Winning Strategies  As with any initiative,
success in multichanneling requires a clear understanding of what must be done,
how it will be done and by whom. Multichannel managers must understand which
customers and products are best suited to each channel, how they intend to
interact with customers and intermediaries and how to manage channel conflicts.
The experience of companies that have successfully
navigated multichanneling suggests the adoption of three winning strategies.
1. Design Around the Customer. Many
financial services companies currently design their business around a few
products pushed out to customers through a limited set of channels. But forcing
consumers to fit particular product specifications is no longer tenable in
today's world of savvier, price-conscious shoppers, who have more options than
ever to choose from.
Understanding the customer has always been important but
never more so than today. Most financial services providers agree that the
customer, not the product, is now king. Banks have tended to believe in simple
math: add a new low-cost channel while subtracting an older high-cost outlet.
But the numbers don't add up.
Contrary to banks' expectations, the addition of call
centers and ATMs didn't drive most customers away from tellers. Yes, ATM
convenience did lead to some substitution. But mostly, transaction patterns
merely changed and the total number of transactions increased. Instead of
dropping by the neighborhood branch for a weekly visit, a customer now makes an
ATM withdrawal on Monday, contacts the call center on Thursday and checks the
account online over Sunday morning coffee.
  Consumers want
choice and don't always follow conventional behavior patterns. Indeed,
financial institutions are beginning to learn that channels rarely replace one
another. Instead, they complement one another.
Take two examples in the United States. E-Loan is a
leading online mortgage company offering access to more than 70 lenders to help
consumers find the best package for them, at the best rates. Initially launched
with a call center, E-Loan soon realized that the emotional nature of the
mortgage decision and transaction process warranted a more personalized
approach: the assigning of a personal loan consultant to applicants to advise
and support them throughout the process.
Insweb is an online insurance marketplace that provides
consumers with quotes on insurance policies from multiple carriers. It began as
a purely electronic channel, but it had to add a call center to make the
process more user-friendly.
Both companies discovered that the human touch improved
the rate of completed applications. Remember, a Web site alone is not the
answer. Customers still expect pre- and post-sales support.
And customers aren't easily weaned from old habits. When
banks tried to discourage branch visits by introducing penalty fees for using
tellers, they faced an uproar from customers. Some banks have finally given up
on their teller fees.
Even Schwab has resisted the impulse to require that new
accounts be opened online. The majority of new Schwab accounts are still opened
the old- fashioned way: at the company's retail branches. Even customers who
manage their accounts online or by phone seem to prefer that initial human
contact.
Thus multichanneling requires a customer-centric approach
that organizes channels and access points around the needs and satisfaction of
specific customer segments. Keep three principles in mind: Customers should be
able to choose the channel they want to interact with; customers should be
treated in a consistent manner, regardless of how they access the company; and
the sales and service experience should aspire to satisfy customers (as opposed
to minimize the company's burden in providing customer satisfaction).
Focusing on customer needs will drive financial services
providers—and, indeed, almost any provider that is contemplating
multichanneling—to redefine their product and service portfolios (see box,
Redefining the portfolio). Because different channels offer the consumer
different attributes, products and services provided via a specific channel
must be aligned with that channel's attributes and economics.
Selling term life, personal auto or other simple insurance
products through high-cost advisory channels, for example, isn't a winning
long-term proposition. Direct and affinity channels provide both lower price
and more convenience for these low-advice, cost-sensitive commodity products.
By contrast, selling complex, advice-intensive business-insurance products
requires interactions within an individual relationship-based channel.
Indiscriminately adding new sales outlets without seeking
congruency between the channel, products and consumers won't work. For
instance, some financial services companies develop direct channels through
which they attempt to sell all their products, both simple and complex. The
result? Disappointing sales of their complex products because the expert
advice—typically provided by the agent or other financial professional—is
absent.
Financial services companies must offer some reason for
customers to use a particular channel, such as lower prices, greater
convenience or the opportunity for self-service. Typically, customer value
results from the creative segmentation of customers and channels.
For example, Direct Line Insurance rose to prominence
direct-selling personal auto insurance in the United Kingdom by clearly
identifying consumers who were willing to forgo an intermediary in exchange for
lower-cost insurance. When it was launched in 1985, Direct Line was the first
UK carrier to use the telephone as its primary sales tool. Today, with more
than 2 million policyholders, it is the country's largest private auto
insurance company.
Similarly, European banks, including Crédit Agricole of
France and Banco Bilbao Vizcaya of Spain, have capitalized on strong brand
names, consumer trust and convenience to sell simple life insurance products to
middle-income customers.
2. Focus on Critical Capabilities.
Most financial services companies lack the time and resources to build all the
critical capabilities required for multichannel management. So they must
quickly decide which of their existing processes, technologies and
infrastructures can be used as a foundation, and which capabilities need to be
developed.
