A Case for Building Better Customer Engagement in the Financial Services Sector

A Frost & Sullivan White Paper Hiral Jasani, Industry Analyst, Digital Media Practice Mukul Krishna, Senior Global Director, Digital Media Practice frost.com

The Check is in the Mail: A Market in Transformation...... 3

The Straw that Broke the Marketer’s Bank...... 4

Lack of centralized customer data management, real-time reporting and single view of customers...... 4

Inability to access actionable insights and measure ROI on marketing...... 4

Omni-channel marketing still a pipe dream for many...... 5

Marketing to Today’s Savvy Buyers...... 6

Reactive to Proactive: Understanding the Customer in Real Time...... 7

Empowering Marketers with the Right Tools and Information...... 8

Using the Right Channel to Engage with Customers at the Right Time with the Right Content...... 9

Technology to the Rescue...... 11

The Bottom Line...... 13

Marketer’s Need Assessment...... 14

contents A Case for Building Better Customer Engagement in the Financial Services Sector

The Check is in the Mail: A Market in Transformation The Financial Services Sector (FSS) has seen transformational changes and undergone a period of massive overhaul following the financial crisis that rattled this market six years ago. The turmoil created a major setback as financial institutions had to make some significant changes in order to re-establish trust and re-evaluate long-term profitability, while stabilizing the resources spent on protecting customers. They have to be very high on capital and liquidity, but are limited in their ability to maximize their sources of revenue. Most importantly, financial services have had to start from the ground up in finding sustainable ways of re-establishing customer trust while building new relationships and restoring old ones.

Most importantly, financial services have had to start from the ground up in finding sustainable ways of re-establishing customer trust while building new relationships and restoring old ones.

The Financial Services Sector is vast and encompasses commercial and investment banks, insurance, wealth management, asset management, private equity, venture capital, credit unions and non-bank institutions such as debt collectors, credit reporting agencies, brokerages, and those services that offer residential mortgages, education and payday loans. Due to the high proliferation of devices and rapidly improving broadband connectivity, the target customer today tends to be much more engaged across multiple marketing channels—on and offline. One misstep, such as sending wrong/irrelevant/redundant information across the wrong channel to customers, could easily send customers or prospects to competitors who today are just a click away. In 2014, Frost & Sullivan research found that the global general IT investment in the FSS marketplace was USD 8.1 billion, with the US alone accounting for USD 3.2 billion. At a CAGR of 4.7%, this spend is expected to reach USD 10 billion globally by 2018. In contrast, Frost & Sullivan found that the investment by FSS companies for customer engagement-specific technologies was at just over USD 1 billion in 2014 and is expected to grow to well over USD 4 billion by 2020 at a CAGR of a whopping 22%. These numbers are very telling as they show not only how critical customer engagement is for the FSS companies, but also how much more important it will become over the next few years. Online and mobile banking have opened up new avenues of customer touch points, and created new opportunities for customer engagement and business growth. Increasing customer expectations, coupled with elevating price sensitivity, have compelled FSS companies to revisit their customer engagement strategy and identify effective ways of enriching customer relationships.

The Straw that Broke the Marketer’s Bank For FSS companies, the need for better customer engagement is a critical competitive factor and is well understood, but the path is fraught with numerous challenges. The customer cannot be taken for granted and customer outreach is increasingly being dictated by how, when and where the customers prefer to be contacted, and not at the whim of the financial services company. Through its research, Frost & Sullivan has uncovered the following key pain points identified by the FSS community as some of the most critical issues they are currently dealing with when it comes to customer engagement. Lack of centralized customer data management, real-time reporting and single view of customers

FSS organizations have been plagued with the silo culture for decades, the side effects of which have trickled all the way down to their technology adoption. The fact that FSS has large volumes of proprietary data adds to the problem. Often, inter-departmental sharing is limited and a single customer may have multiple interactions with the company with little or no internal transparency about these customer touch points. Organizations typically do not have a central place for dashboards, where key decision-makers can view and access a centralized database. This severely affects the ability of marketers to collect all relevant information of a given customer and build a real-time, complete profile of a customer by tying all the channels together. It is critical for a FSS marketer to have a unified view of a customer so they may access the customer’s profile in real time for more contextual, personalized communications. The intelligence derived from a single, complete view of the customer empowers marketers to have a high probability of success to drive profitable customer interactions.

