Why Understanding Customer Behavior Is So Valuable in Commercial Banking

By Tony Iero

For businesses in every industry, it’s important to understand customer behavior. Having a strong grasp of customers’ actions and the thoughts, beliefs, and needs that drive them are essential for making key decisions related to resource allocation, marketing, and product development. Within the realm of commercial banking, customer behavior is also fundamental to determine the flow of service and engagement from the first interaction through the entire customer journey.

For commercial banks of all sizes, understanding customer behavior is often more complex because it is highly verticalized and segmented. However, it is just as important as it is in any other industry. When you consider that the top 10 banks exceeded $40 billion in profits in 2015, you can understand why getting it right when it comes to customer behavior is so important.

While most banks’ retail divisions use a variety of advanced analytical tools to improve performance and grow customer relationships for maximum profitability, it has not historically happened on the commercial side. This is probably because of the large size of commercial banking customers and the products that are sold to them, which are highly specialized.

The opportunity to provide more specialized, targeted marketing and service to commercial banking customers lies in gaining insights from data. Analytics can enable key employees, including service representatives at the contact center level, to have the necessary tools to offer more personalized service and products that truly meet the needs of customers.

CRM solutions, such as Salesforce, offer significant amounts of customer data to better understand customer behavior. The key is being able to leverage the data in such a way that it is uncovers insights to maximize customer interactions. Some questions that take into account customer behavior can be answered from insights generated from these solutions:

  • Are in-person visits worthwhile?
  • What are the deciding factors to determine if a banker should make a call or schedule an in-person meeting?
  • What clients should be prioritized?
  • What is the ideal amount of time that a banker should spend on a customer?
  • What leads should be prioritized?
  • What are the potential upsell and cross-sell opportunities?
  • What indicators signal the potential for a customer to shift to another bank?

Interestingly, most commercial banks focus on the analytics that identify habits of top performers, rather than what drive customers. An example of this would be focusing on identifying the top two percent of commercial bankers who prefer to use conference calls over in-person meetings. While this information is important, this number doesn’t necessarily provide any deep insight into what customers prefer. Rather, it may be more indicative of top producers’ ability to relate to their customers or to leverage certain productive habits.

Commercial banks are wise to evaluate a broad spectrum of data and measure data points across multiple segments of clients. This will help determine who should be prioritized and how to best help every client while balancing productivity and profitability.

“In commercial banking, the customer is very valuable and understanding the interaction history of the customer is very essential,” says Vishrut Lugani, VHT executive advisory board member. “One of the key differentiators of the VHT product is the ability to create granular data regarding customer interactions. And, when you have that granular level of data, you start to recognize that this data leads to behavior data.”

Super-Specialized Service Based on Customer Behavior
For large accounts or those that require highly complex services or products, it may be necessary to bring in an expert who can best identify and achieve specific needs and goals. The challenge is determining which accounts require specialists. The best approach is to look at data over time. By looking at accounts where specialists were brought in or not brought in, you can evaluate the overall success level of offering more specialized service. By digging deeper, you can understand which accounts responded the best to this higher level of service.

Delving into customer behavior in commercial banking and applying analytics to drive business decisions can be challenging and time-consuming. However, it can drive increased profitability and productivity on multiple levels. And with technology advancements and shifting customer needs, understanding customers isn’t just a good idea, it’s a must for staying competitive in an increasingly competitive marketplace.