RETAIL BANKING IN CEE

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RETAIL

BANKING

IN CEE

THE SECRET OF EFFICIENT

CAMPAIGN MANAGEMENT

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1

prEfaCE

Since years, banks in Central and Eastern Europe have changed their focus from growth to sustainable bank size definition and cost-efficiency optimization. Intensive media campaigns for mass clients were one of the first victims of cost reduction programs, several banks moved to targeted, far more transparent BTL type of lead generation. This shift of focus influenced the organizational models, the campaign processes and the analytical tools, requiring a different level of coordination.

Based on the rising interest for more efficient Campaign Management in CEE, Roland Berger Strategy Consultants and Efma, kindly endorsed by Erste Group, conducted a study on current Campaign Management practices in the CEE region. On the following pages we present the identified key success factors and outline the improvement potentials.

The report at your hand contains the study results and provides an insight into how retail banks in CEE handle Campaign Management, covering the following main questions: > How do banks treat campaigns?

> How are campaigns managed?

> How do banks differ in Campaign Management practices? > How are campaign organization and processes defined?

> How do IT systems support client base analysis, campaign execution and assessment? Over fifty Campaign Management responsible manager of banks all across CEE were personally interviewed. These findings were combined with the market knowledge of Roland Berger and the insights obtained during numerous projects in the region.

We believe that in the coming years Campaign Management needs to be further improved since the importance of proper organization, process and tool elaboration and the capability of successful execution are critical factors for each CEE bank. It is our hope that this report will support you and your organization in assessing your Campaign Management skills and practices, in identifying further improvement potentials to consequently better coping with the changed business environment in CEE.

Frigyes Schannen Managing Director

Roland Berger Strategy Consultants

Patrick Desmarés Secretary General Efma

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5

fOrEwOrd

Independently from the actual market conditions, we – all retail bankers in Central Europe – aim to boost our sales performance with efficient and effective campaigns. We all are aware of the fact that the targeted stabilization/growth requires extra efforts: the so called “business as usual” with mainly ATL focus cannot guarantee enough business volumes anymore. We see three major factors – driven by the aftermath of the crisis – that recently pose challenges towards Campaign Management. Today, it is essential to regularly initiate, plan and execute targeted and coordinated actions to reach additional sales volumes at least within an interim period of a campaign.

The first logical consequence is that the expectations towards sales supporting and lead generating campaigns have significantly increased.

Secondly, we shall not forget at the same time, that campaigns are actually daily

investments both in terms of efforts and costs, therefore represent a sensitive topic at the era of cost optimization programs. In this respect, it’s even more important to know how to plan, execute and evaluate campaigns with high and still increasing cost-efficiency. We see at the same time clear indications of know-how and capacity limitations in our region, e.g. how to define target groups, how many campaigns can be run in parallel efficiently, how frequently can similar campaigns be executed and how to reach significantly higher conversion rates.

The third, but most important aspect is the client itself. On one hand, we all face the challenge to run more campaigns with higher conversion rates with a lower budget while we seriously avoid any action that might be perceived by clients as irritating and can even destroy long-lasting brand image building. On the other hand, clients became even more cost cautious and less influenceable by campaign messages.

These above described challenges motivated Erste Group to support this study. We consider it as a useful insight, a detailed status report as of 2013 about current issues and capabilities of the CEE retail banking sector extended with valuable recommendations for future developments. Even if the results do not fully reflect the situation in our countries, it is obvious that we all still have our efficiency increase potentials in Campaign Management, therefore this Roland Berger study hopefully will help readers identifying how to assess internal capabilities and also to define and implement sound Campaign Management practices.

philip list

head of group Brand Erste group

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This year we conducted a representative interview series among top managers of the major banks in CEE about Campaign Management practices. The key objective was to provide a regional insight on how retail banks in CEE really organize and steer their activities. We have involved more than 50 major banks active in the CEE region’s 12 countries, namely Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, Slovenia, Serbia and Ukraine.

As a first step, we clarified how Campaign Management was defined and applied in our region. The unfortunate result of the financial crisis is that marketing expenditures were significantly reduced at almost all the banks in our region. The

EXECUTIVE SUMMARY

given trends of the increasing competition at the advertisement market, the strengthening mobile banking solutions and the new communication channels created even more opportunities for (cost-) efficiency in Campaign Management. Our aim with this study was to present the three cornerstones of successful Campaign Management based on CEE best practices: treat campaigns as investments, manage them as a project and help you to find your own way at the implementation. Starting with the obvious definition, based on our market and methodological knowledge and the consolidated interview results: a CAMPAIGN is an investment of an organization through focused, planned efforts of multiple stakeholders with a goal to increase sales (or brand image/awareness) by a

aCTual CampaigN maNagEmENT praCTiCES alONg ThE CEE

COuNTriES rEflECT a vaST amOuNT Of kNOwlEdgE aNd

iNdiCaTE rOOm fOr EffiCiENCy imprOvEmENT

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7 one-off, limited time period action (deviating from

“business as usual”).

We have to underline, that in this framework the size of Campaign Management budget implies significant importance as a business investment. Based on the overall target setting of a bank, we could conclude that the best practice in our region concentrates more on existing client base rather than seeking for acquisition opportunities. The level of decision making over campaigns were also inconsistent. Actually, the optimal decision makers/ approvers should all be Board Members and/or Retail Heads. When deciding on a new campaign investment, numerous factors are considered simultaneously. Unfortunately only 2/3 of CEE banks prepare at least a high level business case or a preliminary ROI calculation.

On the other hand, Campaign and Project Management are twins. First of all, unless a clear goal is set, no campaign is to be launched and can succeed. It must be manifested in sales or marketing linked KPIs with a forecasted ROI. A campaign is linked to an organization unit frequently with multiple stakeholders. Therefore, similarly to a typical project setup, operational and steering tools should be applied with sole responsibility for successful execution. Additionally, all campaigns are to be run under strict budget constraints. As a campaign requires an additional budget, a business plan has to be developed to justify the required expenditure level. Finally – as the last framework characteristic of a project – a campaign also runs under a predefined, one-off timeframe with a set end-date and given milestones.

We see mixed organizational responsibility over efficient campaigning. Banks with stand-alone CM units are in minority, but only they practice the true form of “Market Management” and of course with higher campaign efficiency. The reason for a patchwork team setup is merely historical and cultural.

