2.2 The Market
Many blogs and Medias suggest that the public do not trust banks to fulfil their promises and in the current economic crisis there is a general fear of bank failure and as a result a loss of consumer funds.
In response to this the highly regarded ‘Which?’ magazine has been advising savers to spread funds over a number of different banks (Telegraph, 2009). The reasoning behind this will be because at the time the FSA (Financial Services Authority) rules stated that only £35,000 of consumers’ money will be protected in each bank. This £35,000 is protected in the following way, the first £2,000 will be 100% protected, whilst the following £33,000 will be 90% protected. Therefore assuming you have £35,000 invested, you will receive £31,700 back, if the bank was to go bust.
2.3 What is Customer Relationship Management?
According to Jobber (2004) CRM is the methodologies, technologies and e-commerce capabilities used by firms to manage customer relationships.
3.1 What is in place at the moment?
At the Halifax, departments run independently for each product area. For example, there is an area for bank accounts, credit cards, insurance, mortgages, investments, etc, and each department does not have access to real time information about the other.
When the marketing department takes an individual snap shot of each customer they can collect information from each department and from external sources such as Experian or Equifax (external credit reference agencies that gather information about people’s financial behaviour from all banks). This allows the bank to segment each customer by risk, which is sensible, the less risky you are as a customer the cheaper it is to borrow money and the more products are made available to that customer.
However, at branch level all of this information is not available and operations are run differently. By referring to Appendix 1 you can get an insight in to the way each branch in the retail banking environment is set out, which offers understanding as to why the CRM operates in the way that is does. Each branch runs as an independent small business in competition with the others and a Single Customer View is not available.
3.2 Using CRM for Sales in the Branch
The CRM operated by Halifax is supported very well by the infrastructure of their database and I.T. systems used. Figure 1, below, shows how data is collected and processed in to a useful source of information that is used to target customers for potential sales. Cross sales are then converted in the appointments/reviews conducted by the advisers, which will be discussed next.
Figure 1 demonstrates how data is collected during counter transactions and in banking reviews, the data about customers is collected and stored in the ‘Customer’ application. The data collected is analysed and processed at a central location/level and not by branch employees. Once processed, the information extracted in fed back to the branches in useful formats.
One way the information is fed back in using the ‘Leads’ application. Advisers can enter the leads application, which is updated once a month for each folder. In the leads application there are many folders that are named after products (i.e. credit cards, personal loans) and inside these folders there are lists of customers that have credentials that make them potential customer for that specific product.
The advisers can use the application to find potential customers for products that they need to sell in order to hit their sales target; these targets are shown in appendix 2. The contact with the customer is normally made via telephone; however, if it is not possible to contact the customer the adviser will then send a letter.
The other way that useful information is fed back to branch employees is in the form of pop-ups about customers on the transaction screen at the counter, an example of this is shown in appendix 3.
These ‘pop-ups’ would not be on every customers screen, but attached to a customer that has been identified by the marketing department as good potential for a specific product. The information provided is enough to identify that the customer being served is the correct customer and give a basis for the conversation that the cashier may have with that customer in order to book that customer in for a review with the required adviser. Approximately 20% of customers served at the counter with have a pop-up attached.
Of the customers that have a pop-up on their screen, therefore they will be informed at the time of the transaction that the bank can either save or make them more money only a small proportion of those customers agreed to be booked in to see an adviser. When talking to managers and employees they felt that the customer felt like they were being “sold” to or had a “pre-prepared excuse” for not wanting to attend. This obviously goes back to the trust people have in banks and being more marketing savvy.
3.2 Building a “Relationship” with customers in the branch
Having knowledge about the systems surrounding and supporting CRM at the Halifax it is also important to know how the relationships are actually formed. In the branch environment Halifax has the opportunity to communicate with customers on a personal level and build a relationship. This opportunity is maximised by getting employees to adhere to the mystery shopper criteria when communicating with customers (Appendix 6).
The Mystery Shopper is a person supplied by a third party organisation that enters the branch on a monthly basis, acting as a normal customer and quantifies the standard of service that they receive in the branch.
