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Wake up to reality

Even before the economic downturn became quite so apparent, financial services companies were starting to question IT budgets in a much more stringent way than ever before.

The importance of technology, such as customer relationship management, to today&#39s customer-focused organisations cannot be overestimated. But companies are no longer willing to sign blank cheques for systems without a clear understanding of when and where they will make a difference to the bottom line.

For that reason, return on investment is a hotly debated issue. But very few organisations in the financial services industry have managed to narrow return on investment cases down to actual benefits within a particular company.

Many are still measuring performance using irrelevant and outdated metrics. Others are using generic return on inv-estment models that are not in line with a particular company&#39s objectives or with the markets it operates in. The majority of models are about as accurate as informed guesswork would be.

The problem with any app-roach that does not concentrate on return on investment is that the heyday of selling technology to a ready and ravenous market is over.

There is no customer relationship management bonanza on the horizon. It is time for the market to wake up to the real and contemporary needs of its clients, which are to red-uce costs through more efficient processes and to improve the value delivered by each customer to the business.

There are precedents for taking this approach. The shared risk and reward model adopted by IT services companies such as EDS is built on the delivery of some very tight and measurable improvements to the business, for example.

That approach goes part of the way towards creating a watertight return on investment model for companies. The other half of the process is identifying specific areas within a company that can be improved. These areas include sub-optimal sales and marketing processes, where opportunities to provide extra products or services are being missed.

Taken in isolation, the value of one of these transactions may not be huge. But multiply that value by the hundreds or thousands of customers that a company may have and the number of transactions they make and the amounts can add up significantly.

Another way to look at this process is to identify “value at play” or the real difference bet-ween what a customer is spending with the company and what they could be spending if sales/marketing processes were not “broken”. What does this mean for us as consumers? The answer is that it is just as beneficial for customers to be given the opportunity to buy relevant products as it is for companies to offer them.

Like anybody else, I find the experience of dealing with certain companies deeply frustrating, especially if they seem incapable of understanding my real wants and needs. A company that offers me exactly what I want at the time I want it in an efficient and professional way is the one I will choose to give my business to.

So, the key to all this is information about people, the products and services they have already bought and about the products and services they are likely to need in the future. What we are advocating is a new approach to the development of return on investment cases. This begins with the identification of sub-optimal or broken sales and marketing processes.

Where could we improve the information gathering process?

Are we giving our customers the chance to buy all the products and services they could buy from us?

Do we run the risk of losing our customers to competitors who manage this process more effectively?

Are we gathering the right information about our clients – do we know enough about them?

By asking these questions, organisations can begin to expose the gaps in the way they deal with customers. It also allows them to develop real return on investment cases on the basis of extra income that could be derived from plugging those gaps.

So, instead of justifying an investment in CRM technology on the basis of broad-brush goals that are little more than a stab in the dark, companies can begin to establish real, quantifiable business benefits.

Xchange has identified a number of templates to use when identifying sub-optimal processes, particularly in the area of cross-selling and managing customer value.

What customers and their IT partners are looking for is an easier way to calculate ret-urn on investment, a toolset that makes the process of identifying potential cost savings and revenue enhancements through the effective use of IT much more straightforward.

In uncertain times, the idea of calculating wide-scale return on investment to justify the introduction of big new systems across the business may not be feasible. But analysing systems and processes already in place to identify areas for improvement must be a key area for financial services companies to focus on today.


New Star – High Income Fund

January 23, 2002 Type: Oeic. Aim: Income and growth by investing in UK ordinary shares, fixed interest securities, preference shares, convertibles. Minimum investment: Lump sum £1,000, monthly £50. Investment split: 100 per cent invested in UK ordinary shares, fixed interest securities, preference shares, convertibles. Yield: 4 per cent gross a year. Isa link: Yes. Pep […]

Clive Boothman

Lives: Wandsworth, London.Born: May 28, 1955, London.Education: BA in politics philosophy and economics at Trinity College, Oxford. Went to school at Charterhouse in Surrey.Career: Began as a trainee chartered accountant at Ernst & Young in 1981. Joined Schroders as a research analyst for the investment division in 1983. In 1987, took charge of rebuilding Schroders&#39 […]

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