Often, inter-departmental sharing is limited and a single customer may have multiple interactions with the company with little or no internal transparency about these customer touch points.

Inability to access actionable insights and measure ROI on marketing

Given the inter-departmental differences discussed above, the ability to make an investment in technology is a big challenge as each department may have different needs. Due to regulatory constraints, a technology purchase plan goes through several layers of approvals, delaying the entire planning cycle. Most of all, decision- makers in FSS are struggling to understand that technology that enables better customer engagement brings substantial benefits to an organization; it as an investment, rather than an expense.

Most of all, decision-makers in FSS are struggling to understand that technology that enables better customer engagement brings substantial benefits to an organization; it as an investment, rather than an expense.

Due to the enormity of the task and unavailability of resources, FSS companies typically outsource their marketing and communication services to agencies. As these agencies do not have access to proprietary customer information or insight into the various ways customers are interacting directly with the financial institution, they lack the capability to create meaningful customer profiles that would lead to highly personalized and targeted marketing campaigns. Concerns around privacy further add to the skepticism. Cisco IBSG study indicates that 65% of the respondents from developed countries had significant concerns about privacy, security and identity theft. To add to the conundrum, Frost & Sullivan’s analysis of current versus future prevalence of technology applications shows that FSS companies continue to use a wide range of technologies, with many use cases of competing and redundant technologies existing within the same company in different departments. This results in confusion over which tools are the most effective and who has business ownership of the data and technology. Omni-channel marketing still a pipe dream for many

For a typical FSS company, customer interaction takes place on a number of channels, such as chat, Intelligent Voice Recognition (IVR), email, social and mobile apps. With the digital transition, customers expect the same level of personal touch, irrespective of which channel they use. Consumer engagement across mobile and social media has seen a rapid boost, especially in the retail banking industry. A 2014 US Federal Reserve Board report on financial services found that 51% of smartphone users used mobile banking over the past year. In terms of means of access, ATMs were used 75% of the time, online banking was used 72% of the time, telephone banking was used 33% of the time, and mobile banking was used 30% of the time. Oftentimes, the data collected on each of these channels is not well-integrated, which leads to data siloes within the organization. To add to the confusion, as financial institutions have a large portfolio of products, there are different departments that interact with the same set of customers using at times competing solutions to facilitate the customer interaction. Typically these solutions work independently of each other, thus fostering channel and product siloes, while creating a number of layers between the organization and the customer and giving rise to disjoint threads of communications. This is one of the biggest challenges that financial services face today. As seen in the figure below, it is no longer a question of whether or not technology is available, but what is the correct marketing mix and if the acquired technology is aligned to it.

Typically these solutions work independently of each other, thus fostering channel and product siloes, while creating a number of layers between the organization and the customer and giving rise to disjoint threads of communications. This is one of the biggest challenges that financial services face today.

Customer Engagement Benchmark Assessment

Glider High Flyers (high on strategy, low on execution) (high on strategy, high on execution) Demonstrate a solid understanding of the importance of Demonstrate best practices in all categories. Customer customer engagement across channels and understand the engagement management is driven from the top down, creating benefits of a comprehensive content marketing and customer a center of excellence through which cross functional teams engagement strategy. Top management understands the value can efficiently collaborate enterprise wide. There is buy-in from proposition and has buy in from all key stakeholders. These FSS all key stakeholders. Implementation is well planned and

eting companies are ready to make significant technology executed. investments to translate the management vision for customer engagement into action.

