Tuesday, October 13, 2009


Is the change from the traditional and well known Customer Relationship Management (CRM) towards Customer Managed Relationships just a nice idea or really an interesting concept for the future? Customer orientation and improvements of the value to the customer is something all financial services institutions have on their radar but the realization of these goals is not simple. In any case, the customer becomes more and more the key factor for the success of a company.
The market condition has changed significantly with the internet. The possibilities are immense and the transparency of the market increased a lot. While it was difficult in the past to compare the simple facts of financial products like interests and fees with each other, it is now much easier for the consumer to get this information online. As long as we are not talking about structured products like asset backed securities – which even bank clerks have difficulties to fully comprehend – the market is pretty visible for the investors and provides an unlimited amount of data.

As a consequence, the loyalty of the customers towards their bank has declined. Just take the tough competition around interest rate as an example. It tempts the consumer to switch quickly.
The answer for the financial services industry lies therefore in even more data and better information and analysis about their target customer groups. The traditional CRM is here sometimes not comprehensive enough as it only analyzes existing contracts of their customers. The problem with CRM is that it looks at the customer from the perspective of the company, not from the customer angle. CRM tries to identify new sales & service opportunities for their clients based on the processes of the bank.

CMR – or "Customer Managed Relationships" is using a different approach. The concept of “CMR” started to be spoken about maybe two years ago but still gets not much attention. “Self service” is a term that is more broadly used and understood but misses the power of what customers really want. It looks at the saving from a company’s point of view, not the empowerment from the customer’s perspective.

CMR means three things
1. The ability to question and reshape your organization and its knowledge in a way that it is at the disposal of your customers
2. Internet enabled management tools which customers use to get what they want
3. The ability to react to the information being generated and used by customers in order to increase profitability.

CMR generates - if executed well – the following major benefits over CRM:
1. It is easier to implement because the customer is doing the more complex work
2. It creates more binding of your customers since customers having invested their data with the financial services institute will not move easily
3. It allows financial services organizations to move faster than their competitor since they are in a trusted relationship with their customer

Companies need to understand CMR and then change accordingly. With the words of business strategist Gary Hamel – you need a well developed view of the future, whether or not it is true. You have to invest in the competencies to make that future come true. You need to experiment and learn to see which parts of your view are developing.

“Customer managed” – a simple thought but with major impacts
The consequence for the company is a loss of control. Customers will be in the driving seat, not the financial institution. They have to start thinking and behaving differently.
It may be hard to envision but it is nevertheless absolutely feasible – with internet enabled platforms and the right business intelligence –to imagine how whole industry processes can be reconstructed putting the customer in charge of their own needs by giving them the internet based management tools and data they require. This is what a customer managed relationship is about.

The industry is currently not designed to serve customers that way. Almost every financial services institute puts the customer and the improvement of the relation to its customer base in their mission statement and strategy as a top priority. The mindset is clear. If they can establish a good relationship with their customers it will (hopefully) result in cross sell opportunities and more profit.

However, the customers usually do not care so much about a relationship with their bank. They want results. If a customer asks for a loan a simple yes over the phone would do! In other words, the customer decides when a relationship with his bank is useful.

Customers need to answer the question “How much money do I get and what shall I do with it?” all the time. Presenting this dynamic problem to a financial institution will be difficult to handle for them. Their CRM systems would not answer the question.

With CMR you present the customer with the tools to manage his relationship with his bank. This can be a portal that provides the ability to key in (safely) the individual information about customers’ savings, pensions, investments, insurance information, salary etc. The customer then can decide to take a look at his portfolio from different angles, using dashboards. Benchmark information as well as learning algorithms based on the data provided and external market data will help the customer improving in managing his own finances. Only when he needs to contact a clerk or a bank analyst he can do so by triggering an action, an email alert etc.
This flexibility and self-control from the customers’ point of view may be too farfetched right now but it will most likely be the next evolution of customer relations in the financial services industry in an effort to retain their customer base.