NEEDHAM, Mass. /PRNewswire/
-- Much has been written on the "hype" surrounding
customer relationship management initiatives, and
the failure of major CRM implementations to
significantly transform the financial
services industry. However less attention has been
paid to the role of global benchmarking standards --
or lack thereof -- in building and measuring against
the CRM business case.
As talk of CRM's failures accelerated into 2002, it
became quickly apparent that the "problem" with most
implementations was one of poor planning and lack of
established metrics. According to new research from
TowerGroup, the ongoing inability by a majority of
financial institutions to define clear objectives
and measure results continues to plague CRM
programs.
"While press headlines trumpeted the failings of CRM,
the real challenge for the majority of banks was in
knowing if the implementation succeeded," said
Kathleen Khirallah, senior analyst in the Retail
Banking practice at TowerGroup and author of the
research. "At issue was the inability to measurably
prove either success or failure. And in the case of
many CRM implementations, the difference between
failure and complete uncertainty is
significant. Thus talk of CRM's failures began with
the inability of
individual banks to understand their success or
failure, and the lack of common industry definitions
for CRM metrics only exacerbated the situation."
Highlights of the research include:
-- In their eagerness to begin a project, banks
often overlooked setting clear definitions for
success, and lacked adequate metrics regarding their
pre-CRM implementation status. Consequently, banks
did not have a stake in the ground to start from and
failed to set realistic goals. With an ill-defined
starting point and no defined end point, success was
understandably elusive.
-- For the majority of banks, a definition of
success against internal and/or external benchmarks
was not possible in the late 1990s - too few other
banks had begun the journey to CRM. Today,
appropriate metrics for a CRM business strategy
remain generally ill-defined across the banking
industry - with little consensus from bankers on
which combination of internal and external
benchmarks are most appropriate.
-- TowerGroup points to a bank's ability to
understand customer
profitability as another major stumbling-block in
the building of CRM business cases. Banks are
notoriously poor at measuring the
profitability of their customers. Not knowing the
value of current
customers with any degree of assurance makes
assumptions as to the value of additional customers,
or the incremental revenue from existing customers,
highly questionable.
Khirallah noted that some institutions today do have
the ability to measure many different aspects of
their relationships with their customers -- a point
underscored by the wealth of information that
forward-thinking banks collect, massage, analyze and
distribute on a monthly basis. "But what is also
clear from reviewing individual banks' CRM metrics
is that although there
are many similarities, there are still just as many
differences in approach and definition. So even the
smartest of the 'smart banks' still lack global
common benchmarking standards," she said.
"TowerGroup believes that the banking industry needs a
brief but solid superset of customer-oriented
metrics with common definitions that will enable
competitive benchmarking. This superset of customer
metrics should include areas like loyalty,
satisfaction, profitability, cross-sell ratio and
primary demand deposit account retention rates.
Ideally, a neutral industry
organization should draft reasonable definitions,
terms and measurement intervals for all banks -- so
that competitive benchmarking in the CRM arena can
move a step closer to actionable reality," Khirallah
said.
TowerGroup's research report, "CRM Metrics and the Myth
of Benchmarks: How Smart Banks Measure Success," is
available to qualified members of the press for
review. Those interested in purchasing a copy of the
report may contact TowerGroup at +1.781.292.5200 or
service-info@towergroup.com.
About TowerGroup: TowerGroup is the leading advisory
research and consulting firm focused on the global
financial services industry. A respected source for
trusted information and advice, TowerGroup brings
many of the world's largest financial services,
technology and professional services firms a deeper
understanding of the business and technology issues
impacting
their organizations. Headquartered near Boston in
Needham, Massachusetts, and with offices in New
York, London, and Kuala Lumpur, TowerGroup serves a
global client base. Visit TowerGroup online at
http://www.towergroup.com.
Contacts:
Anne Green
p. 212-455-8017
agreen@cooperkatz.com
Faye Nikolaidis
p. 212-455-8078
fnikolaidis@cooperkatz.com
05.11.04 
