The business case for Web sales is made on influence, not direct sales

[Posted by Brad Strothkamp}

One area where metrics in financial services are still hard to come by is the level of influence that the Web has on sales made in a branch, by phone or via mail. This is one area where Forrester's data can help clients. Every year, we survey US and Canadian consumers on their acquisition activities in the previous year.  

I just published a brief around the topic of online-influence sales. The big find?  The influence of the Web in sales is far more extensive than most expect. Just 37% of US online adults who researched online go to apply online - that means 63% research online and apply offline. Product is the key determinant of the percentage of online influenced sales. This graphic shows the breakdown by product for some of the products I looked at.

 
So what does this mean? If you are selling brokerage accounts, focus on the online application, if you are selling mortgages, focus on the cross-channel experience, if you are selling auto insurance, focus on both.

Brad
 

 

What financial service eBusiness execs will be saying in 2013

[Posted by Brad Strothkamp}

There is a great article in the Las Vegas Journal based on a speech by Macy's CEO, Terry Lundgren, at this year's Shop.org retail conference.

The gist of the speech is that he went from non-believer to a believer in the power of eBusiness as their online sales went from $30,000 in 1996 to over $1 billion today.

Everybody involved with eBusiness in financial services should read this article as it speaks to many of the questions financial service execs have about eBusiness including:

• Understanding a changing customer - "It's clear to me the customer has evolved and changed the way they shop and we have to change with them. There's no going back,"
• Online influenced sales- :"Every dollar spent online influences $5.77 spent in the store over the next 10 days"
• Role of ratings and reviews - "We were worried about what customers would say on product reviews. We realized that if you start getting bad reviews on a product, get rid of that product. Stop doing business with that particular product."
• Channel conflict- "He never worried about someone shopping online and not going into a store. What he did worry about was people shopping online with another company."

I fully hope and expect the CEO of a major financial institution to be giving this type of speech four years from now.

Brad

The Age Old Question Financial Services Executives Ask

[Posted by Brad Strothkamp}

Not a day goes by that I don’t get the following question from a client: How do I effectively cross-sell existing customers?

I just stumbled upon a great posting by David Martin at Bankstocks.com that piqued my interest. He talks about the subtle but clearly purposeful change some retailers like McDonalds have made related to cross selling.  His conclusion that I agree with is that financial firms are often not successful at cross selling because they often put the cart before the horse or they overlook the fact that cross-selling is more than just executing the right email campaign.

I just published a brief around cross selling that I encourage you to take a look at.  The gist of the document is that to be successful at cross selling a firm must do more than just execute or communicate well; they also must understand the role that customer advocacy and the product itself play in the process.

I hope you enjoy the document, and encourage you to post and/or send me your comments.

Brad

What should Forrester write about?

[Posted by Brad Strothkamp}

We need your input.

Periodically, Forrester runs a progam called Client Choice where we ask clients to vote on topics we should write about in upcoming research reports. We are currently running a client choice ballot and would appeciate you taking part in the voting. 

This particilar Client Choice topic list is centered around Financial Service topics including topic areas like direct banking, data security, next generation selling/servicing, and eBusiness channel strategy development.

Take a second and vote. VOTE NOW.

If you do not see a topic that interest you here, no sweat -- write one in.

Thanks.

Brad

Online Chat Success Can Mask Problems On Your Web Site

[Posted by Brad Strothkamp}

One clear trend in eBusiness these days is the increasing importance of interactive help tools including online chat and click-to-call. Hardly a day goes by where I do not get asked about how to best use this evolving technology. The problem is that often firms put the cart before the horse when approaching this important technology. Firms are quick to head down interactive help path without first solving common Web site problems. The result can be chat and call sessions resulting from sub-optimal site design; essentially interactive help is used because the site visitor cannot get their question answered on the site.

Consider this.

Royal Bank of Canada recently redesigned portions of their Web site and won accolades in Forrester's annual ranking of Canadian Web sites. While results of this redesign are still coming in, one interesting finding came to light related to RBC's usage of LivePerson online chat. Reactive chat sessions (i.e. chat sessions initiated by a user) actually deceased by 30% in the two months post-launch.

WHAT IT MEANS: Don't assume if you high online chat usage you are a success. In fact, the truth could be quite the opposite. The best interactive help implementations start with a strong eCommerce site. On the bright side, Royal Bank of Canada did find that the reduction in chat sessions due to the redesign allowed them to offer chat in other high-value areas of the site that couldn't be done in the past due to existing chat volumes.

What Consumers REALLY Want From Their Financial Services Provider

[Posted by Brad Strothkamp}

American Banker published an article last week that Mint.com and Wesabe were adding "unwanted fee finders" as a part of their services.  About a week later, I received the following notice from Mint related to my Wells Fargo account (BTW - it is a bill payment fee)

I always have to laugh when I see new services like this. I laugh not so much because it is a bad idea (quite the contrary in fact), but more because so many services and sites we see that are popular and useful are born out of a consumer need or desires that companies fail to see or more likely don't want to address.  What firms fail to recognize is that their unwillingness to recognize and meet a need doesn't make it go away - often they become companies onto themselves.