TEGY:

Strugglers Underachievers STRA ement and Digital Mark (low on strategy, low on execution) (low on strategy, high on execution) Lack the strategy, processes and technology required to Demonstrate a limited understanding of digital marketing and achieve operational efficiencies. Disparate and siloed functional customer engagement workflow processes and lack a coherent work groups are rampant in the organization, managers pursue strategy for business and IT alignment. Where these independent and non-interoperable solutions, and there is a companies may understand the benefits of individual tools total disconnect between marketing, business needs and IT within the customer engagement value chain, they typically Customer Engag demands. All of this leads to inconsistent management of would operate in silos, leading to a underutilization of their processes and technologies, greater exposure to risk of technology assets as there is no business strategy driving it. non-compliance and non-adherence to regulation.

Most FSS Companies are Underachievers

EXECUTION: Integration and Deployed Technology

Although offline channels remain critical, customers now like to access services on their smartphones, tablets, laptops and kiosks with the same ease and convenience. Given the sophistication of available technologies, such as predictive analytics and the availability of a vast amount of customer data, FSS companies have come to realize that their multi-channel marketing initiatives have been inconsistent. They now understand that customers are in control of their interactions and they need to deliver seamless user experiences across all channels. This is called omni-channel marketing.

Marketing to Today’s Savvy Buyers Over half of the world’s population, or about 4 billion people, will be accessing the Internet by 2018 (per Cisco Visual Networking Index). Thus, a vast majority of customer interactions for financial services are expected to continue to move to digital channels. Given the challenges discussed in the previous section, it comes as no surprise then that FSS companies today see effective customer engagement as highly critical for their continued competitiveness. In today’s hyper-connected environment, no FSS company can afford to treat its customers as anonymous data points anymore.

In today’s hyper-connected environment, no FSS company can afford to treat its customers as anonymous data points anymore....

The days of batch and blast emails are fast becoming obsolete. FSS companies that will win are those that are shifting from marketing AT customers to engaging WITH them to build meaningful and lifelong personal relationships. Achieving this is not a pipe dream anymore. The tools needed to address the pain points discussed earlier in this paper are readily available but, unfortunately, are still deployed as point solutions and not integrated together into a single customer engagement platform. We shall now revisit the challenges discussed earlier in the context of how such a customer engagement platform is defined and the benefits of integrating seemingly underutilized point solutions in the FSS marketplace. Reactive to Proactive: Understanding the Customer in Real-Time

Frost & Sullivan defines a customer engagement platform as one that facilitates omni-channel marketing by integrating traditionally siloed and disparate digital marketing tools such as customer relationship management (CRM), digital asset management (DAM) and business intelligence (BI). Through this integration, a customer engagement platform brings together online and offline channels such as the web, email, social, mobile, display and search to enable marketers to measure customer interactions, attribute the right resources to the right channel and access valuable customer data and content on a single platform, on the go. A comprehensive customer engagement platform helps bring traditionally disparate and siloed customer engagement systems that exist in financial institutions together to provide a seamless platform through which decision-makers can understand the customer in real time. As discussed earlier in this insight, typically within FSS companies, there are myriad different customer touch points, such as retail banking locations, contact centers, ATMs, Kiosks, mobile applications, email- based contact and the FSS company’s Web presence. The data and the associated metadata collected through these various customer touch points is typically funneled to separate repositories that are connected to various technology platforms.

A comprehensive customer engagement platform helps bring traditionally disparate and siloed customer engagement systems that exist in financial institutions together to provide a seamless platform through which decision-makers can understand the customer in real-time.