Our focus is always on finding the right measures to increase operational effectiveness. Well, one-third of the respondent banks can only manually

assign targets to front-end. Without proper tracking, not only the concept of handling campaigns

as investment falls apart, but also from project management perspective it is close to a blind run. And in the last step, we have concluded the three key elements of the need-based adaptive operation: First, tune it to your strategy and your level of maturity. Actually you have to think in strategic terms. Campaigns will not yield the results unless they are derived from strategy and segmentation. Second, tune your Campaign Management into a specific and most logical order. This means the classical triangle: clients, channels and then organization (IT). At last, if a bank can master all of these elements than it should focus on the competitive edge: find the way how to become unique based on your individual strengthening “assets” and spice up the campaigns.

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Campaign Management gaining

importance again

1) Except in Russia and Slovakia, where budgets have been increasing in some banks.

As a direct result of the financial crisis, marketing expenditures were frequent victim of the cost reduction waves that almost all of the financial institutions went through. Based on our extensive cost-efficiency project experience and benchmarks, at least half of the financial institutions have reduced their ATL heavy marketing spending with more than 10% in 2011 and 20121)_.

Despite increasing competition from the Internet, newspaper ads still accounted for the largest share of advertising expenditures in 2011. Nevertheless, the digital age has taken hold. In 2012 mobile banking was the most commonly introduced new product.

With the spreading of the new communication channels, BTL is strengthening ATL due to its higher targetedness and cost-efficiency. However, it very much requires a perfect understanding of the client base and its smart segmentation.

Once banks reach the recovery level, they usually realize the need for another growth phase (or at least a maintenance of market share in key profit generating client segments), which requires smarter and sometimes larger spendings. Therefore, it is not surprising that 42% of respondents at least plan to stay on the same marketing budget level and an additional 30% plans to even increase it in 2014 and beyond.

a CampaigN iS aN iNvESTmENT ThrOugh plaNNEd EffOrTS

wiTh a mEaSuraBlE gOal TO iNCrEaSE SalES By a limiTEd

TimE pEriOd aCTiON

PART I

UNDERSTANDING

CAMPAIGN

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9 parT i – uNdErSTaNdiNg CampaigN maNagEmENT FIGURE 1. "NO UNIFIED CAMPAIGN MANAGEMENT DEFINITION”

"Contact clients at the right moment, at the right time."

"All client communication that is not performed through physical distribution and all related data management."

"Centralized data collection/analysis to maximize profit and maintain client satisfaction."

"Support to sales targets through definition of target

segments, selection of channels and offering and creating marketing message to customers."

"Activity to determine the format of the marketing campaign, the organization of the campaign, as well as the preparation of

analytical reporting on its results."

This is the point where the importance of Campaign Management revives. With already 30% of the banks monitoring online debate about its brand, and with 74% having Facebook activity – although spending only about 1-5 hours a week developing it – banks have to be ready to channel their growth aspirations in BTL format via smart campaigns. According to our market view and based on the interviews, this new wave of growth focus is the driver behind the increasing importance of Campaign Management.

Our definition of Campaign

Management

During the interviews across the Central Eastern European countries, the first warm-up question has always been: “How would you define Campaign Management?”. As many times we asked this question, as many different answers we received (see Figure 1.). Some of the banks’ responsible emphasized its analytical, data mining nature, the way how clients are segmented. Others stressed client communication, yet others highlighted more the operational tasks that are necessary for

carrying out campaigns. Sales support has also been commonly mentioned as a key element, but the predominant term has been marketing for describing Campaign Management.

All this implies that currently there is no clear definition for Campaign Management even among the responsible managers in the region.

Our aim in the current “Retail Banking in CEE – The Secret of Efficient Campaign Management” study is to fill this gap and present the three cornerstones of successful Campaign Management based on CEE best practices:

1. Treat campaigns as investments 2. Manage campaigns as a project 3. Find your own way

Based on our market and methodological

knowledge and the consolidated interview results a CAMPAIGN is an investment of an organization through focused, planned efforts of multiple stakeholders with a goal to increase sales (or brand image/awareness) by a one-off, limited time period action (deviating from “business as usual”).

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PART II

QUANTITATIVE INVESTMENT

LOGIC

uNTil CampaigNS arE NOT TrEaTEd aS fuNdamENTal

iNvEST-mENTS, ThE STraTEgy implEmENTaTiON will lag BEhiNd

Campaigns are investments into the future. Taking into account that banks in CEE spend almost EUR 2 per client annually on average just for BTL campaigns (see Figure 2.), they are rather significant ones. Due to the crisis, budgets were slightly cut compared to 2011 levels, however in some countries this trend has already changed as mentioned in our previous chapters.

0.4

3.5

Low

quartile quartielTop

1.7

Median

FIGURE 2. BENCHMARKING RESULTS - BTL CM ANNUAL BUDGET PER CLIENT [EUR/CLIENT]

U N IM P O R TA N T VE R Y IM P O R TA N T ✗ ✓

0% 0%

71%

29%

FIGURE 3. IMPORTANCE OF CAMPAIGNS TO ACHIEVE ANNUAL TARGETS [% OF RESPONDENTS]

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11 parT ii – quaNTiTaTivE iNvESTmENT lOgiC

Goals of investment

The first question that arises: what is the overall goal of the investment carried out by launching a campaign? CEE banks usually run campaigns based on a comprehensive campaign plan that considers multiple goals at once, among which cross-/up-selling, product maturity and client activation are the most important objectives, covering over two third of all campaigns.

Concentrate more on the existing client base rather than seeking for new acquisition opportunities.

The general trend in the region among banks is to concentrate more and more on their existing client base rather than seeking for new costly acquisition opportunities. While back in 2011, 15% of the campaigns were targeting new clients, in 2012 it dropped to 9%. Based on future plans, this ratio is expected to further decline. On the other hand, the importance of cross-/up-sell, product maturity and client activation campaigns have increased significantly (Figure 4.).