Here are some of my favorite ideas that come directly out of customer needs:

• Bankrate.com, Creditcards.com - For year's Forrester has surveyed consumers on how they research financial products. Always topping the list is the obvious "product information", but the second and third items usually have to do with information to compare products and providers. Yet only a handful of times over the years, have I seen any recognition of this clear customer goal on financial firm Web site - Progressive Insurance is one. Today, firms like Bankrate.com and Creditcards.com are filling that need by allowing consumers to compare products and providers. The result is commoditization of financial firms - precisely what firms have tried to avoid all along.
• Mint.com/Wesabe - Figuring out and delivering smart and well integrated financial management tools has been a struggle of many a financial services sites. The 90s were filled with failed experiments around aggregation and eWallets.  Yet getting a better sense of "how am i doing" is a goal for many financial services consumers - especially today. The result is Mint.com and Wesabe who have taken the financial information financial firms have held so dear and actually made it useful to consumers to track and improve their spending habits.
• Esurance/Geico - Auto insurance was (and to a large degree still is) sold by your local broker or agent. Many traditional insurance firms turned a blind eye towards the Web - assuming it was just a fad (I guess). Just like discount brokers a decade before, Esurance and Geico recognized the cost benefit and potential reach of the Web channel. But they did not just offer products via they Web, they instead understood the Web's ability to deliver product faster and more conveniently than traditional channels. This goal is perfectly aligned with consumer's goals, who use the Web more for convenience today in financial services than trying to save money. The result are products and more importantly processes that are the envy of the industry.
• eBay/paypal - Ten years ago, there were dozens of attempts to crack the ePayments market.  Anybody remember C2IT from Citi or Flooz? These services missed one important element, they tried to create a need where there wasn't any. Paypal on the other hand recognized the need of payments as a part of the auction process. They recognized that there was a clear benefit for integrating payments with auctions.  The result was an enhanced the auction buying experience both for the buyers and sellers.

Are there any other stories out there like this?  If so, please share.

Person-to-Person Lending Evolves and Devolves Simultaneously

[Posted by Brad Strothkamp}

Is it me or is there at least one major announcement in the Person-to-Person (P2P) lending space every week?

This last week had two:

• Fynanz shuts down. Fynanz, a student lending person-to-person lender, shut down last week.  A note on their site states "Due to market conditions, at this time we are not accepting new members."
• Pertuity Direct emerges. Pertuity Direct emerged on the person-to-person scene today with a model of person-to-person lending (and more importantly investing) that make the process more palpable - more on that later.

Here is my view on person-to-person lending:

PROS

• They are actually lending money to consumers that need it.  Unlike banks, consumers my actually be able to get a loan from a P2P lender
• They offer compelling rates both to borrowers and lenders.
• The investing (lending) side of the house is evolving into a model that is clearer and simpler. Pertuity Direct has an interesting investor model.  Investors don't fund individual loans (like with Prosper), but instead buy into one of two mutual funds. The funds differ in the types of borrowers and loans that make up the portfolio. Fund #1 - borrowers with 720+ FICO,  Fund #2 borrowers with FICOs 660 to 720
• It is a unique lending process. Crossing traditional lending with the aspect of community is unique.

Cons

• Few consumers know these lenders exist.  Forrester published a report around Person-to-person lending that showed that just 10% of US on-line consumers had heard of ANY P2P provider.
• Few consumers apply for loans on-line let alone apply with firms they have not heard of (a requirement of P2P lenders). In the US in 2007, just 16% of consumer that applied for a home equity product did so online versus 32% for a product like credit card.  Throw in the fact that P2P lenders are not well known brand name, and the potential market willing to apply for these loans online becomes very small, very quickly.
• It is a unique lending process - As on-line bill payment has shown us in the past, consumers are often unwilling to change habits and the change that happens happens very slowly.

Unfortunately, the cons outweigh the pros at this point.  Until that changes, the P2P market will remain a niche market utilized by only the most savvy of Internet users and investors. 

So what will be the sign that P2P lending is poised to take off?  I believe it will be when we see at least a quarter of consumers applying for loans online and/or we see a larger percentage of consumers utilizing comparison shopping sites. Forrester data has shown that consumers willing to do these activities tend to be longer tenure, savvy net users. The precise audience best suited for P2P lending.

Search Engines: A Simple Way To Better Understand Consumers

[Posted by Brad Strothkamp}

A large portion of a Forrester analyst's job is keeping tab on hundreds of different Web sites. During my Web site travels over the years, a few truths have become evident:

• You can tell a lot about how a company is organized based on their Web site
• Too much sales content is written or developed by individuals that have never sold anything
• Sites often suffer from lack of understanding of how consumers make product and service choices.

