Author: Rich Weissman
President and CEO, DMA
Portland, Oregon
WHAT
YOU NEED TO KNOW WHEN SHOPPING FOR A MARKETING, SALES & PROFITABILITY
SYSTEM
For
financial institutions, the benefits of employing an effective marketing,
profitability and sales system can greatly enhance the bottom line.
The down side is that the process of obtaining this type of system
can be daunting. With a wide
array of system types and options, making the right choice can be
extremely complicated, but choosing the wrong system would be as big a
mistake as not employing this type of system at all.
There
are a multitude of factors that make the process of selecting an
appropriate and effective system a challenge.
To begin with, systems are referred to by many different names, and
each type is very different. Systems
feature different components and functions, and those varied elements
often work in altogether different ways.
There’s no question that trying to compare one to another can be
overwhelming simply because they are so diverse in what they do and how
they work. The same factors
mean that gauging a system’s real costs can be equally tough.
Frequently
managers find themselves so confused that they will quite simply give up
and either drop the idea of obtaining a system or make a bad choice based
on the wrong reasons. The result can be that the financial institution
winds up stuck with a system that is unused, mismanaged, over-priced,
and/or requires significant internal resources without generating results.
Fortunately,
there are effective methods to clear up the confusion when evaluating a
system. So just what is
important to look for and how can you make an apples-to-apples comparison
across systems and providers? The
first step is to truly understand what this type of system actually is.
So
What Do They Call These Systems Anyway?
There
are many names for marketing, profitability and sales systems, and they
are not the same thing.
You may have heard them referred to as an “MCIF” (Marketing
Customer Information File), “CRM” (Customer Relationship Management),
Profitability, Sales Tracking, Data Mining, Cross-Selling, Data Warehouse
… the list goes on.
Each of these systems refers to a specific type of
“stand-alone” program, which performs one basic function.
These “stand-alone” systems each accomplish a defined purpose,
focused on one discipline.
Usually, each is aimed at one particular division, such as
Marketing, Sales, Finance, or IT, catering specifically to a set of needs
of each one.
However,
there is also another category of integrated marketing,
profitability and sales systems which are comprehensive in terms of both
function and applicability by department, bringing all of the
“stand-alone” services together for maximum results.
Many institutions have tried to merge systems acquired separately,
or at different times, but the result is usually not pretty.
It’s as if you bought a car – but could only purchase each part
separately and then had to try to put it together.
By far, the most effective type of system is one engineered as a
cohesive (and comprehensive) system – integrating all of the components
of the “stand-alone” systems so that Marketing, Sales, Finance and IT
departments are all working from the same database
,
reports and access systems.
The
Key Issues in Acquiring a System
When
shopping for a system, you need to consider five critical factors:
Integrated
System Capabilities –
What can the system do and what components does it have?
Perhaps the
most important review aspect of a potential system is to make sure that it
is truly integrated in terms of “system capabilities.”
Systems capabilities refer to the breadth, or range of components
it provides, and the depth of each component.
The key ones to check for are:
Institution-Wide Analysis
Make sure
that the system efficiently pulls together marketing, sales and financial
data into a single integrated whole.
For instance, MCIF’s are typically marketing and cross-sell
systems only, and do not have the sophistication for sales and
profitability analysis and reporting.
The key is to get an all-encompassing view of an institution’s
relationship data and profitability information.
Make sure the system is fully integrated, so that all components
and tools are based on a common database, measurements and metrics.
This way, the marketing, sales and finance divisions will all be
working and building strategies from the same data set.
Relationship Creation vs.
“Householding”
You should
make sure that the system is based on relationship creation, and not “householding.”
Relationship creation is broader and brings together all related
accounts and parties into a consolidated relationship, crossing over
names, addresses and other criteria. In addition, “householding” is a retail concept, and
relationship creation is a far more robust mechanism for identifying
business or trust relationships that may be far more complex.
The system should also make sure that business relationships
(including those that are “mixed” –
with both business and retail components) can be properly
identified and treated differently than retail relationships.
Activity-Based G-L Cost
Accounting vs. Rudimentary Profitability
Since
profitability is core to a sophisticated system, the profitability
analysis should not be a separate "module." the full
allocation of each G-L line item, and the preparation of an income
statement for each account, relationship, product, officer and branch
should be central to the system. You should be able to fully
customized the profitability analysis, and it should be based on your
institution's unique G-L and management. "Average" costs,
one-time cost studies, or industry-general profitability is not
enough. An effective profitability analysis needs to be specific,
with sensitivity to month-to-month changes in the interest rate
environment, product re-pricings, changes in the balance sheet,
cost-cutting measures, and other steps taken each month.
