate more often with program members, call attention to online capabilities, and steer program members online.

(And btw, 1 to 1 magazine’s claim that right channeling “got its start through the thinking of Scott Neslin, a Dartmouth professor” is wrong — Cathy Graeber and I first wrote about right-channeling in 2002).

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