1. SOPHRON PARTNERS Published: 19981 The impact of CRM on branch networks Author: Des Glover

2. SOPHRON PARTNERS Published: 1998 Introduction Financial institutions need to secure long-term profitable business by anticipating and meeting customers' needs.

3. SOPHRON PARTNERS Published: 1998 Attempts at cost-efficiency Attempts to become more cost-efficient have led to:  organisational downsizing  less branches in the network Results:  painful to employees directly involved  little or no change in the way business is done Conclusion:  Fundamental changes needed to the culture of Financial  Institution branches

4. SOPHRON PARTNERS Published: 1998 Traditional culture: 1 - the branch Traditionally, the branch is seen to  act as a self contained unit  'own' customers whose accounts are held there  deal with all administration  handle all customer mail / phone calls  attempt to cover the full range of business

5. SOPHRON PARTNERS Published: 1998 Traditional culture: 2 - roles within the branch The Branch Manager  managing accounts  sanctioning loans  marketing and selling products  development of business potential in catchment area Branch Staff  processing counter transactions  handling administration

6. SOPHRON PARTNERS Published: 1998 Traditional culture: 3 - branch focus Focus Areas "ticking and blotting" bad debt investigation Areas Ignored sales effectiveness service effectiveness

7. SOPHRON PARTNERS Published: 1998 CRM approach The introduction of CRM thinking is a culture change that is reflected in almost every facet of branch thinking

8. SOPHRON PARTNERS Published: 1998 CRM approach - the role of the branch New role of the branch as part of Multi-channel Strategy, as the prime location for face-to-face sales.  differentiate the Branch Network Structure to reflect the customer needs  automate and remove all Administration Customer Ownership  the relationship  account location  credit scoring Identification of the Sales function as a separate skills base  IT Support Systems  Redesigning the branch layout to take advantage of freed space  Locate and style branch as part of plan to include other branches and channels for serving particular communities

9. SOPHRON PARTNERS Published: 1998 CRM approach - changing the role of the branch Customer management becomes enterprise-wide issue, bringing opportunity for the branch to focus on:  maximising the advantages of the location  meeting the needs of customers who prefer the branch channel For the near future Branches will remain the dominant distribution channel. Although direct channels will continue to grow and cash handling automation will make further inroads into current counter transactions, there will remain a hard core of customers who will continue to prefer the branch channel.

10. SOPHRON PARTNERS Published: 1998 CRM approach - face-to-face interaction at the branch Although it is an expensive location, the branch offers increased chances of selling  complex products  linked product bundles The aim should be:  to increase the utilisation of the investment The method:  optimising the channel to support face-to-face encounter

11. SOPHRON PARTNERS Published: 1998 CRM approach - current measures CRM activities identify the separate needs of various customer segments To focus on these newly identified needs, the Financial Institution separates responsibilities:  for managing the branch as a successful unit  for performance of a particular customer segment or product range The way this has been implemented varies depending on the size of the Branch. It will create a matrix management structure common in many industries but only found in few successful Financial organisations.

12. SOPHRON PARTNERS Published: 1998 Development of a multi-channel strategy To fulfill its new role, the branch must be part of a strategy which involves alternative distribution channels. Direct and automated channels, when created and optimised, will remove non face-face transactions from the branch, providing: -higher levels of availability and convenience to the customer  transaction-cost savings for the Financial Institution  reduced disruption for customers requiring face-face transactions

13. SOPHRON PARTNERS Published: 1998 Multi-channel strategy - world best practice World best practice:  Introduce range of channels  Implement Distribution Strategy to manage channels for customer choice customer convenience This enables the Financial Institution to  Optimise the cost of service delivery  maintain an up-to-date comprehensive view of the customer relationship  offer a service proposition across all products

14. SOPHRON PARTNERS Published: 1998 Network differentiation The branch  no longer viewed as the best place to meet needs of all personal customers for all products, even where face to face contact is chosen.  Different environments and specialist staff increasingly considered more appropriate to deal with certain products and customer groups. Units are being established to deal with  complex lending or investment products  high net worth individuals These units concentrate selling skills and make customers feel "special". An invitation to these units forms part of the CRM strategy.