The general simplification of product portfolios, along with an intensifying price-war could also be observed: interviewed managers implied plans to shift from new product to new pricing and product maturity campaigns. Furthermore – while searching for possible ways out of the crisis – budget constraints contributed to a strengthened emphasis on campaign effectiveness (and partly efficiency) leading to a reduced share of general image and informational campaigns. Product maturity Cross-sell/Up-sell Campaign plan Activation New product Survey New price Image Information New acquisition Other 5% 2% 32% 14% 10% 11% 5% Split based on interviews 4% 14% 2011 11% 15% 13% 29% 11% 6% 4% 4% 4% 14% 39% 12% 10% 9% 2012 6% 2% 3% 3% 2% 3% 0% 3%

FIGURE 4. ACTUAL DISTRIBUTION OF CAMPAIGNS AND REASONS TO LAUNCH CAMPAIGNS ACCORDING TO THE INTERVIEWEES [AVG. % TOTAL NR. OF CAMPAIGNS]

The size of the Campaign Management budget implies significant importance as a business investment.

This importance could be reassured while

interviewing managers all over Central and Eastern Europe: campaigns have been unanimously

considered as indispensably important in order to reach annual business targets. The clear majority of respondents (71%) even stated, that without campaigns achieving preset goals would be impossible and during the budgeting process the expected additional sales volumes are already built in (Figure 3.).

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Level of decision making over

campaigns

The optimal Campaign Management decision makers/approvers should all be Board Members and/or Retail Heads.

The nature of campaigns serve multiple purposes, and it can be seen in the number of parties involved in the preparation phase: the most important stakeholder is the Segment division (even though mentioned only by 73% of the respondents) being in most of the cases the main initiator and target setter of campaigns. The Product division is consulted by almost all the banks, however its role is usually limited to support tasks. The Sales network plays the key role in the execution phase, but has limited influence in the campaign preparation phase (see Figure 7.).

Campaign preparation is typically an annually recurring exercise with quarterly updates that is manifested in the campaign calendar. Management should have a visual and up-to-date view on the campaign calendar approving quarterly changes and business cases behind the campaigns. In case a bank has implemented a central Market Management Approach, usually coordinated by a stand-alone CRM or Marketing knowledge center, then it should be the key stakeholder in campaign planning. In other cases the Segment division should be the trigger and main counterpart in this phase.

FIGURE 7. MAIN COUNTERPARTS IN CAMPAIGN PREPARATION [% MENTIONED BY RESPONDENTS]

Products Sales network Segments Marketing Other 92% 77% 73% 65% 48% Campaigns being important investments for the

entire bank, the optimal Campaign Management decision makers/approvers should all be Board Members and/or Retail Heads. However this was the case only at 77% of the interviewed CEE banks. From an other angle there is an even split between institutions using single and multiple approval models (see Figure 5.).

Regarding reporting lines – despite high importance – the hierarchical level is far below ideal: during the execution phase only 36% of Campaign Management Heads report directly to the Board, and close to two-third of them are hidden under B-1 levels, definitely not granting enough power to the Campaign Manager to execute the serious investment (campaign) efficiently and effectively (see Figure 6.).

FIGURE 5. DECISION MAKER/APPROVER OF CAMPAIGNS [%]

Ideal final approver

24% 19% 18% 15% 13% 11%

Sub-optimal final decision maker

Multiple approvers Board Retail Head Products Head CM Head Other 50% 13% 15% 12% 8% 2% Retail Head Marketing Head Board Products Head CM Head Other

FIGURE 6. ORGANIZATIONAL LEVELS TO WHICH CM REPORTS TO BOARD LEVEL B-1 LEVEL B-2 LEVEL MULTIPLE REPORTING LINE Board ... ... ... ... ... ... 6% 8% 50% 36%

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13 parT ii – quaNTiTaTivE iNvESTmENT lOgiC

Basis of campaign launch

decisions

FIGURE 8. TOP 7 FACTORS CONSIDERED DURING CAMPAIGN PREPARATION

PRODUCTS CHANNELS BUSINESS CASES USP

Products are the starting point in the majority of campaigns Following products, channel is the 2nd_{factor to} be considered BCs can be prepared on a high level (drivers) or detailed (NPV) In most cases campaigns are aligned to the bank's USPs

ROI COMPETITIVE OFFERING BRANDING IMAGE

Preliminary ROI calculation is prepared by 2/3 of the

respondents

Most of the banks analyze com- petitors' actions - in few cases with strategic importance Bank's image is rarely analyzed with exception of HR, RS and RU

8 3%

7 5%

6 7%

6 5%

6 3%

3 1%

6 7%

When deciding on a new campaign investment,

numerous factors are considered simultaneously. First of all, products (mentioned by 83% of the respondents) and channels (75%) are taken into account. Unfortunately only 2/3 of CEE banks prepare at least a high level business case or a preliminary ROI calculation which should be a prerequisite for a proper business investment decision. Besides these, market/competition factors like image, USP and competitive offering are considered most commonly (see Figure 8.). Intensified use of direct KPIs is essential to decide on campaigns and measure efficiency.

Regarding campaign success measurement, the deficits are even more visible and not comparable to the level which a serious investment requires.

However, response and conversion rates are widely used, while ROI or similar return calculations are only common practice at 56% of the banks (see Figure 9.).

Finally it is not a surprise that direct success indicators are even less reflected in Campaign Management Head’s remuneration. In general, the overall retail results or just a qualitative assessment by the superior serve as an incentive scheme. At 13% of CEE banks no specific KPIs have been mentioned. Direct indicators like conversion rate, profitability or ROI are used only at 9-20% of the interviewed banks. Still 30% of the banks do not carry out control group analysis to measure the campaigns’ effectiveness (see Figure 10.).

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Both the control group analysis (cohort analysis) and the ROI calculation are two performance measurement elements that are specifically relevant for Campaign Management. A sound Campaign Management maturity contains and executes these elements consistently, transparently and with business intelligence support.

We identified a huge deficit in this area. If

campaigns are treated as investments then decisions should be made on Board level: It should be based on realistic expected return calculations and the success shall be monitored on a predefined set of business result KPIs. We kindly recommend for all bank representatives who are responsible for the impacts to assess their current practices honestly and seriously. And then take immediate actions to define the organizational model and the proper business logic of campaign preparation.

