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CRM in mutual societies - Opportunities for mutual benefit

Now that UK financial services are very competitive and fairly commoditised, CRM seems to be a very good fit. The other aspect highlighted by G2 is that brand strength is another important factor. This is a very important issue for most UK mutual societies, few of which are strong household names, or can afford the level of brand promotion required to become one. It appears that not many mutual societies can depend on their brand strength rather than the quality of products and services that they offer, so CRM initiatives are likely to be important.

However, Cantata believes that there is an extra element of the mix which makes CRM a very important tool in the armoury of mutual societies. The customer base is the income source; the owners the beneficiary of profits and the source of future income. So there are several aspects of managing the relationship which go beyond a more conventional company/client situation.

In recent years the nature and challenges of mutuality have been a significant focus for societies as demutualisation proposals were raised and the phenomenon of carpet baggers arose. Companies have reacted to this in different ways with, for example, Nationwide emphasising the member value achieved by using their products and services, Britannia awarding cash loyalty bonuses, and Coventry offering enhanced rates to loyal members. This paper discusses some aspects of CRM which may provide particular benefit to mutual societies.

Data is always a key issue for CRM as customer details are often spread across multiple systems with different input requirements and levels of data integrity. For mutual societies this often has to be reconciled and de-duplicated every year to identify the current membership lists. The work done here is the basis of the data cleanup needed to introduce a single view of the customer and their full relationship with the society but it is frequently reworked annually at considerable cost and effort. Arguably front line staff would be more aware of the relationship with an individual if they were aware that the person had been a voting member for many years, or indeed was not a member at all. Of course it's important to treat all customers well but it's also important to know that this individual would qualify for special rates or bonuses.

Another aspect of membership not always appreciated by the customer is the link, in most societies, to particular product types. Customers may lose membership status when products reach the end of their life, for example a mortgage is repaid, but this may be the very time when the customer is most aware of the relationship. Of course it's also a time when their financial needs are changing and there are great opportunities to strengthen the longer term relationship. Some members may realise the significance of this change but very few would realise that, in many cases, moving from an ordinary share account to an ISA will cause them to lose membership status. Few mutual societies have membership retention schemes to ensure that loyal customers retain their membership status through suitable, though possibly low value, products but this is just the sort of opportunity which would be supported by CRM systems. The point here is to establish mutual gain - prolonged membership of loyal members and additional product holdings are good news for both parties.

Traditional CRM thinking has often focussed on identifying profitable segments of the customer base and focussing effort on these customers. Some aspects of this may be appropriate in mutual societies but many see their member relationship as wider than this, choosing to encourage improved cost effectiveness through the use of different communications channels, sale of additional products, alternative product designs to achieve a reasonable cost base for lower value members, or simple automation such as direct debits. It�s also easy to see some segments as "value destroyers" giving little or no income to the society but with the mutual model it's also important to understand the relationship and history of those members. If they are satisfied long term members they may well have introduced friends and family to the society and may continue to do so. Removing the value destroyers may be a very short term and dangerous strategy. However, the ability to make these decisions is rooted in the ability to see the whole relationship and understand who is "profitable" and who is not. Accurate detailed and widely available data is central to the whole of this analysis process.

Longevity of relationship is also a major feature of the traditional mutual model with many customers being members almost from cradle to grave. The depth and nature of the relationship changes of course as they pass through life stages with child accounts moving up to qualifying savings accounts, travel insurance, ISAs, mortgages, insurance and potentially retirement and inheritance tax planning. This is the point at which CRM can offer additional value as the historic policies are clearly significant to the relationship but may well be archived from back office systems shortly after they are closed. However, information on the term of the relationship and the types of products held can help both in terms of relations with front line staff and also in marketing analyses. Customers are seldom impressed by the relationship systems which offer them new mortgages weeks after they have finally paid off the long standing arrangement, but the data to distinguish final redemption from a change or switch to another provider is often buried in the host system and not available to the marketing analysis.

Longevity is also important in another area - many mutual societies take a longer term view of development and the nature of the organisation than do other companies. Many executives work at the society for a significant part of their career and avoid the short term options adopted by commercial peers. CRM, whilst capable of short term returns, usually becomes most effective over the mid term as customers realise that this is not a freak occurrence of good service or a particularly good member of staff. The willingness to recognise long term building of the service and brand offerings is a significant difference in mutual societies and the long term value of managing long term relationships is one aspect where development is both possible and provides mutual advantage to society and member.

Alongside all this there are specific attractions for mutual societies in building a good relationship and the aspects of CRM systems which support this. Much of the ammunition available to mutual societies as they battle against large corporations is provided by the aspects of customer service and personal relationships so it is important to emphasise the relationship at every contact. When the customer you are dealing with is a member and feels some loyalty to and connection with the society, it is especially important to take account of what you know about them, their preferences and, most of all, to do what they would like wherever possible. As mentioned earlier, it's important to use all relevant information but it may also be very valuable to capture additional data to support the relationship - who are the children whose account they make payments to, do they drive a car or take foreign holidays, and so on. Again, the information may be available at some level but it's only likely to be available through specific CRM systems. Knowledgeable branch staff have often been able to provide this knowledge for some customers but to make it a general feature some degree of system support is essential.

Regrettably it's also very important to reduce the error rate in some circumstances, customers expect the things they request to be fulfilled but there are often quite loosely controlled ad hoc systems which pass requests from one area or person to another.

Of course this means that things can easily get lost; we've seen an example where illness and staff turnover meant that an entire mailbox of email requests for information was overlooked for three months. CRM systems are generally well equipped with simple workflow processes to control these requests and highlight any which are outstanding after a period.

Failures like this are the things which can irreparably damage the customer relationship and lead to disaffected members. Worse still is the impact of random product approaches based on internal targets which offer a customer a product which the society has recently declined to sell them because of their credit status.

Finally there's the thorny issue of intermediaries. The customers they refer are a valuable source of new business and are often comparatively high value either because of the value of the products or because they present a high risk for which premium rates apply, giving the opportunity for good returns. But of course the intermediary controls much of the relationship with that customer and they may well wish to demonstrate their involvement by moving the customer to another institution at regular intervals. The point here is that CRM will help all staff to identify these customers and to allow targeting with allowed offers, especially membership based items which highlight to the customer that the society itself has some value beyond what the intermediary provides. The mortgage account may well switch in the future but retaining the relationship and membership through savings accounts, ISAs or products for other members of the family can support a positive image with the customer. Of course you can also extend this to the intermediary where appropriate, pointing out critical dates and appropriate products which can help them to maximise their relationship and income. The point is to build mutually advantageous relationships with all parties not to start a war of ownership.

Cantata's view is that the unique features of mutual societies in UK financial services are closely related to many of the features that CRM initiatives will support. There are opportunities to build real long term value into the relationships which benefit the societies and their members and which transcend the common view of CRM as an excuse to sell expensive IT kit. We'll be happy to talk to you about these opportunities in more detail.