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Death to bank branches

by Mariette Johnson Wharton

Retail banks, listen up. Video conferencing and electronic signatures are long overdue. Customers wait in lines during limited bank branch business hours when they don't need to. From a technology and legal standpoint, there is no reason to be face-to-face to execute a change to a business or personal banking account, which is impossible otherwise (at least at Citibank branches). Transactions such as opening an account and managing an account can be handled remotely using freely available video conferencing and DocuSign or other services. It would be naïve to suggest implementing these changes would be without hurdles, but everything worth doing has challenges.

In mortgage banking, customers execute multi-million dollar sales contracts using electronic signatures, so why isn’t this happening in the retail bank environment with far more straightforward transactions such as opening or managing accounts? Think of how easily this can be done: A customer can sit at their own desk or at home and verify their identity by holding their drivers license up to a video camera on their computer or their smartphone rather than visit a branch. Once identity been verified, the bank can send documents for electronic signature. This process has been recognized for over a decade and a half by theUS Federal ESIGN Act, passed in 2000. Banks, you don’t want to be slower than the federal government, do you? The Act identifies an electronic signature as an "electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." This is a legally acceptable document.

While of course not as widespread as telephone or general Internet use, video calling is not foreign to millions of Americans (and non-Americans, of course), so why not make this a way to communicate with a bank representative? Pew Research Center reports that 66% of 18-29 year olds have used a mobile device for video calling, as have 49% of 30-49 and 27% of those over 50. This is a not a small adoption rate.

In case you need more evidence for the growing uselessness of branches, The Financial Brand reports that the majority of consumers (irrespective of age or income) use bank branches very infrequently. Bank of America has closed branches and is promoting mobile banking. Research shows that in 8 years, customer preference for making deposits at a teller has dropped 50% as of 2014. Assuming the trend has continued, that number has likely continued to plummet in the last 2 years.

Ok, so you might argue that according to the 2014 US Multi-Channel Preferences Study, bank branches are still useful for new primary checking acquisition. Realistically, though, if people had an alternative to visiting a branch, the bets would be that people would rather use on-line channels. This is borne out by the preference to use an ATM vs. a teller to deposit checks. Now that banks are accepting deposits of checks via scans from a personal mobile phone, chances are no one really wants to visit an ATM except to extract cash. Coupled with the decrease in demand for cash with the use of Apple Pay, Square, PayPal and the like gaining ground, what use will an ATM be, let alone the branch?

And, anyway, in a more recent study, the 2016 Omni-Channel Shopper Survey of U.S. consumers found that the number of new primary checking accounts dropped by HALF in the past decade so keeping branches to win new checking customers is looking less and less appealing. As The Financial Brand writes: “Historically, banking convenience has been defined based on physical branch proximity to either home or work (or both). As banking technology has evolved, the need to visit a teller in the branch or even an ATM has declined. This had resulted in a redefinition of “convenience.” None of this is surprising: “For the first time ever, the highest ranking single factor in the definition of convenience is no longer proximity to a physical branch, but having “leading online and mobile capabilities”, which had 26% of the responses.”

No good excuse exists for banks not to be implementing remote processes for all bank procedures. The message is clear. Customers are less interested in the bank branch experience. Instead, focus on how more services can be delivered on-line, leveraging the aforementioned video and ESIGN Act-compliant technology widely used in other commercial enterprises to interact with customers. The result? More engaged customers, translating into higher revenue and lower cost from fewer (expensive) branches.

Source: Vidyo 2016

Research sponsored by Vidyo indicates that 50% of banks interviewed plan to implement video-enabled banking by 2017, 80% by 2018. Whether they do it or not remains to be seen, and we all know banks are not first movers, but we won’t be surprised when the bank branch disappears. Here to gleefully accelerate the change...

Retail Banking

Convenience

Video Conferencing

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Innate traits of creativity and how to harness so-called dangerous traits

by Mariette Johnson Wharton

So you want a creative team. How do you know if you have people with enough creative juice or if you need to hire them? David and Tom Kelley, IDEO founders, believe everyone is born creative. People are not equally creative, though. Early research into the link between genes and creativity validates some correlation between the two, with a pilot study in Brain Research showing that DRD2 gene and the TPH gene were associated with creativity, but explaining only 9% of the variance in test subjects. If genetic differences then account for very little of creative variances, it begs the question: what of the other 91% of creative variability?

