The road to innovation in retail banking

Overview

In 2006, China’s banking industry has clearly put retail banking on the agenda as one of its main strategic directions. ICBC proposed to build “China’s No. 1 Retail Bank” "China", Agricultural Bank of China regards retail as the focus of strategic transformation. Bank of China joins hands with Royal Bank of Scotland to focus on private banking and wealth management businesses. China Construction Bank takes the opportunity to strengthen small and medium-sized enterprise loans to increase its efforts to transform into a retail bank. CITIC will establish a retail bank within two years. system, China Merchants Bank wants to become the best retail bank in China, and Bank of Communications said it will focus on retail banking business... Retail banks have a prominent strategic position and are growing rapidly, accounting for an increasing share of banking business.

However, behind the rapid development of retail banks, we have seen various hidden dangers in China’s retail banks emerging from the backward wholesale business of commercial banks, especially in terms of marketing. Many banks’ priority is not customers and retail, but credit and risk. Furthermore, their contact with customers is often transactional, so banks tend to focus on transaction efficiency rather than service and sales. Based on research on many domestic and foreign retail banks and the retail industry, Kotler Consulting Group (KMG) proposed four major problems in retail banks:

⒈Clear customer segmentation; Unable to provide differentiated products and services and lack of customer management.

You wouldn’t buy 10 bags of washing powder at 7-11, and you wouldn’t go to Wal-Mart to buy a bottle of Coke at 12 o’clock at night. This is the role of customer segmentation. Segmenting customer groups through different needs is The premise is retail, and China's retail banks are still in the mass marketing stage, which results in high costs in product marketing. Institutions transformed from commercial banks do not meet the needs of retail business. According to statistics from the People's Bank of China, as of September 2005, there were more than 190 bank card issuers in China, with a total of about 920 million cards issued (including debit cards). A large number of card issuances cannot segment customer needs, which will inevitably lead to a large number of The card cancellation phenomenon and high operating costs, as well as the lack of customer relationship management, do not increase customer loyalty due to the large number of card issuances.

So retail banks should first answer the following questions: Who are your customers? What kind of products do customers at different levels need? What kind of differentiated strategies and differentiated services should be adopted for customers who can bring different profits? (Do you let customers who purchase 100,000 yuan in funds queue up together with customers who withdraw 100 yuan in cash?) How to effectively manage your customers and establish a matching operating organization?

⒉The products are simple and lack a rich product line for users to choose from. The reason why anyone chooses a supermarket instead of a specialty store is that supermarkets have a wide range of products, but the products of China's retail banks are too simple. From Yiwofeng issuing credit cards in 2005 to Yiwofeng agency funds in 2006, the products of China's retail banks are too simple and have low added value. Therefore, price wars are often carried out. The price wars in the banking industry are different from ordinary commodities. For example, the personal financial management products launched by major banks in 2006 were fiercely competitive. Therefore, they competed to increase customer profitability, which ultimately squeezed their own profit margins, making the original Personal financial products that should have huge profits have become useless.

⒊Single marketing and service channels. The singleness of marketing and service channels is reflected in two aspects:

First, the marketing and service channels of the same product are single. Retail banks basically rely on counters and ATMs for marketing and services, although telephone and online banking are at the same level. It is under development, but the cumbersome services and single function make its application limited. However, China Merchants Bank's online banking is an exception. Its powerful and secure services make its title of "Asia's Best Retail Bank" well-deserved.

First, the marketing and service channels of retail banks are not fully utilized, and the products marketed are single. If you want to buy funds, securities, and insurance, you have to go all over the city to find different terminal counters. , although there are policy restrictions, the marketing system that does not comply with cross-selling is the root of its shortcomings.

⒋Lack of Brand

Close your eyes, how many retail bank brands can you think of? How many retail banking product brands can you think of? What kind of experience do these brands bring to you?

In addition to China Merchants Bank’s “all-in-one card”, do we have any other famous brands? Not to mention a delightful experience. China's banks are no longer the traditional era of the four major banks of Industry, Agriculture, Construction and China. Retail needs brand and experience. Wal-Mart represents "affordable prices every day", IKEA represents DIY, McDonald's is synonymous with fast food, and Starbucks brings you A unique experience…and has our retail bank built its unique brand, established a lasting brand strategy, and developed a unique brand experience and consistent communications? The answer is unfortunately: no.