The contextual algorithms running on these platforms have not just made data searchability easier, but have also made consumption of the data much more seamless. The platforms today provide hassle-free integration with Digital Asset Management (DAM), Web Experience Management (WEM) and Enterprise Content Management (ECM) systems. This seamless integration further augments search and manageability across an enterprise’s data repository with adequate access rights. The systems also learn as they are used and provide constant recommendations based on user interaction, which drives usage and brings us to the next point— usability, which we will illustrate with an example. A European bank had a vision to leverage technology to set the company apart and differentiate its services. Video was a core part of the content marketing vision to distinguish the company in the eyes of its customers and employees, and define its brand in a very competitive retail banking marketplace. The company wanted to provide executives with a better way to communicate to geographically dispersed staff, and supply one integrated video delivery infrastructure that minimized cost and resources. The bank also wanted to use

digital signage at retail locations to provide information about its products and services to customers. Being in a highly regulated market, the company also wanted to control access rights so that only the intended audience could view the right video content. By deploying a purpose-built enterprise customer engagement platform, this bank was able to provide customers a completely new and dynamic experience when they walked into a branch office. Using video through signage and kiosks at branch locations helped create differentiation and increased customer value and satisfaction, significantly reducing time spent with bankers, while collecting valuable information that helped create deep customer profiles. Each subsequent customer touch point started becoming highly targeted toward the customers’ identified needs and personalized based on the constantly developing customer profile, which was shared with customer-facing employees through the customer engagement platform. The brand is now consistently delivered dynamically through video as the vehicle of choice at every branch, and time-critical information is delivered to the appropriate audiences instantly. Tighter communications between executives and their business units now provides a stronger shared vision and sense of community, while employee training is more effective with valuable reporting metrics. Empowering Marketers with the Right Tools and Information

Marketers in the FSS market need to be highly agile so that they may take advantage of quick but fleeting opportunities created by market forces and regulation. With timing being so critical, customer engagement solutions help marketers design content and approval workflows that are automatically sent to the necessary stakeholders for all the necessary approvals so that there is no delay in running marketing campaigns. The engagement platform also offers real-time analytics that measure the defined and needed marketing metrics to determine the effectiveness of the marketing program and understanding of the ROI on all channels used. With a sizable portion of the marketing needs of FSS companies being handed over to marketing agencies, customer engagement solutions offer tools that help agencies create marketing budgets for each of their FSS customer accounts, while facilitating highly personalized campaigns based on a given FSS company’s requirements and their target customers’ needs. For example, ad spend optimization tools help agencies analyze the effectiveness of ad content and understand what content works best for the customers of each of their FSS clients. The analytics within the tool also ties in information from ad networks to identify the most qualified leads and prospects for a given FSS brand to educate the FSS salesperson each time an opportunity is identified. Customer engagement solutions also offer the ability to share marketing planning calendars and program performance reports that evaluate marketing budgets and spend so that agencies are always aligned with the FSS company’s marketing goals. They also allow marketers to set up triggers on planning and forecasting reports that can be shared with agencies so that they can collaborate on spending decisions and ensure timely cost attribution.

Customer engagement solutions also offer the ability to share marketing planning calendars and program performance reports that evaluate marketing budgets and spend so that agencies are always aligned with the FSS company’s marketing goals.

Using the Right Channel to Engage with Customers at the Right Time with the Right Content

Customer engagement platforms are designed in such a way that they funnel data from all relevant applications to one place for analysis and presentation of a single unified view of any individual customer. Within the Financial Services Sector, the importance of being able to do so simply cannot be overemphasized as this is emerging as the most critical capability to remain competitive. Lifecycle marketing, marketing automation, content marketing, ad optimization, mobile marketing, video marketing and social media optimization tools are some examples of applications that are integrated within a customer engagement platform to move from point-in-time, single channel to an omni-channel marketing reality. By tracking real-time conversations of individuals, FSS marketers can personalize communications across channels, such as email, display, Web, social, mobile and ads. This dynamic conversation ability empowers FSS marketers to track real-time behavior for dynamic retargeting and optimization so that they can drive much higher conversion rates through consistent omni-channel communication. As FSS companies start their journey from point-in-time, single-channel customer engagement and make their way toward omni-channel nirvana, the strategic value achieved also changes significantly. Customer Engagement Maturity Curve

Automated, personalized, Optimal real-time omni-channel

Automated, personalized, Vital multi-channel

Automated,

Strategic Value personalized, Essential single channel

Point in time, single Basic channel

Customer Engagement Maturity

Single Channel: Customer interaction on one channel Multi-Channel: Customer interaction across channels (eg. Email, Social, Web, Mobile) Omni-Channel: Highly personalized customer interactions based on a single view of customer across all channels

Traditionally the FSS sector, especially retail banking and insurance companies, have resorted to point- in-time, single-channel communications to stay top of mind for their customers and simply target the audience based on the products and services that are introduced within the firm instead of first identifying the customers’ needs.

