Peter Massey looks into the future and sees customer managed relationships within the financial sector.

Introduction to CMR

CMR – what’s that?

Who invented the term “Customer Relationship Management” or “CRM”? “Who cares,” I hear you mutter in response. Well for those of you who think you invented the term, it probably matters. For those of you trying to make CRM work you might like to get hold of them and strangle them!

The term “CMR” – or “customer managed relationships” – started to be used about two years ago but still gets little airplay. “Self service” is a term that is more broadly used but misses the power of what customers want. It looks at the saving from a company’s point of view, not the empowerment from the customer’s perspective.

CMR is three things:
1. An ability to rethink, to reshape your organisation and its knowledge so that it is at the disposal of your customers
2. Internet-enabled management tools which customers use to get what they want
3. An ability to react to the information being generated and used by customers in order to increase profitability.

If executed well, CMR generates three major benefits over CRM:
1. It is easier to implement because the customer is doing the complex stuff
2. It creates “lock-in”, since customers having invested their data with you will not move easily
3. It allows you to move faster than your competitor, since you are in a trusted relationship with your customer.

Companies need to understand CMR and then change accordingly. To paraphrase the strategy guru Hamel – you need a well-developed view of the future, whether or not it is true. You have to invest in the competencies to make that future come true. You need to experiment and learn to see which parts of your view are developing.

CMR or CRM – what’s the impact?

This article looks at one potential future. Just imagine if all the marketing spend that went into getting CRM on to the board’s agenda had gone into CMR instead. For those of you who believe in neurolinguistics (ie. something along the lines of “the words you use show what you are thinking”) using the term CMR would mean that the board actually thought the customer was in control, that the customer managed the relationship.

A simple thought but a major impact.

Think about it. Customer managed. They do it to you. You do not do anything to control them. You have to start thinking and behaving differently.

It used to be hard to envisage, but with Internet-enabled platforms it is perfectly feasible to imagine how whole industry processes can be reconstructed putting the customer in charge of their own needs by giving them the Internet-based management tools and data they require. This is what a customer managed relationship is about.

The industry is not designed to give customers what they want

I don’t want a relationship with you

How many customers actually care about a relationship with their financial services providers? To someone in a company with a mindset that says “we have a relationship with the customer”, it implies good relationships result in profit. To a customer who wants an overdraft it implies a simple yes over the phone will do!

At conferences over the past five years, I’ve always asked, “Who here wants a relationship with their bank?” Very few do. Unless you want something from them of course. You decide when a relationship is useful.

In some cases it is even worse. People do not trust financial institutions to act in their best interests. There is no basis for relationship. Mis-selling and monopolistic behaviours mean that trust in financial services has to be carefully defined. Many brands generate trust but that just means “BigCo looks after itself so well by charging the customer and is so well protected by regulation that it cannot go out of business taking my money with it”.

Ask a simple question

I also used to ask audiences which financial institution had the capability to answer the following question: “How much money have I got and what shall I do with it?”.
One or two small wealth banks might come close to answering that question. But surely that question is one we, as customers, have to answer all the time. It’s too dynamic and complex a problem for most organisations to handle. Putting in a CRM system does not solve that problem.

The solution cannot come from current thinking so how could we imagine a different future using the concepts of CMR?

Thinking only in the here and now

Within your financial institution, everything you build is based on profitability and/or growth. Getting bigger, making more money, keeping the shareholders happy and pushing the share price ever upwards. Customers are essential, you may even be excellent at servicing them, but they are not in control.

So imagine your customer wants to manage the relationship (CMR) – I mean along comes this upstart customer who actually believes that they control what goes on in their finances. What would the financial services industry look like if they were in charge?

Let’s imagine Mr & Mrs Customer are very prejudiced. They live in this parallel universe we just described where they do not trust you and get little benefit from a relationship with the bank. Sure, they get mailers and offers, spending statements that mean little and annual statutory statements that look like mailshots from the outside and tell you nothing on the inside.

They believe that they have to take responsibility for their own finances. They have to in fact since they have financial products such as insurance, pensions and savings with so many companies. Many of their “financial products” are kids, cars, job prospects, and leisure pursuits. They vary from day to day in value. One day the job is brilliant and never going to change. Next day he changes his boss. One day the kids will never go to private school, the next day they are put with the wrong teacher.

He still wants to know how much money he’s got and what he might do with it. He looks at the Sunday papers and sees league tables of the best credit cards, investments and cheque accounts. He occasionally hits a good website, more often he hears about them down the pub. He doesn’t do anything though. It’s just too damn complicated to bother.

I’d move but I can’t be bothered…

But then he hears about this website that does it all for you. It’s been designed by some ex-games software guys. There’s no help, but you get your own Lara Croft to run round and show you what to do. The killer is that it automatically calculates tax returns taking live feeds from all the BigCo banks and institutions. Some wit in a government e-think tank saw to that by persuading the banks they could keep their clearing system monopoly if they did.

OK worth a try. Crikey all that data needed to get started! That’s worse than the tax return. Ah but once done …I’m never doing it again.