Each employee is taught a structure in which to interact with customers on a day to day basis and to ensure that each branch sticks to this structure they are tested once a month by a Mystery Shopper and then the results are sent to the branch the following month.
3.3 Using CRM to tailor products according to customer value
The research with managers suggested and from looking at the percentages of customers that are targeted using pop-ups, it is obvious to see that a small proportion of the total customers at the bank are responsible for the majority of the profit and a great deal of customers are not profitable at all. The managers estimated that up to 30% of customers generate no profit at all.
At the Halifax they have put in place a system by where their ‘Easy Cash’ customers have had certain facilities taken away from them, such as counter service (appendix 5). The Easy Cash account is an account available to those who cannot qualify for a full facilities account due to bad credit, therefore assuming that they will be unprofitable because of this. However, these customers only account for less than 5% of customers, therefore they do not account for all unprofitable customers.
4.1 Analysis
Sales – Acquisition v Retention
At branch level the CRM that the research from Advisers and Managers showed was focused on the retention of existing customers. At Halifax there is a clear divide between Customer Acquisition and Customer Retention as spoken about by Bruhn (2003).
The research demonstrated that at branch level the expectation was to sell to existing customers. The employees felt that this could be controlled at branch level as they had sources of contact with these customers and information about the customers that they could use as a basis for a strong argument for having additional products (manage the relationship), whereas the acquisition of new customers was left to the mass marketing and then sold to in branch on demand.
Figure 2, below, shows how communication with consumers changes over time, which is fitting with the Halifax case. To begin with the marketing department uses mass communication to tell potential customers about the Halifax brand and products in order to acquire new customers. Then in time communication changes and the branch will take the reins at the local level and talk directly with its own customers.
The customer Application that has been mention previously is a good demonstration of what has been discussed by Foss (2002). The data collected creates a record for each customer, by where the bank can extract and analyse in order to target them for different products; segments.
4.2 Building ‘Relationships’ with customers
4.2.1 My Mystery Shop
As discussed in section 3.2, Halifax has a rigid structure on communications with customers in branches and measures its effectiveness quantifiably, by using a “Mystery Shopper”. The purpose of this is to achieve a high level of customer service on a consistent basis.
Taking this into mind further research was conducted by where a visit to an alternative branch took place and carried out a ‘Mystery Shop’. Based on this they would have scored 92%, a score that in any walk of life would be a great achievement and based on how easy the staff rolled out the expectations it would suggest that they probably achieved this on a consistent basis. However, from a customer perspective it was not the best level of customer service. The member of staff was wearing her badge, thanked me for waiting, used the name and asked if anything else was required after the transaction. However, the entire script was said in a monotone voice and she yawned at least twice during the transaction and generally acted as though her knap had been interrupted.
4.2.2 What Customers Said
Customers have been surveyed in order to gain an insight as to whether Halifax was achieving its objective to offer a high level of customer service and ultimately build a true relationship with its customers. The word relationship did not make too much sense to customers when referring to their bank; therefore they were asked if they trusted Halifax and if they were satisfied with the service they received.
The service that Halifax offers is very regimented and transactional, which puts a wedge between them forming an actual relationship with their customers. The results of the survey are common with the sense of society about banks in general. More customers were satisfied with the bank than those that trusted them. This fitted with a number of blogs and what is in the media (Telegraph, Money Saving Expert, Datanomic, Finextra, 2009), there is a general consensus that banks cannot be trusted and that is what stops a relationship being built, but at the same time customers can still be satisfied with the products and service.
4.2.3 Moving from Transaction to Relationship
Little and Marandi (2003) produced a framework that helps to understand relationships (Figure 4). The model shows how the satisfaction of a customer can change something that is transactional in to a relationship and furthermore, if the customer can learn to trust you, you will then receive commitment and loyalty in return.
The expectations of a customer will influence their level of satisfaction, meaning that the higher the expectations of a customer the harder they will be to satisfy. As a result Halifax are making their objective more difficult to achieve by promising their customers to “Give You Extra” (Archer-Brown, 2009).