15. SOPHRON PARTNERS Published: 1998 Automate and remove all administration - reasons Many of the staff located in the branch are involved in administrative processes. This is –expensive because of the locations. –unnecessary; they are not involved in face to face contact with customers. –frustrating for the customer. Administrative staff are clearly visible to queuing customers who see staff apparently ignoring them and appearing to be unaware of the queue.

16. SOPHRON PARTNERS Published: 1998 Automate and remove all administration – reasons cont’d Customer records held on paper in the branch domiciled have to be referred to and updated. Part of the CRM initiative is to convert customer information into an electronic form, located centrally, and access given to terminals anywhere in the Financial Institution. This then allows most of the administrative processes to be automated. Where human intervention is required staff can be located in administrative units that are established in centralised low cost locations.

17. SOPHRON PARTNERS Published: 1998 Automate and remove all administration - benefits The space released in the Branches can be used to create confidential sales offices. The grouping of the administrative workload from many Branches into a few locations leads to  economies of scale  specialisation of processes and support. The staff members who prefer sales and personal contact with customers remain in the Branches and receive special training. Members of staff who do not like direct, face to face, dealing with customers but who prefer administration can be relocated in the administrative units and become specialist in administrative routines.

18. SOPHRON PARTNERS Published: 1998 Balancing centralised control and personal relationship - 1 Customers, and the relationships forged with those customers, are a unique asset of the bank. The bank must change the way it manages those customer relationships. They must become more disciplined, whilst still maintaining the goodwill and trust of it’s customers. This will improve efficiency and increase income, through selling more profitable products per customer. The use of CRM techniques provides that efficiency and discipline, but to introduce it successfully a change in the culture of customer ownership is fundamental. This is a subject of considerable emotion to current Branch managers and staff.

19. SOPHRON PARTNERS Published: 1998 Balancing centralised control and personal relationship – 1 cont’d It is often argued that practices which have been shown to succeed in other countries or organisations would not be tolerated in the particular institution being discussed. However, customers may change the way they do business with the organisation if convenient high quality alternatives exist. They may not resist the timely approach of the Financial Institution offering a product which meets a current or future need. What is necessary is for the culture and values found to succeed in the past to be incorporated into the CRM strategy.

20. SOPHRON PARTNERS Published: 1998 Balancing centralised control and personal relationship - 2 Many customers find financial services a confusing subject and they welcome someone taking from them the burden of thinking about the future, the Bank has both an opportunity and a responsibility to fulfill this role. Currently any relationship that does exist is between a customer and one, or a few members of staff. For personal customers this relationship, whilst including recognition and a word of welcome, is unlikely to include proactive consideration of the customers financial needs.

21. SOPHRON PARTNERS Published: 1998 Balancing centralised control and personal relationship – 2 cont’d The CRM strategy ensures that the information on each customer’s situation is correctly recorded, electronically, kept up to date and used by systems to determine the customers needs and the best way to bring these to the customer’s attention. This information is capable of being displayed at any point of sale location bringing the "relationship" knowledge, restricted to a few "home branch" staff, to anyone dealing with that particular customer.

22. SOPHRON PARTNERS Published: 1998 Who "owns" the customer? - 1 Through an integrated Distribution Strategy linked to CRM, customers can be offered the choice of channels over which to conduct business. By its very nature this weakens the link between the customer and the Branch, but only if the customer chooses to use the direct channels. This does not mean that the branch manager is excluded from what is happening to customers; there can be an implementation where, for nominated customers, the manager can have input to modify the generated needs analysis or proposed treatment. What it does mean, however, is that the customer is no longer the sole property of the branch which holds the account.

23. SOPHRON PARTNERS Published: 1998 Who "owns" the customer? - 2(i) Appropriate service can be given at any branch or any channel because the following knowledge is held electronically in a manner that can be made available to all customer facing staff. –Knowledge of that customer –Knowledge of any work in progress –Knowledge of any sales approach planned Several conditions must exist before this concept can be successful...

24. SOPHRON PARTNERS Published: 1998 Who "owns" the customer? - 2 (ii) The information held for the customer must be  Comprehensive  Accurate  Current  Accessible Technology solutions to all these issues exist, but none can compel staff to input correct information or co-operate with the new methods. This will only be achieved if the responsible staff accept and ultimately own the concepts and want them and the Institution to succeed. Then, through these concepts, the staff as individuals will succeed and be rewarded for their success.