FIGURE 10. KPIS FOR CM HEAD REMUNERATION [% OF THE RESPONSES] Direct, objective indicators for campaign success No clear direct KPIs 39% 17% 20% 9% 70% Qualitative assessment by the superior Conversion rate Profitability Overall Retail results

28% ROI

Other special targets

20% No specific KPIs for

remuneration FIGURE 9. MAIN KPIS USED FOR MEASURING

CAMPAIGN SUCCESS [%]

Conversion rate Response rate

ROI & similar Recall Other 85% 83% 56% 33% 40%

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16 parT iii – ThOrOugh prOjECT maNagEmENT

PART III

THOROUGH PROJECT

MANAGEMENT

Campaign and Project

Management as twins

fiNd a gOOd prOjECT maNagEr, prOvidE CrEaTivE SuppOrT

aNd iNpuT fOr BriEfiNg TO wiTNESS ThE BEST rESulTS

Our interviews with CRM responsibles reinforced the fact that Campaign Management and Project Management share the same building blocks. Campaign Management has a fixed set of elements that define its borders: Allocated budget to be utilized in a regulated process under given time constraints by a qualified and distinct organization unit to achieve a pre-defined and measurable goal (see Figure 11.).

1. First of all, unless a clear goal is set, no campaign is to be launched or managed. It must be

manifested in sales or marketing linked KPIs with a forecasted ROI

2. A campaign is linked to an organization, or rather to a dedicated organizational unit frequently with multiple stakeholders. Therefore, similarly to a typical project setup, operational and steering tools applied in project management form the most successful modus operandi. 3. As a project, all campaigns are to be run under

strict and pre-defined budget constraints. As campaigns require additional budget, a business plan has to be developed to justify the required expenditure level.

4. Similarly to projects, the Campaign Management processes do not belong to the “business as

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usual” type of core processes, however, they can and should follow a very standardized flow. The standard flow safeguards the highest efficiency from a cost benefit perspective and allows fast and efficient execution of standard, frequent campaigns.

5. Finally – as the last framework characteristic of a project – a campaign also runs under a pre-defined, one-off timeframe with a set end-date and given milestones.

All in all, the similarity of campaigns and projects means that unless a campaign is not handled as a project, the result and the management process per se will be sub-optimal compared to the tried-and-true methods of project management. Therefore, we encourage all players of the study and of the CEE financial services sector to approach each campaign as a separate project and to apply the

FIGURE 11. CAMPAIGN MANAGEMENT BEHAVES AKIN TO PROJECTS

A CAMPAIGNis an investment of an organization through focused, planned efforts of multiple stakeholders with a goal to increase sales (or brand image/awareness) by a one-off,limited time period action (deviating from "business as usual") PROJECT MANAGEMENT Goal Organization Budget Processes Timing CAMPAIGN MANAGEMENT

> Clear KPIs (but exclusively sales or marketing linked) with forecasted ROI

> Multiple stakeholders from different departments with matrix reporting during the campaign to one

leader/coordinator

> Requires extra budget and therefore a business plan > Deviates from "business as usual", but with level of

standardization

> Pre-defined, one-off, usually from few weeks to few months

standard project management methodologies to run campaigns to success.

Such notion and such emphasis was not always reflected among our study participants. Although most of the campaigns were managed along defined process parts, yet these processes often were far from optimal.

Implementation discipline was the area where we found the largest gaps. Even though it is well- documented how a campaign life-cycle should be managed, basic elements such as business cases are missing. At least the five afore mentioned building blocks should be transparent and available for all campaigns (see Figure 11.).

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FIGURE 12. CAMPAIGN PROCESS LEAD TIMES DIFFER BY CAMPAIGN TYPE

Preparation phase can be even less than 1 week in case of CRM

In extreme cases campaigns can last even for half a year

Tracking is done continuously

in many cases, not just after the campaign finishes

In case of new clients preparation takes 2-3 times more time than in case of existing clients

Campaign dura-tion does not differ significantly compared to existing clients

Same tracking duration range as in case of existing clients PREPARATION

1-4

weeks weeks4-12 weeks2-8

4-12 weeks 2-8 weeks weeks2-8 1 2 EXECUTION 3 TRACKING EXISTING CLIENTS NEW CLIENTS 6w 4w 7w 17w 12w 5w 2w 5w

xw Average duration of the phase in weeks

Observed campaign process

lead times

On average, a campaign for new clients was reported to last 16 weeks, whereas to existing clients this period was five weeks shorter. The differences in campaign length depend on client types: preparing campaign for existing clients takes half the time that it takes for new clients. Root causes can range from time for segmentation and data availability to the rather ATL type of new client acquisition campaigns.

Nevertheless, among almost all the participants a preparation – execution – tracking phasing was visible, even if a bank was not separating these “project” phases. The depicted durations of these phases represent the averages across the sample, providing a good rule-of-thumb for assessing general campaigning process efficiency (see Figure 12.). However, there are extremes in each case. Some banks take little to none preparatory measures,

while others dedicate 45-60 days to this phase. For certain event driven or recurring type of campaigns a longer execution period is natural. These

campaigns – sometime lasting for half a year – have been handled separately when assessing average campaign execution durations.

In our view, there are two warning signs to keep in mind regarding the results highlighted before. First, the difference in preparation time between existing and new client base can be annulled and second, these cycle times fall far from an industry best practice of a well-performing campaign. One pattern was visible: the banks that reported longer cycle times handled Campaign Management as a support function instead of a stand-alone business line. Thus, a clear correlation can be observed between campaign preparation’s efficiency and the organizational setup.

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From a helicopter view, the vast majority (76%) of the respondents handled Campaign Management as a sheer supporting function (see Figure 13.). This role was limited to the coordination of support of others, who were ultimately responsible for the campaign. In these instances, it was often the case that Campaign Management was of secondary importance, besides CM activities, typically embedded deep into other organizations. On the contrary, a quarter of the respondents dedicated a separate business line to Campaign Management. This means that CM has a sole ownership and coordination role over the campaign process. It is totally independent from other business areas, and furthermore, it can give clear directions to the involved departments. In these instances, the true form of the “Market Management” role of

> At the majority of interviewed banks, the CM role is to support and coordinate the different areas involved in the preparation and execution of campaigns

> At some banks, CM independently coordinates the entire campaign process and gives clear directions to the involved departments

CM AS A SUPPORTING FUNCTION CM AS ASTAND ALONE BUSINESS LINE

"CM plays a partnership role"

"CRM drives CM" "CM supports both sales

and product development"

"More business functions are involved, CM only

coordinates" "CM is embedded in each of

the segments as one of its functions"

"CM is in charge of the entire process, even if it involves

other departments"

"CM coordinates campaigns within Marketing & Corporate Communication"

"Standalone CM processes functioning independently

from other areas" CM as supporting function Stand alone CM 79% 21%

FIGURE 13. CAMPAIGN MANAGEMENT IS RATHER A SUPPORT FUNCTION THAN AN AUTONOMOUS MARKET MANAGEMENT CENTER

CRM and Campaign Management is flourishing. In our definition the true form of “Market Management” is implemented when CRM is positioned as the most knowledgeable and central element of the bank with the deepest and broadest oversight on the client base and the market. As a result, CRM is the owner of the data, from which data miners can extract information with high accuracy. CRM – aligning with stakeholder departments – can later steer the subsequent actions such as product development, segmentation or channel optimization. Due to the central steering within these banks, the above mentioned campaign processes are usually shorter by 2-5 weeks, less alignment and faster decision making is possible.

