Generating greater value for customers is good for business. Research from a developed market context has found that customer retention leads to a decrease in operating costs, while a decrease in customer satisfaction leads to a decrease in return on investment. In light of this, focusing on customers is crucial and not simply a marketing gimmick.
Why should financial services providers implement a customer-centric initiative or even a comprehensive customer-centric strategy?
- Increase customer uptake and use.
- Improve market position in a competitive environment.
- Use technology to tailor products to specific customer segments while driving down costs.
- Respond to regulatory requirements on consumer protection.
- Achieve social impact to fulfill its mission.
The decision-making model in this Brief aims to help firms align their investment decisions with their motivations for customer centricity. There is no single approach to customer centricity—financial services providers have different goals, market contexts, target customers, internal capacity, and resources. Nevertheless, there are three cornerstones of value creation for a firm:
- Strategic business challenges and opportunities that can be addressed through a customer-centric investment.
- Needs and preferences of existing and potential new customers and customer segments.
- Expected return from a particular investment over the lifetime of a customer.
Does customer centricity really matter?
Long-term assessment of customer lifetime value can reveal the business potential of customer segments that were previously considered unprofitable. It can establish the value of a customer-centric approach.
Financial services providers should think of customer centricity over the long term as a means to achieve higher returns from a larger number of customers while at the same time achieving social objectives through increased financial inclusion.