What exactly does ‘better’ relationship management (RM) mean, and is the payoff likely to justify the investment? The possibility that superior RM can yield an edge does not mean every attempt to improve RM will succeed.
Investment banks still misunderstand key aspects of RM. Too often, they approach RM in ‘warm terms,’ assuming that attention and goodwill automatically translate into client loyalty. Many believe that superior RM stems from an all-pervasive ‘good attitude’ (the right ‘mindset’) among employees, and that any perceived ‘lack of engagement’ will inevitably erode performance. But being ‘nice’ isn’t a strategy. Surprisingly few banks clearly define what ‘superior’ RM actually means in a specific context.
Even when investment banks invest heavily in RM, results often disappoint, because [1] the investment fails to produce the desired service levels, [2] the initiative is easily copied by peers, [3] improvements occur in areas the client doesn’t really value, or [4] the effort to improve client service may be made at the expense of other concerns.
Clients, it turns out, do not always rank ‘better’ RM among their greatest needs; for many banks, a surprising insight in an industry where the client is the giant. Therefore, RM investments should be expected to produce a value to clients disproportionate to the cost of investment, including a demonstrable change in client behavior leading to additional business. Which small lever moves the big mountain of perception?
Every client interaction with the bank has distinct attributes such as responsiveness, depth of advice/skills, transparency, personalization, efficiency, and speed, and these attributes vary in importance across clients, locations (countries/regions), moments, and specific situations. They must be analyzed individually, because only a few truly differentiate; small improvements in those attributes can materially shift overall client impressions.
Crucially, the relationship between client satisfaction and client behavior is nonlinear: client behavior typically lags changes in client satisfaction. In other words, client satisfaction scores, the outcome of the firm’s client research, do not reliably predict client action.
Message: Investment banks must map how clients perceive RM in fine detail (that is, individually) and then test which changes (in attributes) actually drive client behavior, knowing that client ‘expectations’ (the future) always trump client ‘experiences’ and ‘perceptions’ (the past).
Executives and senior managers admit that even elite firms regularly overlook key pieces of the RM puzzle. Over-investing in ‘gold-plating’ services such as fancy dinners, art events, and social perks, the ‘theatre of relationship management’, often signals inferior rather than superior RM.
More details are available at www.pieterklaasjagersma.com/reports.