Automated and personalized single channel is more focused compared to point in time as it is targeted in nature and takes into account customer segments based on demographic data and other information before running the campaigns. This is a must-have for organizations today as it is slightly more tailored to customer needs.

Automated and personalized multi-channel marketing is the ability to reach customers on various touch points and interact with customers or prospects via a number of channels, such as web, social, mobile, display, SMS and email. This form of customer engagement is essential to cater to customers’ financial plans and needs on a channel of their choice. Multi-channel customer engagement becomes vital for FSS companies that want to cater to customers or prospects that interact or transact with the company through a number of touch points. For example, Chase bank allows its customers to deposit checks on its mobile app for a faster and much easier transaction, thus saving a trip to a physical branch. In this case, it becomes vital for Chase bank to keep its mobile app data up to date and ensure that the transaction is reflected across all other platforms.

Finally, omni-channel customer engagement creates the most optimal value for an organization as it determines a consistent, continuous and coherent experience for customers on any channel at any given time. This is a true one-on-one form of marketing where a brand is able to identify the needs of customers across channels and devices, and engage with them seamlessly throughout their engagement lifecycle. FSS companies need to determine their current customer engagement maturity level and re-evaluate their organizational processes for a desired strategic value since getting to true omni-channel customer engagement is no longer a pipe dream. Today FSS companies can avail of purpose-built solutions that when stitched together, empower Financial Services Sector marketers with agility, customer insight and channel outreach as never before. Though the customer engagement ecosystem has many different components and each of these components has its unique value proposition, marketing automation is the magic sauce that helps bring all these various tools together to magnify the combined value proposition. We shall now take a deeper look at how technology is enabling such unprecedented, personalized and targeted customer engagement with a special focus on the critical role marketing automation plays in helping realize omni-channel customer engagement for the FFS marketplace.

Technology to the Rescue As discussed in the above section on the challenges faced by FSS, customer engagement is not simply about generating a lead, capturing prospects and trying to convert them to customers. It is about understanding customer needs at any given time and being able to reach them in the most optimum way. In order to do so, an organization needs to identify customer interactions with the company in the past and be able to tie all the customer interactions together to determine the right engagement tactic. Marketing is that one function that is capable of being able to connect the dots and create a holistic picture of a customer’s complete engagement journey with the company.

Customer engagement is not simply about generating a lead, capturing prospects and trying to convert them to customers. It is about understanding customer needs at any given time and being able to reach them in the most optimum way.

The following graphic depicts the build-up of a customer engagement platform as it pertains to the Financial Services Sector and illustrates the various components needed to attain omni-channel customer engagement as discussed earlier. FSS companies need to successfully navigate their messaging through digital channels such as email, display, social and mobile. A typical marketer has to go through the different stages of the digital marketing continuum to deliver the most pertinent message to a customer or a prospect at a given point of time through the most appropriate channel. To achieve this, FSS companies need a broad range of technology an organization needs a broad range of technology solutions, such as campaign management, digital asset management, channel management, analytics, and business intelligence tools to bring all the data together and intelligently engage customers through an informed and streamlined process.

