Why Customer Engagement Matters More Than Ever
In today's environment financial services executives have plenty to keep them awake at night; earnings declines, toxic portfolios, the lack of liquidity in the interbank markets, decisions as to accepting governmental investment and looming new regulation. In times such as these it is often easy to lose sight of the fundamentals and yet the current market conditions offers some unique opportunities to those firms ready to take advantage of this instability.
One clear lesson of the current crisis is the value of a strong core deposit base. Many of the institutional failures we have seen over the past several months have resulted from short term liquidity problems rather than fundamental viability issues. Similarly, those firms that best weathered the current market disruption have been those with both broad and deep deposit franchises.
So, how does one build a strong deposit base? In normal market conditions building core deposits has traditionally been a protracted and expensive process, often including building an extensive branch network, offering off-market financial incentives and other tactics. Today's environment, however, is anything but normal and presents unique opportunities.
Between Merrill Lynch, Wachovia, WAMU, Bear Stearns, Lehman Brothers and the other firms who have failed or been acquired, we estimate that there are some 40 million customers who are "in play" today and these customers represent an enormous potential deposit pool. One only has to look at Jamie Dimon's willingness to acquire WAMU or Dick Kovacevich's eagerness to acquire Wachovia to see the value of these customers.
Any market disruption creates opportunities to acquire new customers and today's spate of mergers and acquisitions have placed an enormous potential deposit pool in play. To take advantage of this opportunity the key will be a firm's focus on customer engagement. "Engagement" goes beyond simply customer service and invokes issues of emotive attachment and trust and this will be, perhaps, the key strategic battlefield of the next several years.
- Chip Greenlee