Alastair Blair: Time for bankers to cash in on the retail system

SUCCESSFUL retailers are good at getting into their customers’ minds so that they can better deliver what they want. It’s a way of thinking that is now being heeded by the banking world.

On the one hand, some of the UK’s leading consumer champions, e.g Tesco and Virgin, are entering the market, bringing a different perspective to customer engagement and the customer “journey”. Virgin Money’s new “customer lounge” to be opened in Edinburgh is a departure from conventional banking environments but illustrates that, alongside the move towards internet and mobile banking over recent years, the physical environment – the branch – remains very important to the customer.

On the other hand, significant numbers of traditional European banks are now adopting techniques used by successful retailers to increase revenues and cross-sell products. The process, known as “banking retailisation”, is the morphing of a banking business with traditional retail practices. And it is particularly relevant in an environment where average customer profitability for banks in developed markets has fallen by 5 to 15 per cent since the financial crisis.

According to a survey commissioned by Accenture and UniCredit, 78 senior marketing executives at leading European banks revealed that banks are making substantive progress in implementing proven retail strategies, such as point-of-sale product recommendations and customer segmentation. Overall, 41 per cent of respondents said they had implemented or would implement within a year at least one programme similar to retailers’ initiatives, and a significant number said they had already begun initiatives similar to those of leading retailers.

We also asked the marketing executives to look at 16 successful initiatives by companies outside the banking sector to determine if they could be applied to banks to increase revenues and cross-selling. The top-rated initiatives were Amazon.com’s point-of-sale product recommendations, which present packages frequently “bought together”, and Apple iTunes’ “Genius” tool, which recommends new content based on individual users’ purchasing histories and entertainment libraries. Four out of five respondents believe that the customer analytics and behavioural segmentation techniques being used successfully particularly by the supermarkets will be vital to their banks’ future competitiveness.

It’s clear that, despite the differences between banks and retailers, banks can be inspired by retail techniques.

Many major retailers have distinguished themselves in marketing, customer segmentation and the ability to monitor customer needs continuously. While only some can be applied to banks, many – with appropriate investment – can be used to help banks grow, be more profitable and rebuild customer loyalty.

There is a caveat, however: the survey’s findings suggest that many of the retail strategies considered to have the greatest potential for banks are also among the hardest to implement.

But the world’s best retailers are benefiting from being laser-focused on getting into the minds of their customers and translating their insights into ways to deliver what their customers want. Retail banks can increase their revenue by doing likewise – and some are already doing so. For instance, at one US bank, once customers have completed the online application form for a student loan, the bank’s website will automatically suggest other products, such as savings products and insurance, that could be of interest to the clients.

These banks have learned quickly and selectively from retailers, particularly in areas such as customer analytics and behavioural segmentation, and customer-centricity, giving them a clear opportunity to outperform their competitors. Scotland has become a backdrop to much of the evolution of the banking industry as many of the new entrants look to Scotland’s expertise and innovation. It now looks as if making progress also includes following retailers’ lead.

• Alastair Blair is the managing director for banking in Accenture UK & Ireland.