25. SOPHRON PARTNERS Published: 1998 Location of accounts In many Financial Institutions certain facilities have always been restricted to a "home branch", the Branch at which an account held. This is often a matter of history and may indicate the location most convenient to the customer for counter services many years ago. The disruption previously involved in changing account numbers have led to customers being tied to completely inappropriate branches and needing to make special arrangements if new facilities were needed. These ties need to be broken if the new, CRM driven model is to prevail. Where the "home branch" is no longer convenient, if a specialist segment service is not provided at the "home branch" or if the sale or service of the product is accomplished by a Direct channel, it should not be necessary to cause inconvenience to the customer by renumbering or changing the existing accounts.

26. SOPHRON PARTNERS Published: 1998 Credit scoring Superior credit policy and skills is a core competency highlighted as key for top performers. The use of Credit Scoring is critical to  improving efficiency of processing  facilitating the exploitation of CRM and direct channels. Credit Scoring is the application of rules specifically to the sanctioning of loans. These techniques have been applied in consumer lending for years and are now being seen in the Commercial lending area.

27. SOPHRON PARTNERS Published: 1998 Credit scoring - early systems, current systems Early Credit Scoring algorithms granted loans using  life style data  income data  demographic data This proved to be more accurate than decisions made by bank staff applying their judgement and was less time consuming, but did nothing to reflect the known behaviour of existing customers. Current scoring systems will include "behavioural" scoring which reflects the way customers have conducted their accounts, e.g. the way they have repaid loans, operated their credit cards, the monthly range balance etc.

28. SOPHRON PARTNERS Published: 1998 Credit scoring - pre-scoring Many Banks now pre-score customers prior to marketing campaigns, there is no point in arousing a customers interest in a product, which the Bank is not prepared to allow them to have. One bank have taken this to the point where a limit of approved loan is determined by running their model, which uses an algorithm including behavioural items, against all customers. This is used as input to the CRM process and the amount of the "approved Limit" is available to all customer facing staff over all channels. Any member of staff can sanction, on request, a loan up to this limit with no other approval being obtained.

29. SOPHRON PARTNERS Published: 1998 Credit scoring - responsibilities In cases where the decision has been taken by a system, it does mean that the responsibility for the loan, should it go bad, is not with the channel where the loan was granted, but with the centre. That does not mean the Branch has no role to play in account management. Reports identifying the early signs of delinquency are directed to the channel over which the loan is authorised. If the account fails to respond further action is transferred to a Central Recoveries unit which will manage the debt collection from then on using whichever channels appropriate. By using scoring techniques to sanction simple personal loans, staff with lending skills can be used to handle the more complex situations with commercial or more affluent customers.

30. SOPHRON PARTNERS Published: 1998 Credit scoring - pros Potential Benefits:  The process is quicker and cheaper  Decisions are consistent across the Bank  Loans can be approved through any channel  Acceptance rates can be increased with controlled risk  Losses can be easily monitored and controlled  A focused team will learn and improve forecasting and predicting techniques  Competitive advantage through speed and convenience -Local decision-makers freed to concentrate on complex situations

31. SOPHRON PARTNERS Published: 1998 Credit scoring -...and cons Potential Problems: -Branch staff may feel loss of control  Branch staff may feel loss of status, size of lending limit = ego  Local conditions may not be captured in system  Sometimes scored decisions can be difficult to explain to customers

32. SOPHRON PARTNERS Published: 1998 Booking appointments In the past pro-active selling, if attempted at all, involved approaching customers who had visited the Branch to conduct transactions. This lead to regular customers being approached several times for the same product at a time that they had neither the time or inclination to consider a new proposition. CRM processes clearly identify the customers needs and the most appropriate treatment strategy.

33. SOPHRON PARTNERS Published: 1998 Booking appointments cont’d The Branch has a role to play: -making sales to customers who are more comfortable in this environment -for products where the features are complex and benefit by being supported by graphical illustrations incorporating the customer’s own details. This is best achieved by arranging a time and location when the customer is available to meet an appropriately qualified member of staff.