The results of these truths are often Web sites that are driven and designed by opinions about how consumers shop versus actual hard-facts.  When I came to Forrester from Wells Fargo nearly five years ago (eek!), I made it my personal goal to try to provide some tools and data for clients to make more rational Web site decisions.  During this search, I happened upon a free source of information that any Web site manager has access to that can give you a good sense of the mindset of the consumers.

It's search data.

Yes, the same information you use to buy search keywords on Google or Yahoo! can be used to make better site decisions. Simple searchers on Google Adwords search tool reveal insightful details about how consumers think about products. 

Here are a few examples:

• Financial services: A search on "credit cards" yields interesting insights.  First of all in the top 30 search terms, there are absolutely NO provider brand name (e.g. (Blank) Bank Platinum Rewards VISA).  What you do see are a few distinct term categories including customer segments like consumers with less than perfect credit searching for "bad credit credit cards" or consumers that are interested searching for particular types of cards searching for "free credit card" or "no fee credit cards"
• Retailing: A search on "luggage" reveals that brand names are more important to the category as there are terms like "Samsonite luggage" appears high among the results.  Additionally luggage features are important as there are also terms like "carry-on luggage" and "leather luggage"
• Travel: A search on "hotels" reveals that factors like destination are important with search terms like "las vegas hotels". Additionally, types of hotels are important with terms like "luxury" and "cheap" as well as desire for hotel deals with terms like "last minute hotels" and "hotel discount"

So what does all this mean?  It means the next time you are unsure of the right words to use on a page or how best to set up navigation on your site there is a free and easy resource to conduct some primary research. While it may not solve every problem, it will help keep your site focused on what aspects of your product are important and the words consumers use to describe the products and services they are interested in.

Fair Isaac - A Truly Innovative Online Banking Function

[Posted by Brad Strothkamp}

For years now, every new secured site function has had a business case built on getting users to access their accounts more often. So much so that you'd think every online banker would now spend half of their day checking out their accounts online. The reality is that there are just a few functions that can really drive incremental increases in activation.

I am happy to say, I have found one. Here the story.

Everybody is painfully aware how much accessing credit reports is becoming a common desire among consumers. Television commercials from companies like Experian with their FreeCreditReport.com Web site are raising the awareness of this important piece of financial information. A few weeks ago, Fair Isaac briefed us here at Forrester about their service called FICO Scores on Statements. The poor name they choose for this function overshadows how innovative of a function this really is.

The gist of the function is simple. Financial services firms can integrate a user's credit scores into their online banking session so that every time the user logs in they can easily get access to their credit score. Credit scores are updated on a monthly basis (as they are for other services), and the user can pay to get more detailed access to their credit history.

Why do we think this is such an interesting function?  Because it:

·       Is relevant and related.  Credit scores and account balances go hand in hand. It makes sense to access credit scores through online banking because both reveal the financial health of a consumer. Having these two functions integrated brings together two pieces of highly relevant financial information.

·       Makes for better educated consumers.The more consumers see their credit score the more educated they become. Washington Mutual and the Consumer Federation of America have conducted at study the last two years that consumers are becoming more educated about the credit scores, but could save billions if they knew more.

·      Is revenue generating. Not only will consumers visit a site more to view their credit scores, but also they will pay to view more detailed information about their credit. The opportunity to generate incremental revenue is easy to see.

·      Leads to cross selling opportunities.There is a very good chance that a consumer accessing their credit scores is doing so in preparation of a purchase they want to make. Firms could use this fact to target their products like loans and cards to this group.

Compass Bank: Allowing truly customized accounts

[Posted by Brad Strothkamp}

Forrrester recently conducted a teleconference where I presented and spoke about what I considered the top best practices in financial services in 2008 to be. Many of the best practices I have written on in the past, but one that stood out is a tool developed by Compass Bancshares, a bank with 166 branches in Texas, Alabama, Arizona, Florida, Colorado, and New Mexico. 

The tool allows customers to build a truly customized checking account. So why is that so interesting?

I recently published a brief that discussed how consumers choose checking account providers. The key thing I took away from the research is that different segments of consumers value different things from their bank. Younger consumers care about fees and the convenience of ATMs, and older consumers care more about good customer service and competitive rates. But in today's world most banks (with a few exceptions) offer a one-size-fits-all account.

NOT SO WITH COMPASS.

The tool from Compass is the first one I have seen that lets shopper choose exactly what elements of a checking account are important to them. If they use foreign ATMs a lot, then they can have those reimbursed. If earning extra rewards is important, they can earn double rewards. Shoppers are allowed to select two options at no cost. Beyond that, each selection the shopper chooses increases the monthly cost of the account.