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Chuck Epstein
Chuck Epstein
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Financial Services Firms Take Aim at Customers

Wall Street is hopping on a new trend -- investing in software that gather customer information in order to better target sales.

Reasons for Growth

Why the growing awareness of CRM software capabilities? Basically, it's due to the high expense of growing new business and the even higher cost of replacing lost customers. The opportunity cost of diminished customer relationships has taken its toll on companies, according to William Hopkins of the Knowledge Center Group, who noted that 20% of the customer base accounts for 80% of profits; 70% of revenues; and 20% of costs.

According to META’s Zornes, CRM software can provide solutions for such problematic issues in the insurance industry as customer turnover, unacceptable delays in new product launches, and increased competition from financial services providers.

The solution, Zornes says, is available through such sources as better data mining tools on specific customers, changing the call center into a ""customer interaction center"" involving the corporation's Web site and improved e-mail response. The result is increased acceptance of new financial products and improved customer satisfaction and retention, Zornes says.

As expected, the Internet is a leading key component for the entire CRM effort. Interactivity and data mining from Net activities is changing key corporate functions, such as marketing, according to Mary Committee, president of Marketing Mastery.

In its redefined role, Committee says marketing will rely on customized sales presentations and product configurations, video-based reference selling, online delivery of customized collateral materials and Internet-based marketing events. By compressing the time frame for closings, Committee says a firm can "mass customize" products and "cultivate a learning relationship with customers."

Hal Steger of Rubric Software, San Mateo, Calif., notes that a large retail bank wanted to do more local campaigns. The bank asked if Rubric could automate its marketing campaign management so it could conduct highly targeted and personalized campaigns, using traditional marketing--direct mail, faxes and call centers–-as well as starting to use Internet marketing. "This segmented approach would allow the bank to test different offers, channels, and creative approaches, and instantly measure the results so they could expand what's working and stop what's not working,"" Steger says.


The Privacy Issue

While gathering detailed customer financial information and combining it into an electronically accessible profile is often part of what CRM software can do, the privacy issue is often not discussed. "U.S. corporations have a very market-oriented approach toward its uses," says Meridien’s Bradway, which produced a study of the issue in March. However, in Europe, strict laws are in place, which prevent financial customer information from even being sent between countries. At CitiGroup, client information and entire client files can be suppressed. "We are heavily involved in maintaining the trust of our customers and we follow a very conservative privacy policy," CitiGroup's Janet Clarke says.


Global Spending on CRM Software by Industry

Total External IT Spending (US$ million)

Commercial Banks 300 $1,100-1,150 $1,500-1,550 6%
Insurance 100 $385-435 $575-625 8%
Securities/Investments 50 $120-170 $250-300 14%
Non-Bank Financial 50 $60-85 $110-140 11%
TOTAL: 500 $1,665-1,830 $2,435-2,615 8%

CAGR=Calculated annual growth rate

SOURCE: Meridien Research Inc. estimates

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