4.3 Customer Value
As spoken about previously in section 3.3 the managers at Halifax recognise that there are a large proportion of customers that are totally unprofitable and therefore some customers are in receipt of a lower level of service.
This is fitting with the “Whale Curve” as spoken about by Murphy (2006); Murphy recognises that a large proportion of the profit is accountable from a small proportion of customers. The whole point of recognising figures like these is to adapt the organisation with the aid of this information to make it run as efficiently and effectively as possible. The most profitable customers deserve the best service because they pay for it and the unprofitable customer do not; it is as simple as that.
A case study about British Telecom explained how they dealt with similar circumstances. For services such as their telephone enquires they would simply fast track the calls of their most valuable customers (Bruhn, 2003).
British Telecom responded to this information in a more positive manner than Halifax. BT offered a better level of service to those customers of value, whereas Halifax offer a lower level of service to their less valuable customers.
5.1 Issue Diagnosis
The diagnosis is:
- That Halifax are too product focused and not consumer centric. This is understandable, because of the layout of their business from top to bottom is broken up by their products.
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Their consumers do not trust them, which stops them from creating a relationship and with no relationship it is simply customer management and not customer Relationship management.
5.1.1 Being Product Focused
The technology that is being used to support the CRM at Halifax is fantastic. However, the execution of CRM is not. Banks are broken up into different sections of the business for different product types.
In the branch there are advisers that are committed to their area of expertise and for telephone banking there is a different telephone number to be called depending on the business area that the customer requires.
The difficulty is that the organisation is dictated by its product area; Halifax is product centric, as opposed to being consumer centric. Looking specifically at Figure 3 there are some clear elementary mistakes.
Donaldson and O’Toole (2002) have another simplified option that could fit with Halifax’s existing way of doing things (Figure 6). However, for this to work it will need to be underpinned by a single customer view, data quality and customer segmentation. The most difficult element of this is the data quality and with thanks to the Halifax technology the quality of data should be high.
The boundary for adopting is that with many different business areas Halifax will struggle to take a single customer view because each business area will want to satisfy their own needs and not necessarily the customers.
Referring back to Figure 3 you can see that mistakes are being made at the segmentation stage. The customers are segmented by which product they could primarily be sold and then that adviser is then expected to cross sell further products and therefore the customer will then be required to attend more appointments.
5.1.2 Trust Issues
Figure 6 shows a model of trust and commitment that highlights elements that contribute to getting trust and commitment from customers. From looking at this model it is clear to see that there are several areas that Halifax could improve on, with the obvious being:
Figure 7 – (Little and Marandi, 2003)
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Customer Orientation, which is an area that has been spoken about previously. At present the Halifax have more focus on products over their customers. This could make customers feel undervalued, give them a lack of trust, and stop a relationship forming, which will result in a lack of commitment and loyalty.
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Brand and corporate image/reputation (which speaks for the industry), as of late the financial services industry has taken a bit of a battering, which is contributing towards the lack of trust. It has become a social norm that banks cannot be trusted and on top of this the economic crisis. Furthermore, Halifax is part of the Lloyds Banking Group whom has recently been helped by government funding despite investing heavily in the HBOS acquisition.
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Avoidance of opportunistic behaviour, this is difficult as it appears to be part of the culture created at Halifax, with even the systems in place are made to support this. It would be easy to believe that the focus is on products and all sales may not be to the need of the customers.
My recommendation will look to erase issues that create mistrust and hope to give the customers of the Halifax something significant to benchmark the rest of the banking industry against.
6.1 Recommendations
My recommendations:
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Segment on Risk – Section 5.1.1 discusses factors with regards to focusing on products, as opposed to focusing the business around its customers. It is understandable that without focusing on its products it would require members of staff to have skills in every specialist area and would therefore have many Jack of all trades, but masters of none. It is important to have product specialist in finance for many reasons; one reason being that there are industry standards and qualifications that must be gained for some business areas, another is that it benefits customers to speak to somebody with a depth of knowledge when discussing large amounts of money.
