Survey Shows Companies Are Focusing More on New Buyers Instead of Taking Care of Current Customers
Stamford, CONN., August 8, 2002 — Customer retention must be the No. 1 priority for financial services’ CRM strategies, but a new survey by GartnerG2, a division of Gartner, Inc. (NYSE: IT and ITB) showed that acquiring new customers is often the main goal.
In the first quarter of 2002, GartnerG2 surveyed 117 U.S. retail marketing departments in the financial services industry (banking, investment, insurance and credit cards) via the Web to state their CRM priorities.
According to the survey, the primary marketing focus for retail financial services marketing departments was on new customer acquisition at 43 percent, or cross-selling at 30 percent. Customer retention was the No. 1 priority among just 9 percent of those surveyed. GartnerG2 analysts said this is a major mistake among financial services organizations.
“Customer retention should be the first line of defense in a financial services provider’s CRM strategy,” said Kim Collins, research director at GartnerG2. “However, most financial services companies do not even have a clear definition of customer attrition, much less a way to accurately identify and respond to early warning signs that a customer is likely to exit.”
Many financial services providers often miss opportunities to drive retention and loyalty because they focus CRM initiatives on gaining revenue through cross-selling. However, if a company’s churn rate is high, cross-selling is not that effective.
GartnerG2 analysts also pointed out that acquiring new clients costs nearly five times more than retaining an existing one.
“On average, that’s $280 spent to find a new customer vs. $57 to keep one. If you are losing high-value customers, the costs go up substantially to acquire a new customer and grow that relationship to the same level,” Collins said.
Retail financial services companies must put more effort into monitoring customers, and identify and respond to early warning
signs, such as the removal of key services, such as direct deposits; changes in channel usage, such as declining branch use or increases in foreign ATM transactions; and the steady diminishment in accounts over a period of time.
“These events might signal a change in financial status that could put the provider at risk,” Collins said. “Careful assessment will determine what is a retention opportunity versus a risky relationship.”
GartnerG2 recommends financial services companies develop a retention strategy to identify risks before a customer leaves.
“For example, use event-triggering and state-based technologies to recognize important events or changes in customer behavior that are leading indicators that signal likely defection,” Collins said. “Provide enhanced services, advice and better product bundling to boost loyalty among high-value clients. Communicating with the customer on their terms based on their contact preferences about their financial interests will go further than larger marketing efforts.”
GartnerG2 is a research service from Gartner that helps business strategists guide and grow their businesses. For more information on the report and about GartnerG2 services, please visit www.GartnerG2.com.
Additional analysis on the CRM market will be discussed at the Gartner CRM Summit September 18-20, 2002 in Chicago. During the Summit, Gartner will present its CRM Excellence Award. Nominations for this award are being accepted via an online entry form for Gartner clients and nonclients who demonstrate excellence in CRM initiatives and illustrate a specific end-user implementation of CRM. Gartner is currently accepting nominations for this award through August 23, 2002. More information on Gartner’s CRM Excellence award and the online entry form are available at www.gartner.com/us/crmexcellence.
About Gartner, Inc.
Gartner, Inc. is a research and advisory firm that helps more than 10,500 clients understand technology and drive business growth. Gartner’s businesses consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,000 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. Fiscal 2001 revenue totaled $963 million. For more information, visit www.gartner.com.Tags: Customer Relationship Management (CRM), Gartner