In a healthy economy, financial organizations are focused on customer experience and the ongoing customer relationship. Actions in the customer management stage can help rebalance your portfolio in times of crisis and reduce the negative impact. Through stormy times, customers will also value those companies who anticipated these outcomes and offered creative solutions to help them pull through. This becomes an opportunity to ensure that actions you take are not in isolation from cross-functional teams but a group effort to support customers based on an understanding of a customer’s entire relationship with the organization.
Before the Great Recession, financial services organizations worked with FICO to implement technology and analytics projects that would improve their understanding of the accounts that make up the customer’s financial relationship. The goal was to make more consistent decisions, grow profitability and retain customers. They aimed to make the right analytic-driven customer management decisions in areas such as credit line management, authorizations, and next best offer/action. However, when the recession hit, the focus flipped. The goal became risk reduction, staying afloat and managing delinquencies - customer management projects fell by the wayside.
This is an understandable reaction. It’s easy to justify collections investment since it directly effects efficiency in recovered amounts and collection costs. Origination is similarly easy to prioritize in order to manage growth and portfolio quality. It is harder to immediately understand the need for continued customer management strategy investments. It is not a single decision but a series of decisions involving multiple business areas such as line of business owner, collections, customer service, digital and marketing. Often, each business area already owns its processes and solutions and does not visualize how a customer management solution will interact and add synergy to their processes.
Although this reaction is consistent with most financial institutions during the last recession, ongoing customer management strategies shouldn’t be neglected again if we face economic stress.
How does customer management improve economic outcomes?
An efficient and well-designed customer management process delivers ongoing, mutually beneficial results for financial institutions and their customers through good and bad times. After all, the customer management stage is the longest, and least stressful, in the customer relationship. Multi-product customer management improves your business in the following ways:
- Deeper Customer Understanding: Improve your capabilities for evaluating customer behavior, be more dynamic over time by adjusting offers and improving your terms and conditions based on fluctuating risk and reward.
- Faster Product Activation: Design strategies to accelerate the activation of new customers, see faster use of products and services, increasing profitability and customer satisfaction.
- Relationship Growth: Take actions that encourage better or greater use of products and services, often with product migration offers to adapt risk and potential of each customer. This increases overall customer profitability.
- Retention: Quickly identify changes in the usage of products and services. Understand the reason and offer advantages for the customer to return to the desired behavior.
- Collections Prevention: When a client's financial condition weakens, identify this issue and intervene with payment options in advance. This reduces potential losses by stopping customers from rolling into the collections stage.
- Collections Effectiveness: An efficient customer management process delivers valuable information to Collections from the moment the customer enters default. Collectors get a complete and systemic view of the customer’s history to determine treatment by looking at performance in every account held with the organization.
What does FICO suggest?
A customer-level strategy approach. This will centralize the efforts across teams preparing your organization to quickly recover the quality of your portfolio and the confidence in customers after the storm. This means your organization will work together to achieve consistency in customer decisions, the right outcome that balances risk/loyalty/profitability and agility for any scenario.
To learn more about how to manage customer management strategies during economic stress, watch our sessions from our recent virtual event: