Personalization: The Key to Customer Loyalty?
By Guy de Torcy
April 13, 2005

Summary: Customization and personalization are not the same thing, although they are often thought to be. Guy de Torcy looks at how financial services companies can gain from personalization.

Full Text (Page 1 of 3)  

Late 2004 saw another announcement about a huge breakthrough in customer service technology for the financial industry: the news that ATMs (or cash machines) could offer a ‘personalized’ service. This announcement was one of many to highlight what is surely one of the most important, yet most misunderstood and even neglected, topics in financial services.

Personalization is not something the FS industry is doing well. It’s something we rarely do at all. Too often this word is used synonymously with customization, which does not mean the same thing at all. Customization has been around for some time, and at this the sector is adept: name, address, specific details are tailored on communications to fit the individual to whom they are sent. For example, the majority of such postal offers are customized but not personalized.

Personalization means using accurate and up-to-date customer data to introduce individual amendments for each and every customer which refer to past interaction, account information or preferences. Is it not time for companies to go back to basics and improve the personalization of their letters and telephone calls before attempting to do this properly in other areas?

“Dear Mr. Jones, we noticed that last time you visited your branch you mentioned you've recently inherited some money. Can we interest you in investment advice?”

“Mrs Jones, we see that you recently purchased a holiday. Would you be interested in our rates for travelers checks?”

While this may seem like something from science fiction, it is the direction in which financial services cross-selling should be – and is – moving. Otherwise what could be provided would be - and usually is - simply an advertisement on the ATM screen with a name at the top, or a personally addressed piece of generic direct mail.

Gartner (in a 2003 report) found that 75% of consumers believe that contact with a real person cannot be replaced.  As such, treating the customer as an individual, dealing with him/her on a personal basis is essential, whether face-to-face, on the phone, in written communication – or at the ATM. Despite this, recent research has found that over 80% of companies still use templates allowing little modification for their customer communications.

In order to achieve better customer relationships, improved customer loyalty and, by extension, higher customer profitability, financial services need to give customers what they want: a return to personal service. Twenty-first century financial services companies have well and truly departed from personal, local service; and moved to Internet, telephone banking etc. Banks and insurance companies need new ways to improve retention, new ways to create ‘perceived intimacy’ with the customer, thus increasing their loyalty to that brand. Where customer acquisition was the key to improving profit margins, now customer retention has become the golden rule.

The way to offer this level of service is through true personalization. The Holy Grail of the mass marketing is ‘the segment of one’ - the ability to make the customer feel that they are being spoken to as a valued individual. This means stepping away from templates and creating a means of generating genuinely individual communications for every customer – or, if this seems a little far-fetched for immediate practicalities, then utilizing customer data to break down mass customization into groups much smaller than they currently are, in order to create the perceived intimacy mentioned above. This requires high levels of accuracy and detail within customer data.