Retail banks should use retail methods for marketing. However, due to the particularity of financial products that are different from general commodities, in addition to the general rules of retail, marketing also has its own unique aspect.

As a model of applying retail thinking to operate a retail bank, Washington Mutual has even been rated as one of the top 40 retailers in the world. WaMu transformed what was once considered a sleepy industry and successfully infused it with a consumer-centric retail environment. Wamu builds retail environments that are warm and inviting and provides a high level of customer service, and the result is that its retail financial centers are places where consumers want to be, not where they don't want to be. While other banks have pushed consumers out of their branches and into ATMs since 2000, Wamu has pioneered a new path to take retail banking to the next level. Wamu launched its first signature-branded retail bank in April 2000. Since then, Seattle-based financial institutions have successfully opened or restructured 780 financial centers across the United States. Feedback from customers also shows that Wamu's strategy is being implemented successfully, with customers giving high marks to virtually every area and feature of the establishment - from the janitor who leads customers to the cashier's counter, to the removal of traditional tall Teller "tower" for counter and teller window. In addition, wamu's internet portal is open to customers who want to learn about banking products on their own. In many retail financial centers, a "WaMu Kids" area provides an area with activity tables, books, games and even more.

Dr. Philip Kotler, the father of world marketing, put forward the "STV Marketing Triangle" theory after entering the new century after summarizing the development of marketing in the last century. KMG On this basis, the development path of retail bank marketing is proposed by fully combining the practical characteristics of retail and finance:

Effective customer segmentation and differentiated customer management of retail banks

Innovative products of retail banks and market segment matching strategy

Channel innovation and cross-selling system

Retail bank brand strategy and experience shaping

Retail bank marketing organization and performance reform

Effective customer segmentation and customer management in retail banks

At a strategic level, an urgent problem for China’s banking industry is to effectively segment customers, that is, based on existing customers. Effective collection and analysis of customer data. And it is urgent to achieve the following aspects:

1) Marketing-oriented customer data collection

In banks, existing customer data collection is based on products and is mainly for To prevent risks, KMG believes that marketing-oriented customer data collection should be established. First, the important basic role of customer data in marketing strategy should be established, and then customer data should be collected based on marketing orientation combined with credit orientation.

2) Effectively use IT systems for customer data mining and analysis

It is necessary to establish a data warehouse that can effectively conduct customer data mining, and supplement it with corresponding marketing analysis IT systems to achieve After data is input at the front desk, it can be analyzed promptly and effectively.

3) Maximum effectiveness of customer management

Different market segments are equipped with different resources. To carry out refined customer management, China’s four major state-owned banks have successively Going public, a large influx of foreign competitors, and facing pressure from both shareholders and competitors, banks will inevitably be required to increase their profit margins and return on assets. Therefore, effective customer management must be carried out. KMG applies KMG's unique approach in the field of financial marketing. Some value marketing (ROI) models optimize the matching of resources and market segments.

Innovative products and market segment matching strategies for retail banks

Why are toothpaste and toothbrushes always placed together in supermarkets? Are chewing gum and other gadgets always placed at the checkout exit for customers to purchase? This is the retailer's good grasp of the market segment. He knows that housewives may pick up a box of cosmetics for themselves when buying washing powder.

At the strategic level, China's banking industry should clearly understand the characteristics of each group of people and understand how their competitors are doing. Retailers have given good experience in this regard. Most of their products are of the same quality and price, but each supermarket always has its own unique products, which either have price advantages or are inferior to others. These items are not available. The same goes for banks. It is difficult to differentiate products in basic products such as credit cards, so they must either provide a combination of products for the target group, or adopt corresponding promotional methods or smoother channels to reflect differentiation. Product innovation is a good means.

