KPMG experts surveyed the major Russian banks and concluded that even in today's tough conditions the customer focus actually generates additional value.
In times of crisis, the banking system is among the first to be affected by negative developments. The volatility of financial markets in November-December 2014 resulted in an outflow of over 20% of deposits, while an increase of the key interest rate by the Central Bank up to 17% p.a. made credit products far less appealing. However, in light of the impossibility to raise external financing because of the international sanctions imposed on Russia, customers are compelled to adapt to the current conditions and it is vital for the banks to retain their deposits. In this paradigm, the quality of relations (especially long-term ones) between the bank and its customers becomes crucial.
Although the majority of the leading Russian banks have fully or partially set up a customer data collection and analysis system, translation of these deliverables into life is still missing. In more than half of all cases, banks fail to include their evaluated customer-related deliverables into the employee incentive system. That is possibly why in times of turbulence banks so quickly forget about the importance of building up long-term relations with their customers.
As for value creation, our survey revealed that banks that use a customer value management system or its separate elements generally achieve better financial performance compared to those that use such instruments (for example, dynamic data collection tools, "next best offer", individual pricing, etc.) to a limited extent or do not use them at all.
It is important to note that KPIs (return on capital, return on assets) of the banks that implemented elements of the value management system are twice as much or more.
At the same time, such system may be of a moderate complexity: data collection is mostly effective if done at least once per month, while a popular microsegmentation topic has not yet gained confirmation as the best performance is achieved by banks having not more than five segments.
As for relations with customers, it is important to note that banks are paying little attention to developing relations with their existing customers to provide them with several offerings (for example, by way of cross/additional sales), while giving high priority to attracting new ones. As a rule, the existing customers are offered one or two additional products at best.
At the same time, most respondents noted that they acknowledge importance of developing relations with the existing customers and analyze personal data both for selling new products and for managing customer outflow.
In summary, we note that the processes of building up a customer value management system and motivating bank employees to establish and develop long-term relations prove to be effective in Russia, and banks are recommended to carry out such activities even in a period of financial turbulence.
The report is available here (in Russian only).