34. SOPHRON PARTNERS Published: 1998 Booking appointments - requirements In all sectors there are benefits from ensuring that the customer is given advance warning of any information needed and how long the meeting will take. From the Bank’s point of view it ensures that the appropriate resources are available. In the multi channel environment it is necessary to be able to arrange sales visits to the home or office, telephone interviews by a Telephone Banking advisor or an appointment for a meeting with an expert from the appropriate segment with relevant skills. This requires a support facility which allows appointments to be booked at any time from any Point of Service location, to schedule with any suitably qualified customer facing officer, at a designated time, in a designated location.

35. SOPHRON PARTNERS Published: 1998 Requirements for an enterprise wide appointments system An "enterprise wide" Appointment System could be achieved by the creation of an information base which records:  Each member of face to face staff and the level of qualification or registration they hold, hence the products they are permitted to sell or give advice on  Details of any "Home Visiting Staff", their territorial boundaries and visiting hours  Each interview facility, e.g. office or bay within branches, the degree of confidentiality, the equipment available etc.  Each Branch or specialist unit, details of its location, opening hours, parking facilities, plus any other items of information likely to be needed to be conveyed to a customer by a member of staff neither of whom has ever visited that location

36. SOPHRON PARTNERS Published: 1998 Requirements for an enterprise wide appointments system cont’d  Each product the bank sells with details of the qualifications needed by staff to sell or give advice on that product, the requirements the customer must satisfy in order to buy the product (e.g. over 18)  The creation of an algorithm which matches the preferred time and location with a suitably qualified staff member to sell a given product to a qualifying customer  The creation of a diary which records bookings of staff and facilities and is capable of access and authorised update from any channel at any time  The construction of interrogation tools to provide Management Information on the effectiveness of the process  The creation of a Culture where sales staff accept that their work can be effectively scheduled by a remotely based colleague. This must be recognised as beneficial for the customer and the sales person.

37. SOPHRON PARTNERS Published: 1998 Benefits of an enterprise wide appointments system Enhanced customer service  Appointments can be scheduled to meet their needs, often a choice can be offered  Confirmation of an appointment can be given at any time through any channel  The match of staff to customer eliminates unqualified staff meeting customers necessitating re booking

38. SOPHRON PARTNERS Published: 1998 Benefits of an enterprise wide appointments system cont’d Effective Recourse Utilisation  Face to face staff do not have to be involved in booking interviews  The algorithm used can favour the times when interviews which occur naturally, or are prompted in branch and follow customer flow, are less likely  A high match of the right qualification level to the right interview will reduce over or under qualified staff being allocated. The Management Information provided enables the resources to be maximised. Like any retailer the effective utilisation and location of its "floor-space" is critical as is the mix of the staff skill set. This Bank-wide information can be used to determine the location and skills mix to satisfy customer demand.

39. SOPHRON PARTNERS Published: 1998 Enterprise wide appointments system - issues raised There are certain business and implementation issues raised:  Initially there may be resistance to centralised allocation of Appointments, this must be overcome by demonstrating the benefits in terms of increased "hot " leads  The Management Information which will be available and shows the way resources are being utilised must be used to plan resource provision in favour of local or anecdotal information  Responsibility for ownership of the information files within the system must be allocated and accepted by the appropriate line function.

40. SOPHRON PARTNERS Published: 1998 Enterprise wide appointments system - issues raised cont’d The Appointment booking system may not be successful:  If sales staff resent what they may perceive as interference in their role and do not co-operate with the concept  If customers see no advantage in having appointments  If the Information Files are not kept up to date  If the Algorithm is not effective  If sufficient flexibility is not provided to allow common sense to prevail.

41. SOPHRON PARTNERS Published: 1998 Sales Top performing Financial Institutions have recognised that in order to maximise the effectiveness of the leads generated from a CRM campaign and increase the sales of their products to customers they must first create a culture in which sales skills are fostered and given due recognition. Having established contact with a customer either as the result of a CRM pro-active campaign or as the result of a customer originated request the Sales Process must be optimised for efficiency and effectiveness. The aim will be to close the sale as quickly as possible. This will be consistent with maximising the opportunity to meet as many of the customers needs as can be achieved, and where possible get commitment for a "Financial Health Check " at an appropriate time in the future. These goals will only be achieved by staff motivated to succeed supported by comprehensive training and IT support.

