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Simon-Kucher Banking Strategy Forum | London
Digital customer journey, gamification and loyalty in Retail Banking Business models
London, 19th April 2018
Jens BaumgartenSenior Partner
Frankfurt office
Bockenheimer Landstr. 33 60325 Frankfurt/Main, GermanyTel. +49 69 905010 602
jens.baumgarten@simon-kucher.com
Agenda
Five current challenges
Digital relationship banking
Creating product ecosystems
Jens Baumgarten - Pricing and sales success in a digital environment - April 2018_vf 2
Source: Simon-Kucher & Partners.
Challenge: Be digital!
PSDII disintermediates the customer relationship, forces
banks to open up their “data treasure box”
(New) digitalchallengers
End customer
API
Third party
1 2
Bank
3 4
Three strategic questions
1. How to differentiate on (digital) value?
2. How to fight commoditization in the digital space?
3. How to cope with new API risks and oppor-tunities from PSD II?
1.
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Fotos: COLOURBOX/Sergey Nivens, COLOURBOX/nopporn, Simon-Kucher & Partners.
Challenge: Be slim!
Average number of marketed products
Average number of used products
>150 2
Management Board:
"Should I remove 130 products?“
"How can I deepen relationships?"
Three strategic questions
1. How to reduce portfolio complexity?
2. How to increase cross-and up-selling?
3. How to combine ‘personal’ and ‘digital’?
2.
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Source: Simon-Kucher & Partners EONIA* money market annual average interest rate in the European Union and EFTA countries
Challenge: Be profitable!
Negative interest rates
Three strategic questions
1. How to increase fee income to compensate declining net interest income?
2. How to price more granular in lending (mortgages / consumer loans / business loans)?
3. How to better monetize existing customer relationships via new digital services?
3.
▪ PSD II
▪ MiFID II
▪ Directive 95/46/EC (DSGVO)
▪ Core capital requirements
▪ Etc.-0,35%
-0,32%
-0,11%
0,01%0,09%
0,23%
0,87%
0,44%
2013 2014 2016 201720152011 20122010
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Challenge: Be simple!
75 x 25 = ?
The thinking of “system 1” is…
▪ Intuitive and without effort
▪ Fast
▪ Emotional
The thinking of “system 2” is…
▪ Effortful
▪ Slow and limited
▪ Rational
Source: Simon-Kucher & Partners
4.
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Fotos: COLOURBOX/Sergey Nivens, COLOURBOX/nopporn, Simon-Kucher & Partners.
Challenge: Be engaging!
Anchor effect Power of sortingCompromise
effect
Panini effect Framing effectParadox of
choice
Separation effectPrice tresholdsEndowment
effect
Prospect theory
System I vs II
Price fairness
Three strategic questions
1. How to quickly improve the offering without long IT lead times?
2. How to remove barriers to buy?
3. How to leverage behavioral economics?
5.
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Agenda
Five current challenges
Digital relationship banking
Creating product ecosystems
Jens Baumgarten - Pricing and sales success in a digital environment - April 2018_vf 8
Source: Simon-Kucher & Partners.
Digital relationship banking addresses these challenges
SolutionChallenges
Digital, responsive tools across products (payments, lending, invest-ments) & channels (web, mobile, POS)
Be digital!
Price increases paired with cross-selling rewards on anchor products (e.g. loans/cards/current accounts)
Be profitable!
Individual status, rewards and gamification
Be engaging!
Be simple!Consistent, intuitive and high value communication across all channels
Clear 3-tier structure, harmonized across for all product categories
Be slim!
1.
2.
3.
4.
5.
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Level 3:Products(e.g. card A, B, C; Account 1, 2, 3)
Level 2:Service families(accounts & cards
Quelle: Simon-Kucher & Partners.
Digital relationship banking: 3-level structure
Level 1:Financial needs(e.g. liquidity)
Methods
▪ Panini-/Puzzle-Effect
▪ Gamification
▪ Needs discovery
▪ Basic and quick orientation
▪ Panini-Effect(within a category)
▪ Orientation along an intuitive "story"
▪ Individual configuarionof products
▪ Up-“buying“ into highervalue product versions(e.g. premium cards)
▪ Proudct purchase
Goal
Cross-Sellingby category
Cross-Sellingby product
Selection andSales
Jens Baumgarten - Pricing and sales success in a digital environment - April 2018_vf 10
Source: Simon-Kucher & Partners.
Digital relationship banking: Tool demo
Attention directed to missing elements to cover all relevant financial needs!
Status and financial rewards as additional amplifiers!
Impact
System1: simple story
Simple incentive for cross-selling
Status & rewards
Thought leadership
Link to individual product configurators
Integration of professional advice
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Source: Simon-Kucher & Partners.
Project case (1/2): Relationship banking for retail customers
Advantages
Holistic approach
Puzzle logic
Product categories known to customers
Sales platform
Modular extendable with product finders for different product categories
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Source: Simon-Kucher & Partners.
Project case (2/2): Relationship banking for business customers
Advantages
Increased cross-selling between product categories
Increased up-selling within categories
Holistic approach for corporate customers
Sales story for sales force
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Agenda
Five current challenges
Digital relationship banking
Creating product ecosystems
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TOP-Performers
Apple Microsoft
Mercedes
C-Class
Elegance Avantgarde AMG
Source: Simon-Kucher & Partners, Websites from Apple, Microsoft and Mercedes-Benz.
Best practice "product ecosystems"
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Source: Simon-Kucher & Partners.
Consistent product ecosystems
Digitalization
Retail clients SME clients
Financing
Current accounts
Deposits
Securities
Credit lines
Securities account
Mortgages
Deposits Investments
Relationship banking
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Source: Simon-Kucher & Partners
Goal▪ Incentivizing customers
to take up higher value current accounts
Approach▪ Analysis, expert
interviews and a customer revenue forecasting tool to estimate price elasticity
▪ Usage-based customer segmentation and tailoring of account offerings
Project example: Retail current accounts
Jens Baumgarten - Pricing and sales success in a digital environment - April 2018_vf 17
Source: Simon-Kucher & Partners
Project example: SME current accounts
Goal
▪ Deepen SME client relationships
▪ Increase number of payment transactions
▪ Incentivize consolidation of business customers' payment accounts
▪ Reduce comparability of current account offering
Approach
▪ Non-linear pricing through introduction of a two-part pricing scheme
Ave
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Number of transaction
Level of discount on transaction
prices
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Source: Simon-Kucher, Sparkasse (Homepage)
Project example: mortgages
Results
▪ Increase in interest spread of 20+ bps
▪ Upselling: 40-50% of clients take at least one additional module on top of the basic mortgage
▪ Cross-selling: 30% of clients buy additional insurance products(compared to only 10% before)
▪ Increase in mortgage volume of 10%
The right product for risk-averse customers: The security module with its various insurances guarantees them that they can keep their property in any case.
The right product for price-sensitive customers: They get a pure mortgage for a competitive interest rate.
The right product for customers who want to have a premium package including all features.
The right product for customers with a higher willingness to pay, who want to have more flexibility.
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Source: Simon-Kucher, Volksbank.
Project example: securities accounts
Results
Differentiation
Expansion of target group
Growth platform
Consideration of MiFID II
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Source: Simon-Kucher, Volksbank
Project example: credit lines
Results
Transparency
Granular pricing
Innovative two-part pricing scheme
Implementation power/ sales excellence
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谢谢
ありがとう
Photo: COLOURBOX/-
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