Building customer-centric business models in retail banking
The fourth dimension
This Deloitte Research report draws on in-depth interviews with senior executives and a consumer survey of 2,104 UK adults as well as a detailed financial analysis of UK retail banks and building societies.
Bank executives are grappling with some difficult choices: improve customer profitability by building a ‘high-volume, low-cost’ model or offer a ‘differentiated service’ model designed to attract and retain the most profitable customer segments. Many are opting for the latter approach, focusing service improvements on high-end customers. They seek to improve cross-sales, restructure bank fees and charges and make greater use of capital-light products.
Banks face two key challenges: First, there is a tension between banks’ customer strategies and what customers want; making it difficult for banks to create the customer retention, trust and loyalty needed to improve cross-sales. Second, operating models can create barriers to building customer insight.
The report identifies four dimensions of customer insight on which banks can tailor their services for target segments. In the race for profitable customers, execution will be key.
Deloitte makes nine recommendations to build a more customer-centric business model:
- Adjust operating models for a more customer-centric model.
- Drive co-operation through stronger leadership.
- Simplify operating models...selectively.
- Realign staff culture to the business model.
- Build multi-channel capabilities.
- Integrate client insight data onto one platform.
- Build business analytics capabilities.
- Priorities change according to customer-segmentation strategy.
- Improve branding and messaging.
The fourth dimension (PDF)
In our accompanying podcast, Deloitte partners discuss the trend towards service differentiation - in other words targeting high end customers through superior service – rather than the mass market, low cost approach and look at the challenges of wooing wealthy customers who are increasingly sceptical about whether banks have really put their house in order. The podcast explores why achieving multidimensional customer insight is key in the race for profitable customers.
|Listen to the podcast|