February 2000

The Financial Services Modernization Act: Customer Contact Centers Must Prepare For The Expected Increase In Marketing

BY SUZANNE PORTER-KUCHAY

Last November, President Clinton enacted the Financial Services Modernization Act (FSMA), a law which reversed the way financial services firms had marketed their products and services for the past 60 years. Few will feel this law's impact more than customer contact centers, because they will need to make sense of the additional sales offers that will come from the increased amount of marketing by financial services firms.

FSMA eliminated the barriers that prohibited financial institutions from marketing securities, insurance, credit cards and other financial products under one roof. Previous, Depression-era thinking had assumed that economic shocks could be minimized if there was more control over the multiple lines of business of financial services firms.

With passage of the FSMA, consumers now have access to convenient, one-stop shopping. But to financial services firms, the law dictates they must adapt their marketing strategies to maximize their efforts across the enterprise as a whole. They must now coordinate the activities for their multiple lines of business to avoid bombarding customers with confusing or conflicting offers. In addition, no longer can financial services firms simply "target" the customers that always pay their bills, for example, because the widespread increase in financial services marketing results in a highly competitive marketplace. Clearly, a new approach to marketing is needed --one that encompasses the firms' customer contact center.

However, only a few customer contact centers have provisions in place to accommodate this expected increase in marketing from the financial services firms. This is surprising, considering a 1998 Meridien Research report that cites a seven percent growth rate for customer contact centers, which receive nearly eight billion calls a year from customers of financial services institutions.

Helping Financial Service Firms And Customer Contact Centers Compete
Sky Alland, a Columbia, Maryland-based customer loyalty management firm that operates 10 customer contact centers, has a strategy in place to help its financial services clients handle the FSMA-induced increase in business. Anticipating the need for these clients to improve their marketing strategies and return on investment, Sky Alland entered into a partnership with Dulles, Virginia-based MarketSwitch to incorporate MarketSwitch's Real-Time Offer Optimizer into its customer-contact center applications. Maintaining existing customers is more cost-effective than finding new ones, so resources can be maximized when cross-selling is optimized. This will be especially beneficial since Sky Alland expects clients like American Express, Michigan National Bank, Fortis and First USA to double the list of services they provide to customers.

According to Sky Alland CEO Rich Hebert, "In the last two months of 1999, we experienced an increase in planning activity from our financial services clients for 2000. They are organizing a more aggressive approach to include cross-selling products in response to the expected intense competition."

Sky Alland points to the optimization technology as an enabling factor that helps it increase sales, the number of referrals and cash flows of clients. In fact, the company's customer loyalty management life cycle emphasizes the need to enhance customer service. Customer acquisition, retention and optimization are the components encompassing their central customer care database, but it is the optimization aspect that gives Sky Alland an edge.

FSMA Shows The Need For Optimization
With optimization technology, marketing campaigns are customer-focused instead of product-based. Campaigns must provide value to the consumer, and to do so the customer contact centers must offer the most appropriate products and services that meet each customer's needs. Is it reasonable for customer contact associates to know which offer is most valuable to the consumer from among the millions of offers available? With such a short span of time to make the offer, the accuracy and ability of staff to make the right offer and provide a high level of customer service is minimal.

Optimization technology, according to Bill Bradway, research director at Newton, Massachusetts-based Meridien Research, provides the means of making personalized offers to market an appropriate service through one-to-one direct marketing.

"There is value in having your bank provide additional services such as securities, or your credit card company supplying mortgages. How this additional service is offered, however, must provide value to the customer and keeping customers on hold to figure out the right offer doesn't help," explained Bradway. "The leading institutions strive to present an optimized offer in real-time."

Technology has allowed customer contact centers to do just that. Although the telephone remains the most personal way to communicate when building relationships, the Internet has emerged as the most cost-effective means to build and maintain these relationships. In addition to serving clients by telephone, center associates can now incorporate the use of multiple channels, responding to customer inquiries via the same channel by which contact was initiated and enhancing their means of developing and maintaining relationships.

Multichannel and multioffer optimization requires optimization of information in the customer care database, a central part of the customer management life cycle. Sky Alland's database includes transactional client data, as well as interaction data from the dialogue with customers. These two components are critical to determining appropriate and valuable sales offers.

"Historically, customer contact centers have attempted to perform back-end batch optimization, but that depended on the intelligence of center associates," said Sky Alland's Hebert. "Now, technological developments have given our representatives the tools they need to make educated decisions as to which offer a customer should receive and when. This technology will analyze the customer's history and inform the agent of the appropriate offer to make, in real-time."

For example, an agent may have on the telephone a valued customer requesting information about an account with a financial services institution. The transaction and interaction data prompt the agent to ask a series of questions which can assess the individual interests and needs of the customer. These responses are recorded and become part of the database. Optimization software analyzes these responses in real-time, so it can produce additional questions for the agent to ask, if necessary. As a result, the technology develops a model of the customer by scoring responses and suggests an offer for the agent to make.

In addition to directing the responses of contact center agents, optimization technology reduces the amount of contact necessary between the consumer and the customer contact center. This can translate to more affordable interaction costs for the centers, and customers are not overwhelmed with solicitations of little or no value. Said Hebert, "The system will do most of the work [for our associates], now they will just validate, therefore enhancing their efficiency while providing customers with a high level of service."

How Will This Higher Volume Play Out In Customer Contact Centers?
After passage of the FSMA, a special Meridien Research brief issued in December 1999 reported that large financial institutions will begin planning for increased marketing during mid-February or the end of March. However, Sky Alland's Hebert noted that some of the company's clients began planning before the end of 1999. While these firms' goal is to become more efficient in marketing in the wake of the FSMA, they are in the minority.

Moreover, the Meridien report states retail financial services institutions must deploy at least some of their top strategic initiatives in order to maintain existing positioning and successfully become players in this recently expanded and competitive industry. These initiatives include improving the quality of customer databases, enhancing front-office selling solutions and offering optimized campaign management that supports multichannel inbound and outbound needs.

Corporate America knows it must solicit and market to consumers more efficiently. The FSMA is forcing financial services companies to do it now, and it provides an opportunity for customer contact center marketers to help them through the process.

Suzanne Porter-Kuchay is director of marketing for MarketSwitch of Dulles, Virginia. For more information, contact her at 703-444-6750 x253, send an e-mail to [email protected] or visit the company's Web site at www.marketswitch.com.