Taking a traditional approach to multichanneling will get
you nowhere fast. If you design every channel separately, each with its own
infrastructure and duplicate technologies, costs spin out of control, channel
coordination breaks down, turf wars break out and systems are unable to deliver
necessary data for effective customer service.
The experience of one large Scandinavian bank makes the
point. After acquiring an insurer to expand its sales of life insurance
products, its failure to integrate channels and operations led to duplicate
infrastructure, channel overlap and, ultimately, a doubling of its unit costs.
To avoid escalating costs and to achieve sales and
customer satisfaction goals, a new multichannel business model is needed. This
model creates sharper distinctions between manufacturing and distribution
activities—clearly dividing the roles and responsibilities between channel and
product units. Channel units focus more on new sales and customer relations,
while product units are keyed to product development, efficient core
production, administration and compliance management. Coordination must be
provided across these units, especially as a means to manage channel conflicts.
Traffic Control As too many financial
services companies have discovered, adding new channels means higher costs if
management is weak. Like traffic cops, channel managers should monitor comings
and goings. They should be prepared, for instance, to add capacity quickly if
they notice a steady uptick in online traffic. For banks, that might also be
the time to drive down volume in the bricks-and-mortar channel by reducing
branches.
To support the greater autonomy and responsibility of the
channel and product units, more insightful financial-performance management is
also necessary. For example, data and analytical tools should allow comparisons
of channel, customer and product profitability. Also, cost efficiencies can be
captured by creating shared services of certain non-channel back-office
processes and administrative functions and by reengineering basic business
processes.
Multichannel success also hinges on other key
capabilities, such as more flexible pricing to reflect true economic
differences in channel costs and more efficient processes to reflect the
different value-added services among channels.
For example, private bankers require much more customized
products and services than a branch platform teller, while an Internet sales
capability requires straight-through processing. Additionally, richer databases
are needed to better understand customer and channel preferences and to tailor
channel support to customer needs.
Traditionally, customer information has resided in the
channel in which it was originally captured. This makes it difficult for
companies to have a complete view of customer relationships. The challenge is
for companies to identify cross-selling opportunities and to provide a common
and consistent experience across channels.
3. Move Quickly. As companies begin
to realize the importance of multichannel management, quickly achieving shelf
space with channels becomes a critical challenge. Those driving in the slow
lane risk having to pay a high price for penetration. Worse yet, they could be
locked out of some channels entirely.
Resisting or reacting too slowly to powerful channel
trends may have dramatically negative consequences. For example, US book
retailer Barnes & Noble finally launched its Web site in the spring of
1997, nearly two years after cyber-trailblazer Amazon.com began selling books
online. Late to the starting gate, barnesandnoble.com has struggled to catch up
with Amazon.com, one of the most visited sites on the Web.
Sellers of computers through retailers have been slow to
add direct-to- consumer channels—telephone and Internet—so successfully
pioneered by Dell Computer. Their attempts to shift to a more direct model have
met with resistance from their resellers.
No longer able to ignore the 6.3 million households
trading stocks over the Internet and fearful of losing business to Schwab and
other online brokers, traditional brokers such as Merrill Lynch and Paine
Webber recently began offering their customers online trading. Given Schwab's
huge head start, however—its market capitalization has exceeded Merrill's—the
traditional brokers' efforts may be too little, too late.
Some players, like SunAmerica Inc., a diversified
financial services company, are rapidly solidifying their positions by buying
distribution channels outright. SunAmerica's ownership of six broker-dealers
represents one of the largest retail securities sales forces in the United
States, putting it in the company of such better-known brethren as Merrill and
Salomon Smith Barney. The company's nearly 10,000 registered representatives
help ensure shelf space for its products.
Achieving this speed requires a combination of strong
project management and the focused development of capabilities. By proactively
managing expectations, obtaining support from the organization's key decision
makers to ensure buy-in, and carefully segmenting the products and customers by
channel, turf wars can be minimized.
Nobody ever said that moving to a multichannel world was
easy. Seven Steps to Mastering Multichanneling hasn't been
written yet.
Companies that have successfully created stakeholder value
through multiple channels have learned a few lessons, however. They have
approached the task without the baggage of traditional assumptions and
expectations. They have followed a consumer-centric game plan that aligns their
customers, products and channels. Finally, they have moved quickly and resisted
the temptation to overanalyze every decision. 
Andrew Power, a partner at Accenture,
has consulted to financial services companies around the globe for more than 15
years, focusing on strategic, organizational and operational issues. Mr. Power
is a frequent speaker at financial services industry forums and a regular
contributor to industry publications. He is based in Boston.
andrew.power@accenture.com
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