42. SOPHRON PARTNERS Published: 1998 Sales - component requirements The components needed to achieve the new sales goals are:  Strong management support for a sales culture  Physical location and surroundings  A customer prepared for the business in hand  Focused staff with no administrative duties  Energising, training and coaching sales employees  Introducing performance measurement and incentive systems  IT support systems.

43. SOPHRON PARTNERS Published: 1998 Sales - staff requirements In common with almost every workplace activity the staff will only take the objectives seriously if they feel the Bank’s executives are serious in their intentions to boost income by selling to meet customers needs. The concept of building long term sustainable profit must not be sacrificed to the demands of short term targets which staff can only achieved by selling anything to anyone. This CRM culture of selling to needs must be reinforced by how the message is communicated in internal and external literature, and by how achievements are recognised and rewarded.

44. SOPHRON PARTNERS Published: 1998 Sales - staff requirements cont’d In most organisations there is no incentive for staff to capture accurate customer information, e.g. in one Bank customer dates of birth are defaulted as 11,11.11, the quickest and easiest way to complete the data fields (48% of all customer records held by this Bank have the above default date of birth). This is not because the staff are deliberately sabotaging the CRM process. It is because valid customer information has not been firmly linked to sales and rewards and no value set upon it.

45. SOPHRON PARTNERS Published: 1998 Sales - customer requirements Customers are most likely to discuss their needs in an atmosphere of privacy and comfort. This may be at their home or office, where they will have chosen the environment. This means that the seller has little control over the degree of third party interruptions. Where the interview is on the Branch premises the type of interview area will depend upon the actual location. The appropriate space should be made available by prior booking. During pre-booked appointment sessions the sales officer should not be disturbed.

46. SOPHRON PARTNERS Published: 1998 Sales - customer requirements cont’d The availability of support systems (see IT Support Systems section) should ensure the following:  the customer need not be left alone during the interview  all information on the following should be at the point of sale terminal. customer the product the decision making rules  the screen of the point of sale system should be located such as to enable the graphical displays to be shown to the customer as illustration of the various product features.

47. SOPHRON PARTNERS Published: 1998 Preparing the customer Where the sales interview has been pre booked, the customer will have been aware of the time needed to conduct the business at hand and the type of information likely to be needed. This is ideal in that the customer is already in the right frame of mind to consider the proposition. Where the customer has initiated the process with no pre notice the sales officer should set the scene for the discussion. If certain information needed to close the sale cannot be made available at the time the process should continue assuming the information would be positive and a provisional sale made subject to the production of whatever is needed by the customer. Arrangements should be made, (Perhaps using a Case management system) to schedule the collection of the information by the appropriate channel, e.g. a Telephone Channel outbound call or an pre paid envelope addressed to the central unit.

48. SOPHRON PARTNERS Published: 1998 Focusing staff - separating sales and back office Within many financial Institutions the common current situation is still one where:  Account managers perform diverse tasks with little time left for sales  The overall culture is administrative and bureaucratic Constant interruptions occur.

49. SOPHRON PARTNERS Published: 1998 Energising, training and coaching sales employees Training sales management and staff should be ongoing and dynamic. It should  be a mixture of off site and on site activities  be related to the particular campaigns under way.I  involve use of the support technology  include role-playing and analysis of video recordings. The desired behaviour patterns should be reinforced by frequent communication and achievement recognition. Activities should include off site group training designed to bond and generate high levels of energy and enthusiasm

50. SOPHRON PARTNERS Published: 1998 IT support systems - pre-CRM selling In the pre-CRM world most selling is "Reactive", responding to a Customer’s request for a product or service. The handling of "new Business" normally involves the customer answering questions which are written down on a form in a public area of the Branch. There is then an often lengthy period when the customer has to wait for a decision and lengthy processing before the product is fulfilled.

51. SOPHRON PARTNERS Published: 1998 IT support systems - world best practice Identify "leads" making the process "Proactive". Supporting the sales event itself, making the collection of information interesting and validating customer information already held. Providing visual aids to explain the features of complex products. Automating the decision making process. Providing a link into the Product processing systems, avoiding re- keying. Printing a completed application and product documentation

52. SOPHRON PARTNERS Published: 1998 IT support systems - world best practice World Best Practice Banks have transformed this process by the introduction of Technology to:  Identify "leads" making the process "Proactive".  Supporting the sales event itself, making the collection of information interesting and validating customer information already held.  Providing visual aids to explain the features of complex products.  Automating the decision making process.  Providing a link into the Product processing systems, avoiding re-keying.  Printing a completed application and product documentation

53. SOPHRON PARTNERS Published: 1998 IT support systems - point of service problems In many financial Institutions the only systems currently supporting staff at the point of sale forms part of the branch automation implementation. As such they are normally optimised for transaction processing and the efforts involved in updating the system, and the restraints of screen format do not make it either attractive to use or suitable to show the customer.

