Knowledge Center: Publication
The rise of "consumerization" in financial servicesSubscribe to Financial Services 9/9/2015 Golnaz Yekrangian
The financial services industry is going through a transformation that is best characterized as “consumerization,” as firms increasingly look to reorient themselves around end consumers even when their core businesses do not involve selling directly to them.
Two factors are behind this change in focus: increased rivalry among traditional competitors and the emergence of disruptive players, such as PayPal and Google Wallet, which have joined the marketplace with technology advantages that appeal to young online consumers.
More than ever, financial services firms need to have a full understanding of their end customers so that they can deliver truly relevant products and services and customized experiences while also building the sorts of deep customer relationships that will help protect against long-term competitive threats.
Shareholders have taken notice, and consequently the consumerization agenda has become a top priority for many financial services CEOs. It is being rolled out internally with employees through enterprise-wide customer-centric strategies in companies such as Bank of America and MetLife.
We have seen the consumerization trend in asset management, wealth management, banking, and the insurance industry. Firms in these industries increasingly aspire to know their end customers as well as — or better than — their intermediaries and distributors do already and then to put customers squarely at the heart of their brands.
Find the right leaders
Against this backdrop, experts who can lead consumer-focused transformations are in high demand. With their ability to glean insights from data, experienced insights and analytics specialists know how to power up customer-centric business models. They can guide organizations in connecting business strategies to the needs and wants of the customer. World-class insights and analytics executives tend to own the entire spectrum of customer-focused research and analytics as well as the resulting recommendations and improvement initiatives at the enterprise level. Some may have larger portfolios that include customer experience and customer loyalty. They typically have deep experience in customer segmentation, lead teams that can perform brand analysis and advanced statistical analyses (such as media mix modeling), and are able to prioritize investment opportunities related to the organization’s broader brand and marketing efforts.
These professionals typically reside in the marketing function and often report to the chief marketing officer, but they may also report directly to the CEO/president. Some serve on the organization’s top operating committees.
The problem faced by many financial services companies is that historically they have been heavy on data but light on insights. Therefore, financial services companies increasingly find it necessary to look outside of their organizations and even their industry for senior-level insights and analytics talent.
To find the right leaders, they are reaching out to industries where having extensive customer knowledge has always been a competitive advantage.
This means turning to data-rich consumer-oriented industries, such as consumer packaged goods, retailing, travel, and hospitality — all industries with a history of analyzing vast amounts of information to better understand and engage their customers.
Strong insights and analytics leaders in these industries have typically owned both customer research and analytics. Moreover, some are quite eager for change. For example, consider how the consumer packaged goods talent pool has continued to be challenged by slow industry growth and cutthroat margins. For aspiring insights and analytics leaders, the financial services industry represents an opportunity to join a more dynamic situation. It is a chance to import best practices and be a real “game changer” — provided they are complemented with a supporting team of financial services experts to help them move up the industry’s steep learning curve quickly.
Go beyond technical expertise
In trying to identify and assess insights and analytics leaders, financial services industry CEOs and other C-level executives are coming to understand that the skills and competencies required go well beyond just technical insights and analytics know-how. An insights and analytics leader needs to have strong communication skills and be able to articulate findings in language easily understood by business leaders and corporate directors alike.
They must also have a strong track record. Aspiring insights and analytics leaders must be able to clearly articulate the business opportunities and insights they identified from the data in their current or former roles. They must be able to show how those insights translated into winning marketing and brand strategies and how those strategies were operationalized and paved the way to new business. Moreover, they must demonstrate how their
efforts and recommendations resulted in increased revenues, lower costs, bigger profits, and improved customer experiences.
Finally, a successful senior-level insights and analytics executive in any financial services company where consumerization is relatively new must have the ability to help transform the organization and be an inspirational change agent with the requisite sense of relentless optimism. A candidate who can only repackage data will not come close to achieving the kind of impact required.
Spotting leaders: Questions to ask
Was your organization already supportive of a consumerization strategy, or did you have to gain buy-in across the organization? If so, how
How did you influence key stakeholders
How did you make the business case for the necessary resources
Did you enlist the help of champions and evangelists to help identify — and solve — customer-focused problems? If so, how
How did you go about identifying the “quick wins” necessary to gain momentum
Realize the benefits
Getting the right leaders in place brings significant benefits. For example, a large private consumer bank gained millions in incremental pre-tax net income by leveraging insights and analytics to spot new opportunities in its customer base. It built the appropriate data sets, better estimated the net worth of the target audience, made better risk decisions, and created an effective segmentation that led to a successful targeted outreach program.
Another bank took advantage of a comprehensive customer-segmentation analysis that helped it transform an account-level marketing strategy into a true customer-level strategy. The result: hundreds of millions of dollars in increased revenues because the team focused on a more holistic view of the customer.
Similarly, a large global bank leveraged insights and analytics to define and size three target segments and then tailor its products, value proposition, and the customer experience accordingly in selected target countries around the world. The effort helped streamline operations and clarify the bank’s investment priorities.
In the short term, insights and analytics leaders can be instrumental in solving specific business problems and creating metrics for marketing effectiveness, media mix modeling, brand strategy, and segmentation analysis. In the long term, financial services companies that succeed in making consumerization a major part of their core values and culture will establish deeper and more authentic relationships with their customers.
By being more attuned to the voice of the customer, understanding what customers want, and providing it through appropriate channels, these banks will be better positioned for success — and better able to surmount future disruptions in the industry.
About the author
Golnaz Yekrangian (firstname.lastname@example.org) is a principal in Heidrick & Struggles’ Toronto office and a member of the Financial Services Practice.
The author would like to thank Dan Ryan and Lynne Seid for their contributions to this article.