Customers could be the focus points within product areas. Appendix 7 showed how customers were rated by an external credit agency based on how they behaved financially; this gave people ratings from very poor to excellent.
Using the bank account product as an example, customers who fitted in to the excellent category could be rewarded with a platinum account and therefore the valuable customers could be recognised in branch and be given extra special service. The platinum account could offer extra features such as fast tracked telephone banking, better interest rates on borrowings and savings and a direct telephone number to the branch.
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Introduce Customer Relationship Managers – What is already known as the traditional Banking Adviser could become Customer Relationship Managers. These Customer Relationship Managers could be each assigned a portfolio of customers with a mix of Platinum, Normal and Easy Cash Customers, meaning that no employee would have an advantage over the other.
The purpose of the portfolio is that the customers would always see the same employee every time they opened an account or topped up their ISA and form a bond with them. The most valuable customers, the ‘Platinum’ customer could have a direct number to their Customer Relationship Manager to call in any time of need.
As a result the customers and employees form a genuine relationship and have trust in the bank as a brand, resulting in more business, satisfied customers and more recommendations.
On top of satisfying more customers this may satisfy more employees as well. The employees will be motivated by being given the best opportunity to achieve high standards. Halifax needs to trust all employees to use their natural ability, aided by good training, to offer good customer service (Reichheld et al, 2000). The customer experience creates a Virtuous Circle (Figure 8).
7.1 Summary
If Halifax can move away from a transactional way of behaving and form true relationships with their customers, customers will respond to recommendation and enquiries without fuss, because they will trust in what they are being told. This essentially means that each individual employees needs to keep the promises of themselves and of the bank to their customers. This will in time satisfy the customers, get their trust and commitment and as a result have more loyalty as displayed in Figure 9.
References
Archer-Brown (2009) Lecture 4 Customer Relationship Management, “Features of CRM in Consumer Markets”
Bruhn, M (2003)Relationship Marketing: Management of Customer Relationships, FT Prentice Hall
DATANOMIC, 2009. In God we trust – In Banks we hope [Online] Available from: [Accessed 25th April 2009]
Donaldson and O’Toole (2002)”Networks”, Chapter 5 in Strategic Market Relationships: From Strategy to Implementation, John Wiley, 79-96
FINANCIAL SERVICES COMPENSATION SCHEME, 2009. Fscs home [Online] Available from: [Accessed on 21st April 2009]
FINEXTRA, 2009. Brits don’t trust banks. [Online] Available from: [Accessed 25th April 2009]
Foss et al (2002) “Managing the quality and completeness of customer data”, Journal of Database Marketing, 10(2), 139-158
GENIUS, 2009. Customer Case Studies: BT Boosts Up-sell Revenue During Economic Downturn [Online] Available from : [Accessed on 23rd April 2009]
HALIFAX, 2009. Available from:
Jobber, D. (2004) Principals and Practice of Marketing, Fourth Edition, McGraw-Hill
Little, E. & Marandi, E. (2003) Relationship Marketing Management, Thompson
LLOYDS BANKING GROUPS, 2009. Lloyds Banking Group, About Us [Online] Available from: [Accessed on 23rd April 2009]
LLOYDS BANKING GROUP, 2009. Halifax Company Heritage [Online] Available from: [Accessed on 23rd April 2009]
MONEY SAVING EXPERT, 2009. Do you Trust Banks? [Online] Available from: [Accessed 25th April 2009]
Murphy et al (2006) Converting Customer Value: From Retention to Profit, Wiley
Reichheld, F., Markey Jr, R., and Hopton, C. (2000) ‘The Loyalty Effect – the relationship between loyalty and profits’, European Business Journal
TELEGRAPH, 2009. Financial Crisis: Home Safe Sales Soar as Trust in Banks Collapses [Online] Available from: [Accessed on 21st April 2009]
TELEGRAPH, 2009. Never Trust the Bank when they say: Don’t worry we’ll be careful [Online] Available from: [Accessed 24th April 2009]