Senior executives at retail banks view -- and use --
customer value strategically, but they could get more
mileage out of their customer strategies if they organized
their entire enterprise around the customer, says a new
retail banking survey from SAS and Peppers & Rogers Group.

After interviewing 48 executives from 18 retail banks
ranging in asset size from $12 billion to over $1 trillion,
more than two thirds (67 percent) of senior managers say
they use customer value in their decision making. More
than three quarters (78 percent) use customer value in
strategic planning. The vast majority of customer value
applications tend to be tactical rather than strategic.
Nearly three quarters (72 percent) of the surveyed executives
noted that their banks use customer value metrics to help
measure the effectiveness of sales campaigns, while only
17 percent use them in measuring the overall success of
the organization.

The report urges banks to refocus their customer value
strategies to measure overall success and performance
indicators. Refocusing that strategy depends on two
factors. The first is a better understanding of customer
value. "Value tells you what your objectives should be
for different customers," says Michael Lengel, principal,
Peppers & Rogers Group. "It tells you which customers
bring the highest value today (objective: retention),
which customers offer the highest value tomorrow (objective:
growth), and the core attributes to look for in prospects
(objective: acquisition). Value also tells you where to
focus your resources (employees, marketing spend, etc.),
so banks won't engage in profit-eroding cross-sells or waste
precious time and money acquiring, retaining, and growing
the wrong customers."

The second factor is customer needs. Knowing which existing
customers are high-value and high-growth is only half the battle,
according to the report. The bank must also meet their needs to
retain or grow that value. Needs insight tells the bank why an
individual customer purchases a product. For example, a focus
on customer needs may lead some banks to scale back cross-sell
offers to specific types of customers or to limit marketing
communications to a high-value customer's preferred channel.

The benefits are significant, but banks in general don't do
a very good job of needs-based differentiation of customers,
according to the report. Only by understanding both customer
values and customer needs -- across the entire enterprise –-
will a bank be able to make timely and relevant offers that
both appeal to customers and create more value for the bank.

"When a bank uses customer insight to market, support,
and sell the right products to the right customers, it fuels
organic growth and gains a competitive edge," says Jeff
Gilleland, financial services industry strategist at SAS.

By John Gaffney, Executive Editor