Mixed responsibility over

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Banks with stand-alone CM units are in minority, but only they practice the true form of “Market Management” with higher campaign efficiency. If we dig one level deeper and have a look inside the Campaign Management teams and how they are constructed, no dominant setup can be inferred (see Figure 14.).

In several cases (60%) it is operated as a function of different departments: mainly by Marketing and CRM together.

In ~40% of the cases the CM team is set up as a matrix organization unit and jointly operated by the Marketing, Segment and CRM departments. Furthermore, 14% of the examples show that CM is the matrix organization of multiple departments. The reason for such a patchwork team setup structure is – based on the interviews – merely historical and cultural. There is no logical explanation why such a shared operational and

FIGURE 14. NO DOMINANT CAMPAING MANAGEMENT TEAM SETUP STRUCTURES

FUNCTIONAL

MA

TRIX

Total Marketing Segments Products CRM Others

60% 40% 25% 4% 21% 4% Products Segments Marketing _Multiple departments involved CRM Others 4% 8% 2% 2% 2% 2% - 4% -- - 2% - - -14% 6%

responsibility ownership would be optimal. From a project management perspective such a multi-party team is more than favorable, however, not in terms of ownership. This is exactly where the Campaign Management efficiency of most banks falls short; why the 16 weeks average campaign cycle time can not be reduced so easily.

The reason for such a patchwork team setup is merely historical and cultural.

When we take the example of the preparation phase, we have seen that numerous factors are to be considered simultaneously in campaign setup. As the two most frequently used starting points were Products (81% cited among top priorities) and Channels (73% cited among top priorities), this setup often results in a clash or at least an interaction of two different business units. Unless there is a steering force driving these interactions, the agreement on the final campaign scope and priorities can take weeks.

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As a further step towards functional integration, the role of analytical and operational Campaign Management have been under review.

In 39% of the cases, campaign managers are only responsible for operational aspects and are supported by data manager(s) for analytical aspects of the campaign (see Figure 15.).

According to the majority of the respondents (61%), CMs are already responsible for both analytical & operational aspects, which would lead to more efficient operation. An integrated Campaign Management would mean that the majority of business intelligence competency can be found under CM and thus not at Controlling or any other division.

Measures to increase

operational effectiveness

That is an important insight for those who are seeking Campaign Management efficiency as these roles are overarching through all three campaign process phases: preparation, execution and tracking. The highest level of efficiency can be reached when both targets and operational front-end information flow is automatically generated and supported by front-end systems and Campaign Management tools.

FIGURE 16. RELATIONSHIP OF CM AND FRONT-END [% OF RESPONDENTS]

No option

No

Ye

s

Yes manual import

FR ONT -END INFO TRANSFER T O CM Yes automated CM Front-end

OPTION TO ASSIGN TARGET TO FRONT-END

Targets

Infor mation

10% 15% 6%

27% 42%

FIGURE 15. RELATION OF ANALYTICAL AND OPERATIONAL CM HEAD RESPONSIBILITIES [%]

Separated

Integrated 36%

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Looking into the automation maturity of the banks in scope, more than 50% of the participants still have not solved an automated integration of Front-Office Application with central databases (see Figure 16.)

Every second interviewed bank in CEE uses an advanced system that enables automatic two-way data exchange between the CM system and front-end application, however, one-third of the respondent banks can only manually assign targets to front-end.

One-third of the respondent banks can only manually assign targets to front-end.

The capability of assigning targets from Campaign Management to front-end is still very limited, showing how underrepresented the market management and steering functionality of CM and CRM are. Only 42% of the respondents are able to assign targets to front-end in a fully automated manner.

It is always a difficult decision from the application architecture point of view how Campaign

Management and front-offices should communicate with each other. At the same time, it would be essential for both the central CM unit and the front-end executors to have a direct, fast communication channel that grants an immediate clear picture about campaign status, allows easy task generation and also grants fast feedback to the CM unit about the potential problems in campaign execution. 30% of the banks introduced an automated reporting system and the majority of them applies daily or weekly success rate monitoring. In our view, one of the biggest deficits of Campaign Management practices stem from insufficient and inefficient tracking. Without proper tracking, not only the concept of handling campaigns as investments falls apart, but also from project management perspective it is close to a blind run, without any feedback on what works and what does not.

Without proper tracking, not only the concept of handling campaigns as investment falls apart, but

also from project management perspective it is close to a blind run.

As a bottom line, all of the above mentioned process improving elements – goal, budget, time frame, automation and integration – can be developed, in cases where Campaign Management vindicated itself sufficient level of autonomy. In our view, the best practice grants high level of authority and responsibility to Campaign Management with direct reporting to the Retail Board Member.

Our recommendations for the

optimal positioning of CM

The most typical organizational setup we have found in banks held Campaign Management at a low hierarchical level. The high number of escalation rounds and slow decision processes not only prolonged the campaigning processes, but also buried the “treasures of client knowledge” Further analysis in the field of automation leads to the last important element of running campaigns from a process perspective: tracking. In reviewing how often and in which way banks report cam-paign success rates, it became clear that most of the interviewed banks do not have automated reporting systems yet. Therefore, the frequency of their re-porting is rather irregular and/or it represents heavy workload to CM (see Figure 17.).

