Customer Experience: The Path to Sustainable Advantage

That customer experience and engagement have a huge impact on business growth, revenue and customer retention is no longer in doubt. Research consistently shows that companies with highly rated customer experience grow much faster than their (even better resourced) peers. 

Branch network or reach has long ceased to be the predominant source of differentiation or even the key to customer acquisition. This is particularly evident in advanced markets where the big banks continue to outperform smaller institutions, growing their deposits and customer base much faster despite closing down many more branches. Digital channels have replaced branches as the predominant touch point. Today, many banks around the world report that as many as 90 percent of service transactions occur on digital channels. While the majority of sales transactions continue to pass through branches, especially in the case of high value or sophisticated products, digital channels are steadily increasing their share of simple product sales and repeat buys. These channels play a huge role in enabling experience and engagement, which is today, the main source of sustainable competitive advantage.

That being said, an up-to-date, efficiently managed digital channel network does not guarantee high quality experience or engagement. Banks must negotiate a few challenges, not least of which is a customer journey – and consequently, a sales and service journey – that is rapidly moving out of the bank’s boundaries to third-party channels and external ecosystems. As recently as 20 years ago, over 50 percent of banking interactions occurred in the branch network; in 3 to 4 years, 50 percent of banks’ engagement is expected to occur on channels they do not own. The trend will only accelerate in an Open Banking economy.  This needs to be factored while designing the customer experience.

A bank looking to improve experience en route to sustainable competitive advantage should start by asking the right questions: How can we be most relevant to customers? What do they expect from a banking interaction? What level of engagement leads to delight? Focusing on the following areas will help them find the answers:

Refreshing the customer journey: Progressive organizations are beginning to view digital transformation as the refreshment of customer journeys. With banking interactions often taking place in multiple channels, there is a need to contemporize the concerned customer journeys – sales, onboarding, service delivery, problem resolution etc. – to keep them relevant to customers.

Being omni-channel: Although digital channels are their preferred medium of banking, people have not entirely abandoned assisted alternatives. Hence banks looking to serve a broader set of customer segments must offer the option of omni-channel banking – as opposed to purely digital banking – to customers. Remember that branches and relationship managers continue to bring in the majority of sales of complex, high value, and high involvement products. Experience design must allow for omni-channel engagement, so that customers can transition easily between assisted and self-service/ digital and physical channels. The bank’s staff, relationship managers and customer-facing partners must be included in these plans, because they are essential to the delivery of high quality engagement; all the tools and capabilities provisioned for customers must also be available to them. 

Personalizing journeys at scale: Just like reach, ownership of customer data has also ceased to be a source of competitive advantage. Data is democratizing at speed, giving even small banks equitable access to customer information (of other banks); this is even more the case in countries where Open Banking is mandatory. The advantage has shifted from the bank owning the most data to the one that applies it best to engage customers. Banks looking to exploit this competitive advantage must acquire the right data models that give them the insights to personalize and contextualize the various customer journeys.

Uplifting digital sales and marketing expertise: With banking operations receding into the background, the onus of engagement rests firmly with front-end activities, such as digital sales and marketing. Revenues, which today originate on traditional channels, will move to digital, and it is expected that the most successful banks of tomorrow will have significant digital sales. It is therefore important to uplift digital sales to improve success at all stages, be it engaging with cold prospects, converting fence sitters to customers or turning customers into advocates. Ways to do this include personalizing campaigns, remarketing to customers based on known behavior, and extending engagement to third-party sites or even to the point of primary need (detailed in the next section). Banks should invest in a marketing automation toolkit for a strong technology base that will improve their understanding and response to customers’ expectations. Most banks are currently lagging in this area. 

Entering the primary journey: Going back to the point made in the previous section, banks must look at engaging with customers in their primary journeys – the journeys that fulfill a basic need (for, say, a house), which precede a secondary banking customer journey (for a home loan). This is particularly important in primary needs with significant financing requirements.

While none of these changes are easy, there are several technological solutions that can help banks successfully personalize journeys at scale, analyze data in depth, create immersive experiences, and enable intelligent self-service to create memorable experiences for customers and competitive advantage for themselves. It’s more critical than ever to prioritize investments in these areas, as being the customer experience leader is the only remaining sustainable competitive advantage in today’s world.