Marketing Automation: The Nucleus of a Comprehensive Customer Engagement Strategy Manage (DAM, ECM, MRM, Web Collaboration tools, CRM)

Create (Content Marketing, Campaign Management, Deliver Customer Experience (Channel Management, Management) MA, Email Marketing)

Customer Engagement Optimize Platform (MA, SEO, Interact Testing & Targeting) (MA, Advertising)

Engage Measure (Content Marketing, MA) (Analytics, Business Intelligence, MA)

As seen, marketing automation (MA) plays a critical role across these stages to help a FSS marketer execute a successful digital marketing strategy. At its core, MA automates marketing and sales activities and empowers the organization to make data-driven decisions. It also helps marketers optimize their cost structure by integrating customer data from different organizational siloes for automated segmentation, nurturing and delivery of targeted marketing content. MA platform can be integrated with a number of third-party solutions, such as CRM, DAM and social listening tools, thus allowing marketers to solve the data management challenges discussed above. With MA’s data-sharing capabilities, FSS organizations can collaborate with agencies so that there is no communication gap and all the customer profile data is centralized on one platform.

At its core, MA automates marketing and sales activities and empowers the organization to make data-driven decisions. It also helps marketers optimize their cost structure by integrating customer data from different organizational siloes for automated segmentation, nurturing and delivery of targeted marketing content.

MA is critical for today’s marketers to streamline internal processes and manage omni-channel digital marketing initiatives for ROI-driven customer engagement. In fact, MA is already used by a number of leading FSS companies. Frost & Sullivan’s research on the global MA software market shows that the FSS use case for

marketing automation makes up almost 10% of the total MA market in 2014 as FSS companies spent close to USD 60 million on acquiring MA. Furthermore, the MA market is expected to grow at a CAGR of ~20%, with FSS being one of the leading growth sectors.

The Bottom Line Today’s rapidly evolving customer engagement trends demand a much more personalized and continuous experience across channels. Frost & Sullivan identifies the maturity of all major Financial Services Sectors from the customer engagement standpoint based on their existing technology adoption. Commercial banking has graduated to being the most advanced, compared to all the others. The maturity also largely reflects the maturity of the audience for digital interactions with the brand.

FSS Customer Engagement Platform Adoption Curve

Brokerages, Loans Credit Unions

Insurance

ype of FSS Investment Banks T

Commercial Banks

Venture Capital, Private Equity Wealth Management Customer Engagement Early Adopters Early Majority Late Majority Laggards Platform Adoption

By implementing a marketing strategy that is focused and directed toward omni- channel customer engagement, FSS can transform itself into a highly optimal, service- driven industry sector—a must in today’s hyper-competitive business environment.

By implementing a marketing strategy that is focused and directed toward omni-channel customer engagement, FSS can transform itself into a highly optimal, service-driven industry sector — a must in today’s hyper-competitive business environment. An Engagement Marketing Platform is at the cornerstone of this

new omni-channel engagement journey as it permeates multiple functions of digital marketing. Along with other technological components, marketing automation can elevate an organization’s customer engagement maturity to an optimal level and thus empower it to improve profitability and operational efficiency. Marketer’s Need Assessment

Consumer habits are evolving rapidly, and to stay relevant and thrive in the marketplace, FSS companies need to explore, deploy and exploit technology that can bring them closer to their customers. A sticky customer experience is critical to retain existing customers as well as fuel growth through new customer acquisition. It is no surprise then that Customer Engagement is now valued as one of the most critical competitive factors in the Financial Services Sector. This paper has shown how technology available today enables an environment where companies in the FSS market can raise the bar on customer experience. To understand how your customer engagement stacks up to the market, answer yes or no to the following statements:

Yes/No 1. My company has a lot of customer data, but it is siloed and the marketing department does not have the access it wants to this data. 2. With so many different touch points across various communication channels, on- and off-line, we do not have a centralized way to decide which optimal channel to use to communicate with each of our customers. 3. Due to the lack of visibility about customer data and preferences, we are not always able to provide personalized product and service collateral targeted to the individual customer’s needs. 4. It is very difficult for us to quantify and/or assess the success or failure of our marketing campaigns and the underlying ROI. 5. Our online, mobile and retail channels tend to work independently of each other when it comes to customer engagement.

If you answered yes to any of the statements above, you need to take stock of how you have typically looked at customer engagement, and you owe it to yourself and your organization to explore a very vibrant customer engagement vendor landscape.

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