To some degree, creativity variances hinge on discrepancies in personality traits, of course, which can be shaped by experience. Based on the Five Factor or Big Five Model, defined by Paul Costa and Robert McCrae, psychologists at the College of William and Mary conducted meta-analysis on the correlation between Big Five Factors and creativity, finding that creative people are more open to new experiences, self-accepting, less conscientious (in terms of planning and organizing), and relatively more aggressive and impulsive. Impacting creativity to a lesser degree are the traits of less conventional, more self-confident, more ambitious and more dominant. Those of us who are highly creative or have worked with highly creative types will not find any of this surprising.

Not only do genes and personality influence creativity, but also relative sensitivity to new information and stimuli. National Institutes of Health (NIH) studies show higher IQs and lower latent inhibition in individuals with greater creativity. Since latent inhibition is the ability to block out information the brain has previously deemed irrelevant, low latent inhibition enables more raw material for creative concepts.

After early adulthood, are we stuck with the creative level that our genes, personality traits, and sensitivity have bestowed upon us? Well, no. Millennials do not get to have all the fun. Recent longitudinal and cross-sectional NIH research has shown self-confidence, warmth, self-control, and emotional stability tend to increase with age, although naturally, specific life experiences render individual experiences unique (and there’s always Jack Lemmon and Walter Mattau).

In a separate piece, we will address organizational structure and process, as well as the role of expertise and motivation in creativity, but here we are looking at innate traits, so when hiring or looking to put together a team to maximize creative output, look for those with openness to new experiences, self-acceptance, self-confidence, self-control, ambitiousness and emotional stability. While few would argue that it would be dangerous to blindly embrace more aggressive, less conventional, more dominant and impulsive poor planners as a discrete set of hiring and team-assigning attributes (and disruptive to say the least to hire for these traits alone), every individual is a make-up of various characteristics, so adding a mix of these traits into a team can infuse it with new thinking. Consider both these traditionally positive attributes (some of which are overlooked in hiring) and those that people might shirk from, because they just might ignite new ideas.

Management

Creativity Skills

Team Building

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The danger in focusing on the needs of the most profitable customers and - don’t let a black swan make you a turkey

by Mariette Johnson Wharton

So, it turns out there is a risk involved in concentrating efforts on only the most profitable customers. Granted, that sounds highly counterintuitive, especially after the known rewards reaped from exceptional customer service performance. And, few would argue with the Pareto rule with plenty of evidence that 20% of customers can drive 80% of value. With that in mind, it makes sense to have a strategic focus on the most profitable segment and it can be highly detrimental to be unfocused, attempting to be all things to all customer segments.

Here’s where the danger lurks, though. Over-serving the requirements of the most lucrative customers to the exclusion of meeting the needs of less-demanding customers effectively creates low-hanging fruit for competition and for new entrants. Clayton Christensen labeled this process as ripe for disruptive innovation back in 1995. As he articulated, ignoring the needs of customers creates an opportunity for smaller companies with fewer resources to challenge incumbents by offering more suitable services and products at more competitive prices. Once footholds in the low-end of the market are established, challengers can move up the chain and attack more profitable market segments. That is one type of disruption, from low-end creep. Depending on a company’s lock on distribution channels, product or service switching costs and the company’s brand strength, it still might make sense to ignore less profitable customers.

What it points to, though, is that your competition can eat your lunch if you are not paying attention to where the industry is going. If you don’t evolve and maybe even cannibalize your own products and services in favor of those that meet emerging needs, you might well get blindsided.

A related but different concept is Nassim Taleb’s theory of the black swan. His is a lesson in preparing for a highly improbable, unexpected event that has a massive impact. While it would be impossible to predict a surprise, one defense is identifying areas of vulnerability. What is not a surprise to a butcher is a surprise to a turkey.

This idea applies even on a far less grand scale for surprising, momentous events, that while not revolutionary, can still have enduring, brand-altering, customer market-changing impacts, if the cards are played right. Your company might be large enough to have a risk management department and therefore maybe a crisis management strategy, but do you have an opportunity plan? Now, there are few occasions as opportunistic for a mediocre restaurant chain such as Red Lobster as say Beyoncé singing about it at the Superbowl but one never knows. After all, Leiceister City just won the English Premier League Title with 5,000 to one odds and Donald Trump has prevailed as a Republican Presidential nominee. Do you have a team who can think fast and act creatively in the event that serendipity hits? There can’t be a playbook, actually. The opportunity plan is rooted in a culture that fosters innovative thinking and nimble action, anchored by engaged employees.

To avoid being a turkey, spend some time cultivating an environment that is both protected against unforeseen risks by mitigating vulnerable areas, watch where the industry is headed, listen to the unmet needs of your less profitable customers, and create an innovative, engaged workforce that can exploit opportunities as well as mitigate dangers.