Play as you learn

So, you play a little with the games simulator that shows you what you can do. You play with some dummy data about yourself. You hit all the league tables for different products. You play in the various personal scenarios, finding you needn’t enter the data since Lara cheated and showed you Mr Well-above-average’s profile which has been remarkably similar to your own in the past. The forecast results are interesting. Betting on the housing market vs. interest rates and all that. After playing several times you get the hang of the dynamics of the model and get pretty good at beating Lara at it – not bad since Lara was trained by someone on the Bank of England’s monetary committee in reality and its their model you are playing with. Even the data is up to date and from that same source. In fact all the economic data is government or better, branded news sources or better. And of course there’s online help from real people if you want.

Killer app?

All great fun for five minutes. Sounds good at dinner parties. Then along comes next year’s tax return. All that scratching around for bits of paper, ringing round for interest statements, daft questions from accountants. But Lara’s email says she can do it all for you.

Of course she’ll need your permission. And then she will get all the data on you from the various institutions. In practice she’s already got it. The Government says they have to give it to her live and online. Even your employer has been obliged to provide live access on expenses and pay, pensions, NI, etc.

Pay as you earn

In fact you don’t need to declare anything since some whizz has written a software programme that sits in the ether somewhere and is constantly looking at all this data and checking your tax payments are up to date. Next year they are proposing to abandon tax returns altogether. You won’t need to declare tax; it will have been recalculated online all the time and deducted there and then.

What’s in it for me?

You don’t have to of course, but if you do, you get a 1% discount and an equivalent of interest on early payment. And you get free online access to all your own data, ready installed in Lara’s program so you can play scenarios and make choices.

You get free use of the expenses submission tool, which is obligatory at your firm anyway so they can keep P11D expense submissions live. You get free alerts on pension triggers you asked for, whether because your account suggests it or legislation allows it. You can look at any of your statements any time you want and talk to the online ombudsman if a company you deal with isn’t responding in plain English or at all.

If you are self-employed then all your tax, NI, billing, VAT is done for you. A huge overhead taken away.

In fact it is very little different from being employed since time data is required to ensure employment legislation is being met. It all sounds like a bit of an overhead but once you start playing with the management information tools it’s worth it. Self-analysis, coaching online, skills profiling and so on are all there too should you want to go further having looked at how you spend your time. Now if only you get the car to implement the mileage data directly and co-ordinate it with the diary.
In fact it is much simpler to keep all financial data up to date online this way, five minutes here and there, using either proprietary software to enter data or the tools that come with the site.

I’m now living in a CMR world. I have tools with which to manage the big picture of my finances. I get best offers all the time. If service levels are not good I get to know before I buy by asking other customers of the companies concerned. These financial services companies are now wholesalers or manufacturers or advisers. The whole clearing system is a subset of this system. Banks do not do that any more. Of course I need some cash sometimes but that’s getting rarer because my PFA (personal financial assistant – Lara) can’t track it for me, so I have to enter stuff manually. That will never die out though since lots of people still want anonymity for many things. Financial service always was an oxymoron!

What’s in it for government?

The system networks all the relevant knowledge, process and contact I need. It is regulated and government-backed – for the moment government-owned. They’ve made more money out of online tax collection and the equity value than they have in the national lottery and the G3 licences put together.

The hardest part they had to play was to persuade all the vested interests to set up the new system and to select smart, sharp operators who could build and operate such a scaled-up system in the new technologies. Of course the fact they only paid on % of turnover and had forced liability for errors onto the supplier consortia made a big difference. The prototype took three months – a student project to cut out the wisdom that would prevent progress. But the full system took three years of absolute stamina. That’s what Mr Blair must have been talking about by e-enabled government. Whatever happened to him? On the board of “MyMoneyandWhattodowithit” last I heard.

What’s in it for BigCo?

Of course the real winners were the BigCos who got their heads round the idea of CMR very early and started changing their organisation to meet the knowledge-based economy. They studied the stakeholder pension model but have not really got the point about how much they should be allowed to take out of people’s pockets. The ones that focused on innovating product design based on the new data they had about customers did well. Those that withdrew to large-scale fund management did well. Those that built and now run large-scale Internet-based solutions to support many channels, be they IFAs or BigCo brands have done well. Yesterday’s financial services companies were very good at all sorts of things which are sustainable today when customers expect to be able to manage their relationships effectively and in their best interests.

I don’t believe it…

If you are sitting comfortably, perhaps even complacently, then remember the parable of the dangerous student. They are out there working on this solution for a new financial system now. You just don’t know where.

Last time I told that parable was about the guys who invented CD sales online. They did quite well if I remember in reshaping sales models. Five years ago I was telling it to an audience of retail property people who believed in a forecast by the reputable industry advisers that said 0.01% of sales would be online by 2005. It was the given system at the time.

The views expressed in this article are those of the author alone
Peter Massey is managing director of Budd UK and a founder of the LimeBridge global alliance - www.limebridge.com


Agree or disagree? We welcome your comments, views and thoughts for publication in future issues. Please email me at chris.stables@bt.com.