Channel innovation and cross-selling system

We can buy newspapers at Kodak's digital washing store, and we can buy McDonald's and KFC at gas stations. As the market continues to develop, Different channels start cross-selling, and the same channel starts up-selling. This is somewhat in line with what we say in China: if we divide and combine for a long time, we will divide, and if we divide for a long time, we will combine. With the abolition of the Glass-Steagal Act that regulated separate financial operations, the U.S. financial industry has ushered in a great development of mixed industries. Cross-selling has played an important role in the new round of development of the U.S. banking industry. The development of China's financial industry is similar to that of the United States. In the foreseeable future, it will also embark on a path of mixed industry. The internal meeting to be held in November will make breakthrough progress in the unified management of regulatory agencies. Therefore, cross-selling and up-selling are not only important strategies for banks, but will also be an important prerequisite for future mixed business strategies.

Northwest Bank’s “relationship” model, Bank of America and First Union’s “portfolio” model and Citibank’s “integrated” model are the three major cross-selling models in the U.S. banking industry, but we are Analysis of China's financial industry shows that we cannot simply imitate the cross-selling model of Europe and the United States, but should customize a cross-selling model that suits us through our own analysis.

In addition, the reform of channels is channel innovation. Just like the WAMU example we cited earlier, we carry out marketing-oriented reforms on existing channels and develop new models such as entering large retail stores and opening counters. , China's banking industry has begun channel innovation work. If some banks have begun to go into the community for publicity and product promotion, it is a good innovation.

Retail banking brand building and experience shaping

A hamburger costs 3 yuan in the supermarket and 10 yuan at McDonald’s; when we go to Starbucks and get a cup of coffee, it costs 20 yuan, and we It only costs 1 yuan to make a cup of Nestlé instant coffee, but we still flock to Starbucks. Why? This is the value of brand and experience. McDonald's brand value has reached 25 billion, and Starbucks' experiential marketing has also brought vanilla coffee to all parts of the world. Similarly, as a bank, we also need to create experiences and build brands.

Brand building in the banking industry must not follow the old path of other industries before 1995. Before 1995, companies often spent millions and tens of millions on CIS. The lessons of VIS cannot be repeated in the banking industry. We can see that today's banking industry always talks about logos and images when discussing brand building, which is quite dangerous.

Brand building is a systematic project, and experience is its core. No one will pay for your beautiful logo or catchy slogan. People pay because they buy high-quality products, enjoy satisfactory services, and get the best experience. And your brand’s logo and “slogan” are just visual representations of how you can effectively convey all of this.

China's banking industry has a long way to go to build brand and experience. Customer experience is to build a brand based on the five motivations for customers to interact with the brand: value, norms, habits, identity, and emotion. Finally, the atmosphere of the brand and experience is presented to customers through brand design.

A well-known international supermarket has built an office next to the cashier lane. Normally, only half of the cashier lanes are opened. When it is busy, the managers will come out of the office and open the remaining cashier lanes for cashier work. On the one hand, this improves efficiency and saves costs, but what is really important is that it saves customers waiting time and creates a good experience for customers. Looking back at the retail outlets of major banks in China, I think most people have painful experiences and memories of waiting there. Therefore, the banking industry must learn from the methods of the retail industry and focus on improving customer experience and improving the core of the brand, rather than focusing on changes in appearance and image.

Retail bank marketing organization and performance reform

The original organizational structure and performance system of the bank must be transformed from product-oriented to customer-oriented. This change is based on what we have mentioned above. The mentioned strategies and tactics are oriented, and at the same time they are an effective guarantee for the effective execution of strategies and tactics. Based on long-term marketing consulting for enterprises, KMG has summarized a series of methods and solutions for marketing organization and performance reform. Changes in marketing organization and performance need to follow the following principles:

1) Establish an organizational structure based on market segments that is oriented to customer needs;

2) Establish a team of experts to Sales team for professional support;

3) Establish a dedicated account management team;

4) Establish a brand manager and marketing department;

5) Establish a cross-border Comprehensive reward system for product series;

6) Performance appraisal is more related to account value (we regard each customer as an account) rather than simply related to sales;

In fact, for different banks to carry out different retail businesses, their marketing methods are different and need to be targeted research and reform in specific practice, but the idea should be the same, which is STV centered on customer value. The model is developed to be customer-oriented and draw on operational experience in the retail industry to create a bank-specific retail path.