Major High Street Banks, “Challengers” and Building Societies have been grappling with how to get the most from digital investment since the dot-com boom and the heady days of egg, Smile and the like. It’s a fact that these FS providers are not getting the returns from these investments that they anticipate.
PEN has recently worked with the Judge Business School at the University of Cambridge to analyse why this is and what firms can do to guard against it in future.
As you can see in the diagram, digital initiatives suffer the most acute shortfall in benefits realisation where they set out to improve customer retention, increase customer engagement and reduce costs. This is caused by a number of factors including hasty decision-making; a lack of clarity about why an investment is really being made; an unstructured digital investment programme; uncertainty about how customers will respond (despite lengthy customer research), and /or a lack of clarity about what the impact will be on the business. So, how can firms avoid this in future?
One of our key findings is that companies are not taking a sufficiently co-ordinated approach across the business as a whole. They are directing digital investment too much in some areas at the expense of others. This leads to inconsistent customer experiences, extra complexity and increased costs. We looked across a number of facets where businesses need to be more consistent and these include strategy, customer, distribution, products, the operating model, change and your people & culture.
To bring this to life, you need to marry up the degree to which you look to ‘humanise the digital experience for customers’ with your levels of digital enablement across different products and within the value chain. If firms don’t achieve coherent progress across all of the elements mentioned above, they suffer as a result.
We also found insufficient consideration of how customers want to interact with their FS providers. Clearly, there are plenty of interactions that can be purely digital; take a customer who wants to check a balance on a product. He/she can tap a button or two on their mobile or tablet, the appropriate figure pops up and their need is satisfied.
However, there are other instances where customers will need or want to engage in a more sophisticated way; either through traditional human-to-human means (where digital should serve to enable the process but not replace human interaction), or a hybrid where we take the best parts of digital and human contact to develop a great customer experience.
What does this mean for companies? Well, they have to have customer propensity modelling which is subtler than simply the complexity of the life event / transaction in question and how customers have interacted with their bank in the past. They need to account for customer attitudes, behaviours, levels of confidence and trust in the background support to create a high quality & differentiated multi-channel proposition.
At a summary level, the last key finding is the need to be customer-led in making digital investments. That might sound like a platitude but it’s surprising how often businesses see digital solely as a means to increase sales or cut costs. Yes, digital can help with customer acquisition (although this is not always as cost effective as you might believe) but this tends to lead to operational complexity and additional costs with insufficient revenue uplift to make a proper payback. Yes, digital can help cut costs in the short term but businesses will get left behind by companies who focus on using digital to drive improvements to their customer experiences if they don’t invest elsewhere too. Over time, there is extensive evidence that a better customer experience leads to a reduced cost to serve anyway as well as improved retention and engagement. Investing here and recognising that digital is only a part of the answer, not a panacea, is the best way to get the maximum long term return on your digital investment.
If you would like to speak to us about our work in more detail, please don’t hesitate to get in touch with one of the team.