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The Trap of the Rational Model

by Mariette Johnson Wharton

Overwhelmed by the evidence of human emotion as the driving (if subconscious) element in decision-making, we discard the traditional economic theory that people act rationally. (Contrary to classic economics theory, empirical research in the field of behavioral economics reveals that purchasing choices are perhaps 30% rational decision-making and 70% based on emotional, psychological and perceptual factors.) Brand experts and advertisers have known this all along without the hard evidence. Successful brands make the buyer feel a certain way. In the case of luxury brands, advertising feeds into customer fantasy.

The problem with assuming rational price-oriented approaches such as promotions and discounts is that they do not inspire loyalty, as many retailers offering Groupon and LivingSocial specials have discovered to their dismay. Loyalty brings a much-coveted price insensitivity, the holy grail of a brand and marketing strategy.

If buying decisions have more to do with an emotional connection to a brand or company, how does a company elicit an emotional response from customers? Implications for the price elasticity of demand, and therefore profitability, are enormous. Specifically, Gallup finds that, in their words:

“In the retail banking industry, customers who are fully engaged bring 37% more annual revenue to their primary bank than do customers who are actively disengaged. Fully engaged banking customers also have more products with their bank, from checking and savings accounts to mortgages and auto loans. Plus, they have higher deposit balances in their accounts than less engaged customers with the same products do.

In the consumer electronics industry, fully engaged shoppers make 44% more visits per year to their preferred retailer than do actively disengaged shoppers. And when they do visit their preferred electronics retailer, these fully engaged shoppers purchase more items than they originally intended to. On average, they spend $373 per shopping trip, while actively disengaged customers spend $289 per trip.

Gallup found similar results in other industries, including the restaurant, hospitality, and insurance industries:

Restaurant -- casual dining: Fully engaged customers make 56% more visits per month than actively disengaged customers do.

Restaurant -- fast food: Fully engaged customers make 28% more visits per month than actively disengaged customers do.

Hospitality: Fully engaged hotel guests spend 46% more per year than actively disengaged guests spend.

Insurance: Fully engaged policy owners purchase 22% more types of insurance products than actively disengaged policy owners do.”

How do we get there? Gallup’s study suggests that keeping promises and inspiring customer pride are key but doesn’t offer insight into how. Certainly the two are quite different and require reflection. For the former, developing and executing policies that respect the customer’s time and effort throughout the buying and delivery process would be required. Regarding the latter, customer pride relates not only to functional, innovative products and services that delight customers but also to extends to corporate policies on social issues. Think of Apple’s (RED) program to fight HIV and AIDS and the more recent support of the LGBT community by giant retailer Target, winning the loyalty of some and of course disloyalty of others. Double bottom-line goals, thinking beyond financial stakeholders, could well build pride and loyalty, as Team B and Benefits Corporations proponents argue. In some industries, giving away free valuable content builds engagement.

Interestingly, it also turns out, to our surprise, that even satisfied customers are not necessarily loyal if they are not engaged. Let that sink in a moment. Rationally satisfied but emotionally disengaged customers who have only their price and performance needs met can have the same behavioral characteristics (i.e., not buying again) as dissatisfied customers, according to Gallup research. This is kind of scary if your company is focused on customer satisfaction to the exclusion of emotional engagement. On the other hand it’s encouraging that engagement might not even require more commitment or expense but rather thought. Again, it gets back to what brand strategists already knew: In the long run, the brand is your most valuable asset (apart from your people) and how you make people feel about your brand through your values, your investments, your support, your commitment and your interest in your customers truly matters.

Corporate strategies often evolve from an executive vision of either leading with the most innovative product, offering the lowest price, or beating the competition on service. To sustain an advantage in the long run and leverage the premium of the emotionally engaged customer, consider human nature, irrational decision-making and what you are doing to make your customers feel proud of you. Let’s remember it’s not the same thing as customer satisfaction in the rational model.

Decision Making

Customer Engagement

Brand Management

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Re-thinking the A Player: The B Team (Not What You Think It Means)

by Mariette Johnson Wharton

If the key to successful teamwork is emotional intelligence, as Google’s comprehensive research into the subject has concluded, then maybe we’ve gotten it all wrong. Top companies screen for exceptional technical (or hard) skills foremost and second, cultural fit. But what if the culture stinks? What if, like in many companies, employees are emotionally disconnected and feel threatened? The potential of A players cannot not be fully realized in this scenario, leaving a tremendous amount profitability and productivity on the table, not to mention employee well-being.