FIGURE 17. REPORTING ON SUCCESS RATE DEVELOPMENT [%] Daily Monthly Weekly Not regular

Manual Semi-automated Automated

58% 10% 32%

19% 81%

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deep within the bank. Drifted to the margins of insignificance Campaign Management could not operate with full efficiency, could not recommend key strategic directions and could not apply for important resources enhancing data management capabilities or IT support.

The other typical sub-optimally managed form of Campaign Management could be observed with “too many participants with too many dotted lines”. In a matrix team setup, also often observed among participating banks, lack of ownership with no clear responsibilities made the approval process cumbersome and campaigns rather vague.

In our view, the recommended positioning of Campaign Management unit is located on B-1 level and is an independent business unit (see Figure 18.). As an alternative, an independent CRM unit can also function as an effective and responsible

FIGURE 18. OPTIMALAND SUBOPTIMAL CM POSITION WITHIN THE ORGANIZATION

Ideally, Campaign Management …

... is an independent, stand-alone department (alternatively with CRM)

... is located on B-1 level

... combines analytical & operational campaign management tasks

... Head's incentives are directly linked to the campaign's success

1) Observed at less than 10% of the cases

Disadvantages > Too many hierarchical

layers

> Lack of decision making authority CM hidden in the functional organization

OPTIMAL1)

Product Segment Marketing

Retail Board CM (+CRM) ... ... ... ... ... ...

Retail Board CRM CM Disadvantages > No clear responsibility > Lack of ownership > Complex approval processes Matrix team setup

Retail Board

CM

✓

SUBOPTIMAL

✗

SUBOPTIMAL

✗

Campaign Management operator. One of the most important success factors of a well-functioning, independent Campaign Management unit is that the incentives are directly linked to the campaigns’ success.

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24 parT iv – NEEd BaSEd adapTivE OpEraTiONS

PART IV

NEED BASED ADAPTIVE

OPERATIONS

TailOr CampaigN maNagEmENT prOCESSES aCCOrdiNg

TO yOur BaNkS uNiquE STraTEgy, BuT STarT wiTh

SuB-SEgmENTaTiON

Recommended sequence to

tailor Campaign Management

Although in the previous chapters, we have made clear recommendations based on the findings of the survey regarding the investment and project attitude towards Campaign Management, we have seen that no two banks are the same. Hence, our last key take-away from the study is that once a bank has onboarded the afore mentioned principles, it should tune the campaigns according to its strategy. Our message “find your own way” does not equal that in the end “do whatever you want”. It means three important elements:

1. Tune CM according to your strategy and maturity

2. Tune CM in a specific (most logical) order 3. Aim for being unique

Tuning Campaign Management to your strategy and maturity includes adapting it to the segmentation principles that your bank uses, your client portfolio and its loyalty, your channel focus and other important strategic elements. Additionally, your maturity also defines the paths and opportunities that lie ahead.

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0% 2% 50% 39% 9% Poor Excellent 1 2 3 4 5

FIGURE 19. NONE OF THE BANKS THOUGHT ABOUT THEIR CM CAPABILITIES BADLY [%]

For instance, half of the interviewed banks admitted that they stand at a medium maturity level in terms of Campaign Management, which was a clear indicator that there is room for improvement. Overall, the 98% of respondents evaluating their CM capabilities as at least satisfactory, whereas 48% considered it even being good or excellent, is a bright picture for Campaign Management self-assessment. However, we recommend to adapt your CM strategy along a specific order: first consider the specificities of the client base (e.g. geographical distribution, market share position, sub-segments focus), then focus on your channel usage (e.g. maturity of e-channels, size of the branch network) and finally, take into consideration your organizational setup and other improvable elements such as IT. And last but not least, the message “Find your own way” also means to incorporate the essence and profile of your bank into the campaigns. FIGURE 20. AREAS FOR IMPROVEMENT IN CAMPAIGN MANAGEMENT

> CRM IT tool development > SMS and e-mail support > Monitoring and reporting tool development > Data mining capability enhancement > Data quality improvement > Further automation > Better formulation of business needs > Improved communication between business lines > Multi-channel approach

> More strategic focus rather than tactical one > Improved organizational structure, clarified responsibilities > Process development > Extra capacities/ resources > Dedicated team or

more dedicated time on campaign management

> Better client segmentation > Using more criteria

for segmentation > More targeted approach > Use of social networks > Enhancement of call center > Event based marketing capabilities Mentioned Tools and

infrastructure Operations/ processes Resources / capacities Segmentation Other

Insights/ examples

54% _50%

15% _13%

(24)

During our interviews, we dug more into details to understand what is behind the previously mentioned room for improvement. Thus, we have collected the most common improvement areas that banks felt regarding Campaign Management.

Majority of the banks considered tools and infrastructure the most important improvement area, while operations and processes were also very significant. The previous included CRM IT tool development and enhancement of data mining capacity, while the latter was focusing on a multi-channel approach and a better strategic focus.

The first step in need based

adaptation is segmentation

A fundamental element of representing your strategic focus lies within a well-crafted segmentation and value proposition, and its resemblance in Campaign Management processes. Therefore, our recommendation in terms of “finding your own way” starts with adjusting Campaign Management to the applied segmentation methodology.

Based on the survey, sociodemographic and economic factors are the most commonly applied segmentation methods in campaign preparation and execution. Behavioral segmentation is less

FIGURE 21. CAMPAIGN MANAGEMENT IS TO BE ADAPTED TO THE APPLIED SEGMENTATION METHODS [% OF RESPONSES]

Sociodemographic Economic Behavioral

Customer life time value Psychographic Other 88% 77% 71% 48% 17% 15% E R Progressive Hedonism Progressive Performance Traditional Hedonism Altruism Moneyism Traditional Performance Fair Nature Purism Service Quality Proven Total Cost Personal/ Efficiency Innovation/ Protech Customized Tranquil Clanning Cool & Trendy Prestige Vitality Thrill & Entertainm. Carefree Classic Security Smart Shopping

frequently applied and in most cases only on a basic level. 14% Adult - Mass Adult - Affluent Pensioner Micro - Mass Youth Micro - Premium 59% 8% 8% 9% 2011 11% 12% 2012 70% 2% 3% _3% 1%

FIGURE 22. MOST FREQUENTLY TARGETED SEGMENTS [AVG. % OF TOTAL NR. OF CAMPAIGNS]

Be strategic. Campaigns will not yield the

results unless they are derived from strategy and segmentation.