Components
There
are a variety of components that make up an effective system, providing
all of the data and tracking tools needed by all departments.
You can find a complete list of these components in the call-out
box at right, however, the key is make sure the system has an integrated
approach, with the capability to bring all of these varied components
together in a single access point. In
particular, make sure that the data in each component is populated for
you. Rather than having to
engage in extensive manual data entry, the system (or the outsourced
provider) should do this automatically, including populating CRM and
Contact Management
.
In-House
Vs. Outsourced System –
Does the system require in-house processing and maintenance which requires
staffing or is all of this done for you by the provider?
You
should make sure that you understand the difference between an outsourced
provider vs. a leased system. A
true outsourced provider should do all of the implementation, including
set-up and conversion (with support from your IT and Finance divisions for
customization), and all ongoing processing, eliminating the need to
manage, staff or process the system.
A lease-only option requires the institution to maintain dedicated
staff and equipment, conduct ongoing training, IT support, and other
“hidden” costs which require staffing and management time that takes
away from actually using the information. With leased systems, the buyer is typically “on their
own.”
Another factor is the system’s processing frequency.
Make sure the system updates every month, without fail, as you
update your monthly G-L. Less
frequent processing means you will not have “fresh” profitability and
relationship data each month, a real liability in accurately tracking
performance over time.
System
Access –
How do management and the sales force access information?
You
should make sure that the system has the capability to bring all of these
components together in a single access point.
You should also make sure that all components can be accessed
throughout the institution and are not limited to a single station or
limited number of users. It is important that the system be distributed to
management and the sales force, and not act as just a “back office”
system.
In
addition, you should make sure that the system has very specific “data
rights” established, so that you can specify exactly what each user can
access (e.g. you might want to limit branches to access information only
on their branch; you might want to limit G-L access only to the Finance
division).
Provider
Relationship – How
you do you work with the provider over the long-term and what expertise is
given?
Very
few providers offer marketing support as part of their relationship. Such
support can make the difference between simply having a system vs. fully
utilizing a system for generating results.
You should be sure that this kind of support is available and part
of the ongoing relationship you have with the provider.
Quarterly review sessions and support availability for new ideas,
programs and implementation should be part of how you work with the
provider. You should make
sure that you’re not just getting a system, but that you are getting the
consultative support in making a real impact on your bottom line.
Calculating
a System’s ‘True’ Costs
To
effectively compare costs, make sure that you understand the complete
picture. You should prepare a
spreadsheet of all costs, so that you are comparing apples-to-apples.
You should understand exactly what the costs will be not just to
fully implement the system, but to keep it operating through on-going
support and any internal systems costs.
These can include the additional internal staffing costs for leased
systems – with leased systems, there will be significant internal
staffing requirements of at least one or two full-time staff.
Ongoing maintenance or operational/staffing fees should be clear
enough that you should be able to prepare a monthly budget for the system
and all of its costs, with full details on exactly what those will be.
See the complete list of these factors at the end of the article.
In
Summary
Rich
Weissman is the President and CEO of DMA. DMA is a national
systems and service provider to banks and credit unions throughout the
U.S., providing sophisticated profitability, marketing and sales support
through DMA’s award-winning IDM™ (Integrated Database Management)
system. Since it’s founding
in 1996, DMA has successfully grown to become the premiere database agency
in the industry. DMA is a
member of the American Bankers Association, CEO Summit, Financial Managers Society,
credit union organization CUES, and the American Marketing Association. (www.DMAcorporation.com)
Rich
holds his undergraduate degree (summa cum laude and Phi Beta Kappa), and
two masters degrees in the social sciences and research, and completed his
Ph.D. coursework in Statistics and Quantitative Analysis from New York
University in the school of social sciences and in the business school.
He also completed to Marketing Management program from Stanford
University. Prior to founding
DMA in 1996, Rich was Marketing Director at National Westminster Bank USA
(Fleet
Bank, purchased by BofA), US Bank and US Bancorp, and Bank of America.
To reach Rich, call DMA at 503-736-9490 or rich.weissman@DMAcorporation.com.
