Posted on Harvard Business Review: March 14, 2011 1:31 PM
I had an interesting conversation earlier this week with a very experienced consultant whose company works with many of the largest financial services providers in the world—the banks, funds, and insurance companies we've all heard of. He told me that a lot of them were noticing the same disturbing trend: their younger customers really didn't like them.
Across a lot of these companies, there's a dominant model for how to interact with customers around big-ticket events like buying life insurance, setting up a brokerage account, saving for college or retirement, and so on. The model involves initial recommendations from the company, often delivered in face-to-face meetings, sporadic follow-ups, and more frequent and routine transactions (making deposits, paying bills, etc.) that nowadays often happen online.
What's so bad about this? In the eyes of digital native customers, a few things. The initial recommendations are seen as untrustworthy, since they come from someone who's likely to be more interested in maximizing personal or corporate income rather than customer well-being. The meetings and phone calls around these recs are intrusive and inconvenient, and the documents impenetrable. And the associated websites are clunky; it's harder than it needs to be to execute processes and transactions, find basic information, and get questions answered. In short, the human interactions seem to date from the Eisenhower administration, and the online ones from 1996.
There are two types of bad news here for the services providers. The first one, obviously, is that these customers don't like dealing with these companies. They do so because they need bank accounts, insurance policies, and retirement savings, but it's never a good sign when someone does business with you begrudgingly.
The second piece of bad news is that the digital native viewpoint is spreading. Older people are adopting it as they friend their kids on Facebook, read Kindle books, and use iPads. These experiences show them that Ike is no longer president and websites no longer have to stink. So over time, the dominant model is going to make sense to an ever-smaller proportion of customers.
There is also some good news in this story, though: the first companies in this sector to provide excellent service to the digital natives will mop up the competition and rack up market share. And the elements of this excellent service aren't hard to discern. They include as many online interactions as possible, providing multiple signals of quality (from peers, competitors, objective 'experts,' and other sources), rethinking websites, and introducing apps. Progressive Insurance, for example, is an early leader in this area; it shows competitors' prices next to its own on its website, thereby increasing confidence among prospective customers that it's giving them a fair deal and the whole story.
The hardest part of all this work will be convincing financial services incumbents to give this work high enough priority—to consider it something much deeper than a website facelift. Customer dissatisfaction hasn't yet been enough to make this happen, so it looks like we'll have to rely on the appearance of competitors who realize that it's 2011 now. I hope they show up soon...