…Joseph Pine II knew it 22 years ago!
These days we are experiencing an increased focus of banks to communicate what they call their customized approach towards their customers. Banks are using the term customization most of the times to refer to their ‘tailored approach’. But after reading an article (non-financial services related) I started thinking about what customization really means.
Note: If you are not interested in definitions please scroll down to the part on ‘The customers are deciding for themselves’, but in my opinion the definitions are important in the broader discussion of my blog.
To ensure I was not misleading myself I had a look at the Oxford Dictionary which describes customization as: ‘To modify (something) to suit a particular individual or task.’
This sounds quite straight forward, but makes no distinction on who is modifying something (what is actually spot-on, but I get to that point later).
When we discuss the customized approach banks tend to offer they indirectly try to say personalized. Logically we hear it often in the private banking and wealth management domain, which is fine and which is right in the cases of customers with larger wealth, the UHNWI’s (> $ 25.000.000). Segments where it is getting less obvious, but still very often heard, are the regular retail banking clients and smaller wealth management clients. In fact, these clients do not receive a personalized approach. They receive the same message and offers a larger group of ‘similar’ customers receive as well.
That pointed my attention to the definition of “Mass Customization”. Investopedia shows definitions from Joseph Pine II’s 1992 book “Mass Customization: The New Frontier In Business Competition” which describes four types of mass customization:
1. Collaborative Customization – where companies work in partnership with individual customers to develop precise product offerings to best suit each customer’s needs.
2. Adaptive Customization – where companies produce standardized products that are customizable by the end-user.
3. Transparent Customization – where companies provide unique products to individual customers without overtly stating the products are customized.
4. Cosmetic Customization – where companies produce standardized products but market the products in different ways to various customers.
Most important in this is discussion is that the first 3 (Collaborative, Adaptive & Transparant) have the requirement of certain involvement of the customer in customization. Especially the definition of ‘Adaptive Customization’ is a good fit to what I perceive to be the way today’s customers want to be serviced.
I am describing this not to get into a discussion around definition, but what I actually want to outline is that today’s customers want to decide for themselves, while today most banks still tend to be in the ‘driver’s seat’.
The customers are deciding for themselves
In reality it is not the bank who should tailoring the services, but the customer. A basic example: The product a customer wants to buy is not anymore about the having a bank account only. It is also about how they can access the bank account and how and where they can use it. If I cannot access my bank accounts, or do transfers on my mobile it would be a reason to move to another bank.
A very high level picture shows the bank – customers’ relationship. The orange colored circle being the bank providing products and services and the icons showing how customers can get access to their bank (and pull the relevant information).
Putting the Customer in the center of the banking experience sounds as something we are talking about for years already. That is right. The question is more, to what extend do banks actually deliver it? As banks are still commercial organizations having the objective to sell products and therefore not sit back and relax, most of them are still having the challenge to put the customer in the ‘driver’s seat’ and making money on them at the same time (which is more than fair, otherwise they won’t exist). This is a general business model question. Here the quality of products and services again becomes a differentiator. The customers’ experience will be (or already is) overarching for both the products and services. Where in the past customer satisfaction mainly was influenced by the product we see an increasing importance on the channels as customers’ needs in their buying decision.
The question for banks is how to get there? If the answer was easy it would not be a question anymore. 3 questions banks at least need to ask themselves when answering this broader question are:
1. Do my customers know how they can reach the product they need in the way they want?
2. Does my bank know how my customers want to interact with us?
3. Does my bank offer the possibility to my customers to interact in the way they prefer?
Looking at it very black and white banks should provide (less Push) the products and channels and customers will decide which products they buy (and use!) via which channel (Pull). If the bank should focus more on training and educating their customers on the different ways they can interact with their bank and how they could reach the best products (for them) suiting their personal needs, we might get close to Adaptive Customization. Something Joseph Pine II defined 22 years ago!