The next generation of client segmentation is psychographical with increasing popularity in Western Europe because of its high added value to current segmentations and high level of client

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value centricity, but it is still rarely used in Central Europe.

Banks in CEE try to increasingly position themselves as counterparts that understand client needs. It is visible in focus shifts from universal mass-market oriented campaigns to communication of solutions relevant to specific segments.

Affluent and micro company segments are becoming more attractive targets for communication due to their relatively small number, but higher banking income potential (see Figure 22.).

With regard to the client base, banks have to adapt their campaigning activity to the “no contact policy” based on the sensitivity of their target client segments. The vast majority (81%) of the assessed banks had a “no contact policy” of 1 to 6 months (3.6 months in average) for the same product (see Figure 23.). On the other hand, out of these banks

FIGURE 23. DURATION OF "NO CONTACT POLICY" [MONTHS IN RANGES] % of the respondents Banks having “No contact policy”... ... for the

same product .. for other products 13% 81% Month 6 4 2 0 1-6 Ø 3.6 Ø 2.5 1-3

only 13% went further and specified a “no contact policy” for other products within 1 to 3 months. FIGURE 24. TOP PRIORITIES FOR 2014 REGARDING CAMPAIGN MANAGEMENT

CRM, DATA QUALITY MONITORING, AUTOMATION MIXED PRIORITIES SUCCES RATE INCREASE ACTIVITY CHANNELS > Introduction of a new CRM system > Tool implementation > Improved data mining capabilities and data quality > More automation in monitoring > Test event triggered campaigns > Measurement of campaign success > Metrics improvement and tracking > Improve brand and image > On-boarding and retention measures > Product focus > Improve response and conversion rate > Effectivity increase > Increase number of campaigns > Increase budget and workforce > Integrated, multi-channel approach > Efficiency improvement > Elaborating e-mail capabilities, testing new social network channels for lead generation > Improve cooperation with sales

2

nd

₃

rd

₄

th

₅

th

₆

th

1

st 58% x% % of agreeing respondents 49% 40% 29% 20% 18%

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Enhance efficiency by channel

focus

Our analysis indicates that improving the channel focus was clearly the most common plan for 2014 (see Figure 24.).

Of course, channel utilization can be largely dependent on the client base or target client group of the bank. In our assessment the most frequent target segment was the Mass market, however its significance was shrinking and a clear focus on the affluent segment was in the spotlight for both Private Individual and the Micro segment as well. It is important to highlight one more phenomenon that increases the need for a well-tuned (even segmented and differentiated) “no contact policy”: It is the fact that campaigns are increasingly

focusing on a small number of selected products, for which a differentiated communication to individual segments is necessary to ensure their appeal.

21% Consumer Loans Credit Cards Deposits PI Current Accounts Micro Loans

Micro Business Accounts Mortgages Overdrafts Debit Cards Other 22% 17% 14% 8% 5% 2011 9% 6% 7% 23% 2012 22% 10% 4% 3% 4% 3% 3% 4% 6% 9%

FIGURE 25. DISTRIBUTION OF CAMPAIGNS BY PRODUCTS [%]

Most players limit the number of products that they try to communicate to their customers to focus on the selected high margin ones. Our view

is that other means of differentiation (e.g. channel, conditions, service) will be needed to provide an appealing package to individual customer segments. A great example is that banks turn their attention to event-based communication that allows to automatically trigger campaigns based on criteria such as an unusually high or low account balance: Products offering fast credit or attractive deposit options represent logical reaction to such events.

Successful implementation

needs adaptation to IT

capabilities

And finally, after the product focus – as a technical prerequisite and defining barrier – banks have to assess and adapt their current IT capabilities to serve Campaign Management. Information technology is usually both a big enabler and a major barrier to most innovative solutions, such as sophisticated pattern recognition capabilities or automated task list generators. However, it does not matter how much “hardcoded” IT capabilities are in an organization, the fact is that it is among the easiest to change as it mostly relies on purely internal factors, efforts and resources. That is why we recommend to consider as-is IT capabilities only in the last place when fine-tuning your CM strategy. Based on the participants’ responses, 16% of the banks do not use an IT system to support campaigns in any form. Almost half of the banks have installed a CRM tool (dominated by SAS) to support all Campaign Management activities. About one-third of the banks reported to have special CRM tools and additional IT systems that are integrated with Campaign Management activities. In such cases data transfer is always a crucial point, leaving 39% of the banks with manual data transfers within the Campaign Management process.

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Lack of IT infrastructure

ONLY CRM

TOOLS

NO IT TOOLS

CRM & IT TOOLS

CM IT tool usage1)

Applied CRM IT tools for client portfolio assessment1)

1) Among all the interviewed banks 2) Excel based or home-made solutions

Data reception from analytical CRM tool1)

> 16% of the banks do not use any IT systems to plan, execute,

monitor and evaluate campaigns > 86% of the banks use at least partly some kind of IT

tool for client portfolio analysis in order to generate target groups for campaigns

> 39% of banks having CRM and CM systems have not connected them yet online – Only manual way to transfer data

Yes

Partly2)

No

> SAS is the dominant CRM tool used by CEE banks

> Other IT tools are IBM Unica, SAP Business objects and own solutions 38% 48% Online 61% SAS 40% 46% 16% 38% Other 46% Oracle/ Siebel 12% SPSS Manual 39% 14% 2%

FIGURE 26. LEVEL OF APPLIED IT INFRASTRUCTURE

To sum it up, it is not enough to watch the ROI of every single campaign and to run them as the strictest project ever. These measures will only secure that your Campaign Management activity will be executed in a right way, but not necessary with the right priorities.

In order to reach the aims you have set for our campaigns and even for your bank, Campaign Management has to be derived from strategy and adapted to the essence of your bank.

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30 Summary Of kEy fiNdiNgS

Effective and efficient Campaign Management became an essential factor for retail banks in Central Europe following the financial crisis. The majority of interviewed market players determine their annual sales targets considering the predicted volume increase linked to the campaigns.

Although the majority of the banks evaluated their CM capabilities at least satisfactory, most of them named the tools/infrastructure and also the processes and operations as the main areas for further improvement. In addition channel integration and CRM system implementation and fine-tuning are the main short-term priorities for CM capability development.

