zeb case: Quo vadis, customer?

Decreasing profits can be explained by either one of the following reasons:

• declining revenues at constant costs,
• increasing costs at constant revenues,
• increasing costs and declining revenues or
• a greater decline of revenues than of costs

For simplicity assume that revenues only originate from sales of products and fees of existing clients. We already know that customers are leaving our client. We should look into the historical development of product sales and the average profit for each product.

Key learning

Sales are declining strongly. However, there is no particular product that sells extraordinarily badly. All of the sold products have a positive contribution margin, hence we cannot exclude any of the products. The problem has to be something else. Since the sales volume has declined, we can assume that the sales team has underperformed lately.

For a deep dive into the bank's sales, we would need KPI like sales/employee or channel-specific sales figures.

From the data provided we can conclude that the bank is strong (in some cases even exceptionally good) in its traditional business, compared to industry averages. It is noticeable, however, that digital channels have not at all or only very carefully been entered. Low sales numbers, partly high costs, and unused opportunities are responsible for sinking profits.

It looks like the worry of the board of directors is valid. The bank is not well prepared for changing customer needs in a digital environment. This could be a reason for customers leaving the bank and switching to competitors since customers' needs have clearly changed in the last decade.

In the following, the reasons for customers leaving the bank should be analyzed and potentially be related to each other.

Key learnings

• Generally, fees are a problem for clients
• Linking high fees with low digital capabilities (observable from almost no digital products and the complicated online banking) and extensive, slow processes, we can assume a low degree of automatization and digitalization of processes in the bank.
• The intrusive offering of products may be linked to little coordination between sales clerks and channel representatives. The channels seem to operate separately.
• Consequently, there probably is no unified database for sales. This limits the effectiveness of process optimizing and profit increasing initiatives as well as the usage of analytics systems.

The bank is mainly losing young customers. This is especially in the long term a serious issue for the bank. More than others young customers have high expectations towards a bank regarding digital products. This implies an important area of improvement for His Earlship Charles.

Learnings:

The bank is lacking digital capabilities. What is needed now is a digital roadmap and an implementation plan to recover from this apparent competitive disadvantage.

The primary goal should be to stop customers from leaving the bank. The following three initiatives will do so:

1. Fee reduction/elimination: Taking the customer complaints into account, the fees should be reduced, even while running the risk of short-term losses. To find a sustainable solution to the problem, the business processes have to be analyzed to what extent they can be made more efficient or even automated at best. This allows for saving costs and reducing the processing time. Thus, two of the main complaints can be tackled.
2. Enhancement of digital offer: In addition, the digital offer of the bank has to be enhanced. Online banking must be simplified, it might also be necessary to restructure the website, as significantly low conversions can be identified on this channel. The bank has to develop an app (if not available already) that should at least offer the standard functions for account keeping. Writing emails must also be simplified and automated. The current costs are more than three times as high as in the rest of the sector. This might be explained due to the manual e-mail process.
3. Omnichannel strategy: In order to harmonize the different channels and make communication transparent across all channels, an omnichannel strategy has to be developed. It is key to set up a standardized data source so that all channels know which information has been sent to the customer or which inquiries have been placed. This data source can be used in the long run to optimize the sales behavior on the customer level. Analysis methods for large data volumes allow for identifying customer preferences regarding the type, frequency, and schedule of communication and considering them during the sales process. If the existing product and personal information are taken into account in the analysis, product recommendations for the sales staff can be derived on the customer level.