54. SOPHRON PARTNERS Published: 1998 IT support systems - POS solution It is proposed that new software environments be used, if possible on existing hardware platforms, enhanced if necessary, to develop a graphic rich point of sale system to support the full new business range. This implementation should be architected to provide a separation between the Presentation and Processing layers. This will facilitate an implementation which should common across all channels, with only the Presentation layer (the way the information appears on the screen) changing to reflect the channel attributes e.g. scripts and narrative descriptions for the Telephone advisers, graphic representations for face to face sales. In both instances the underlying processing logic would be identical.

55. SOPHRON PARTNERS Published: 1998 IT support systems - the new POS Any POS system should interface to the following CRM support systems:  Customer information  Case management  Rule bases  Product information file  Leads management  Credit scoring  Appointments booking

56. SOPHRON PARTNERS Published: 1998 Branch layout - pre-CRM Financial Institutions, over many years, have designed their branches giving the highest space priority to the primary business of cash delivery Services, this resulted in rigid and inflexible design. At least 85% of the space was allocated to counter and back office clerical activities usually located in the prime are in the front of the branch, the remaining 15% to the customer area with very limited customer interviews facilities located within secondary areas. With the progression towards automated cash delivery services direct channels and centralised processing the opportunity is available to take full advantage of the space released and redesign branch layouts to create sales and service outlets

57. SOPHRON PARTNERS Published: 1998 Branch layout - the new outlets In the new outlets the traditional length of counter has been replaced by modular units optimised to support the specific function e.g. enquiries, open plan tills, secure tills and a variety of interview spaces. The interview areas should be welcoming and private, open-plan and enclosed areas both have their place since surveys of customers show almost equal preference for each layouts. Branches following world best practice design applications in most cases have achieved a reversal in space allocation resulting in the redesigned branch having:  80% sales, marketing and interview / sales facilities  15% cash services  5% clerical functions

58. SOPHRON PARTNERS Published: 1998 Planning optimum distribution to serve a community Historic network expansion Financial institutions have historically expanded their networks in an unstructured way, driven by external forces including  Population trends  Mergers  Requests from commerce and industry  Competitor network developments In most cases when an individual branch was opened it was regarded as a single profit centre in which it would develop its new business from an undefined catchment area, which also included other branches.

59. SOPHRON PARTNERS Published: 1998 Planning optimum distribution to serve a community cont’d Accounting systems Many accounting systems at that time were not "transparent" (allowing customers to transact business at any branch within the network) and as a result Internal transfers took place which were costly and only moved profitability internally. The development of new transparent accounting systems, allowing customers to retain their accounts at any branch of their choice but purchase products from across the whole group. This "transparency" along with the high cost of the branch networks and the attractiveness in cost and customer convenience of alternative direct channels indicated that a review of network configuration was required.

60. SOPHRON PARTNERS Published: 1998 Planning optimum distribution to serve a community cont’d Communities Organisations carrying out best practice reviewed their networks and redefined catchment areas, known as "Communities" or Micro- markets". These communities were examined in terms of the existing and potential customer needs and were viewed as profit centres, rather than individual branches. The optimum configuration to support that community in terms of branch and direct channels was determined guided by the CRM predictions. The studies often revealed that the number of traditional branches could be reduced with no reduction in income or customer retention providing the benefits of the new channels, e.g. the telephone and more conveniently located ATMs were introduced as part of the initiative. Often the location and facilities of branches were changed.

61. SOPHRON PARTNERS Published: 1998 Planning optimum distribution to serve a community cont’d Communities cont’d This was, "sanity" checked by the local management, and in order to reinforce the "community" inter-channel agreements were reached; e.g. The branch would sell x Telephone banking accounts, the call centre would generate y branch interviews. These service levels were monitored in order to meet the requirements of the area.