As an outcome of the interviews, our performed analysis extended with our project experience the key success factors of a well-performing campaign are threefold:

1. Campaigns should be treated as an investment in order to achieve the annual targets in short/ mid-term and to develop the brand and generate demand on the market in the long-term.

Similar to the financial investments, detailed planning including business case analysis and ROI calculations are required in the preparation phase, while strict monitoring of success is needed during the campaigns and after the project closure.

SUMMARY OF KEY

RECOMMENDATIONS

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2. Campaigns should be managed as projects where the tasks and sole responsibilities of campaign planning and execution are allocated to the CM team with entrepreneurial mindset optimally at B-1 level. As a project team, the CM team has to regularly monitor the advancement and the success of the campaigns based on predefined KPIs and milestones. In addition, the Campaign Management needs to be motivated by

incentive scheme which is directly linked to the campaigns’ success.

3. Find your own way to adopt the CM strategy to the bank’s specifics. The optimal campaign

budget and capacity need have to be determined considering firstly the client base’s specificities such as the geographical distribution, market share position, sub-segment focus etc., secondly the maturity of distribution channels including branch network and e-channels, and thirdly the organizational set up of the bank.

Professionally managed campaigns are the prerequisites for achieving sales targets, and their cost-efficient operation can be only guaranteed if they are treated as investments and managed as projects in line with the local characteristics of the bank.

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32 mEThOdOlOgy aNd SCOpE Of ThE STudy

Roland Berger have conducted representative interviews among top managers of the major banks in CEE with Efma’s continuous support, that built the backbone of this study on Campaign Management of retail banks. The key objective of the study was to provide a regional insight on how retail banks in CEE organize and steer their Campaign Management activity, as well as to provide a base of comparison for regional players. The main topics covered in the study were the following:

METHODOLOGY AND SCOPE

OF THE STUDY

OvErviEw Of ThE mEThOdOlOgy STudy aBOuT ThE CEE

CampaigN maNagEmENT

> Identification of organizational setup, role and objectives

> Definition of reasons and processes for starting a campaign

> Assessment of campaign monitoring and motivation tools

> Examination of Campaign Management tools and IT support

> Assessment of campaign success (e.g. ROI) FIGURE 27. STUDY METHODOLOGY

Frame & indicators

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“The Secret of Efficient Campaign Management” study was completed with the involvement of more than 50 major banks active in the CEE region’s 12 countries, namely Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, Slovenia, Serbia, Ukraine.

Besides the study’s methodology, the following standard approach has been utilized upon formulating the questionnaires and conducting interviews:

FIGURE 28. KEY ELEMENTS OF CAMPAIGN MANAGEMENT FRAMEWORK1) ORGANIZATION 2 IT SUPPORT 4 PR OCESSES 1 CM & EXPECTATIONS CM & EXPECTATIONS 1

> Definition of Campaign Management > Expectations towards Campaign Management

ORGANIZATION

2

> CM position within the organization > Roles, responsibilities and incentive system > Resource and cost KPIs

PROCESSES

3

> Campaign lifecycle

> Different types of campaigns (goals, products, target segments) > Channel usage

> Tracking interim results during campaign > Assessing final campaign results

IT SUPPORT

4

> CRM and CM IT tools

> Supporting execution with IT tools > Communication with FO-BO systems

1) Roland Berger's CM optimization methodology

3

This standardized approach of both content and process has led to a highly comparable set of samples that is representative of the Central and Eastern European retail banking landscape. As the methodology outlined the first step was to define the scope and required data about the banks’ Campaign Management practices, which was jointly conducted by Roland Berger and Efma. As a second step, the survey guidebook was compiled, which was used by all interviewers and data collectors. The data collection was completed by Roland Berger through face-to-face interviews with top mangers and board members. In the third step, all data and information was analyzed. Then the preliminary findings and conclusions were determined and compiled in a preliminary report, which provided the base for the final Efma report. As a final step ”The Secret of Effcient Campaign Management” study report got published and communicated by Efma.

Efma provided continuous support during the entire report writing process. They played a crucial role as facilitator in organizing interviews, providing contacts and often acting as an intermediator between Roland Berger and the banks. The conducted interviews with top managers serve as representative sample of the CEE retail banks’ CM practices and reveal the best practices in Campaign Management.

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34 aBOuT uS

Efma

As a global not-for-profit organization, Efma brings together more than 3,300 retail financial services companies from over 130 countries. With a membership base consisting of almost a third of all large retail banks worldwide, Efma has proven to be a valuable resource for the global industry, offering members exclusive access to a multitude of resources, databases, studies, articles, news feeds and publications. Efma also provides numerous networking opportunities through working groups, online communities and international meetings. For more information: www.efma.com

ROLAND BERGER STRATEGY CONSULTANTS

Roland Berger Strategy Consultants, founded in 1967, is one of the world’s leading strategy consultancies. With 51 offices in 36 countries, the company has successful operations in all major international markets. The strategy consultancy is an independent partnership exclusively owned by about 250 partners. Roland Berger Strategy Consultants has also made a name for itself beyond the standard consulting business, establishing itself in the field of research and development. Numerous studies on current business and management issues bear the company’s logo.

The Roland Berger Strategy Consultants Academic Network, an association established in 1998 and comprising various universities, puts the company at the core of a continuous exchange of theoretical and practical knowledge. In addition, Roland Berger sponsors, chairs at several universities and publishes the „Roland Berger Strategy Consultants Academic Network” and the „Papers on European Management” series.

Visit www.rolandberger.hu

aBOuT uS

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Many thanks to the following persons for collaborating in the production of this study:

Roland Berger Partners, Principals, Project Managers and Consultants who helped col-lect the data with the participating companies: Krzysztof Badowski, Constantin Kinsky, Codrut Pascu, Vladimir Preveden, Adrian Weber, Ioana Leaua, Nikola Jelicic and Michal Carny.

Roland Berger Financial Services team for analyzing the data and writing the study: Frigyes Schannen, Iván Radnai, Johanna Járai, Kristóf Schum, Balázs Zoletnik, Ákos Újlaki and Dávid Soós.

The Partners for providing their insights, industry expertise and overall guidance: From Efma - Patrick Desmarès, Jean-Luc Méry, Lubomir Olach and Lukas Dzuroska From Erste Group - Philip List and Dieter Stock.

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www.rolandberger.com www.efma.com