Top-notch players with the best technical skill can come at the expense of a collaborative work environment. Not always, but it does happen when companies overfocus on hard skill. Most people are not good interviewers to begin with and emotional sensitivity is hard to discern an interview, no matter how talented the person posing the questions. The issue is:  What we are leaving on the table by not considering the impact of a personality on corporate culture and teamwork? Hiring one bad apple can wreak complete havoc on company morale, motivation and productivity.

Underscoring this reality, a recent Gallup poll on the state of the American workplace uncovered the grim reality that 70 percent of American workers are “not engaged” or are “actively disengaged” and are emotionally disconnected from their workplaces. Without a doubt, the majority of companies are not fully reaping the rewards that they could and workplace morale suffers.

Gallup found that "engaged employees work with passion and feel a profound connection to their company. They drive innovation.” The disengaged do the opposite, undermining engaged coworkers. In the Washington Post, Lillian Cunningham points to the economic as well as morale problem evident when only 30 percent of a workforce are motivated and productivity plummets.

Psychology Today points to a Harris Work Stress survey discovering that 83 percent of the interviewed employees are stressed out by work, with documented damage to mental health, increased risk of disease and death, and lower worker productivity among other harmful consequences. Douglas LaBier, PhD. maintains that unsupportive management cultures, lack of opportunities to learn and grow, mismatches between skills and position, as well as “outright abusive, arrogant and narcissistic bosses” play into the destructive workplace stress.

To combat the lack of corporate transparency, The B Team, comprised of business luminaries such as Sir Richard Branson, urges companies to develop policies that inspire wellbeing. Although B Team has laudable goals around serving broader community needs, let’s use their example as a metaphor for how we can do better by society. We are not talking about lowering standards and hiring B players. I mean broadening the definition of an A player to include outstanding interpersonal skills and proven emotional sensitivity that arguably should be measured in performance reviews and factored into compensation.

As a start to this process, we can recognize the negative patterns in the workplace culture and choose to reward the creation of psychological safety. We can commit to the softer skills in recruiting and maintaining new talent, rather than addressing the drive for achievement (without regard for others) above all. We can look for demonstrated cases of collaboration, conversational turn-taking in meetings, consideration for the opinions of others, knowledge-sharing and other traits that will allow creativity and innovation to flourish in others. We can join the philosophical B Team of well-rounded A players that will not only enhance the bottom line but make the workplace a positive one.

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The Paradox of the Less Powerful: Negotiations

by Mariette Johnson Wharton

Overtly or not, we negotiate on a daily basis and what we don’t know about our relative position of power can hurt us. Counter to intuition, it can be advantageous to be the less powerful negotiator. That is, if you recognize and understand how to harness the opportunity.

Generally it is assumed that the more powerful and dominant player has the upper hand in negotiations. These more powerful participants in a negotiation hold more attractive alternatives. They can simply walk away. More dominant negotiators then, we might assume, may only look at a scenario as a zero-sum game, in which one party’s gain is the other party’s loss. With less to lose if the negotiations fall apart, those with the upper hand are likely to negotiate harder to get more of what they want.

Curiously, empirical research by Margaret Neale and Thomas Lye of Stanford University shows the opposite can also be true. According to their research, a weaker player is less concerned with value-claiming and more interested in getting the deal done. Presumably, since the players with the lower hand have fewer options, they would prefer a deal in which more of the gain is transferred to the opponent than no deal at all. Here lies the paradox. Perhaps surprisingly, the weak player can then exploit the synergies between the opponents and thereby expand the available pie, even obtaining a surprisingly bigger slice. Compared to negotiations between opponents of equal power, negotiations between those of unequal power have the potential to yield a greater outcome. This shifts the result, more optimally, from a zero-sum game. What Neale and Lye have found is that the lower-power party is the engine for this value creation.

One of the main takeaways from my negotiations studies at Columbia Business School is this: consider what your counterpart values and what you value. Chances are, these values do not overlap in every arena and therefore you can stand to gain more of what you want by giving up something less important to you but more important to your opponent. Too often, negotiations do not explore the hidden values and what trade-offs can be made outside of zero-sum thinking.

Returning to the research of Neale and Lye, another way to create value is for a negotiator to display the opposite behavior of the opponent. In other words, if dominant behaviors are displayed, show cooperation and deference. Conversely, in dealing with a deferential player, empirical research reveals that dominant characteristics will yield higher value creation. Matching dominance (or deference) prevents participants from focusing on creating additional opportunities to expand the available outcome from the negotiation.

Surprisingly perhaps, complementarity creates opportunities for successful coordination. For everyday and for important negotiations then, having a traditionally lower bargaining position can confer greater rewards if you employ a complementary stance and think about how to exploit the opportunities to expand the pie.

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Soft Skills: Just as Valid as Tech Skills, even in Silicon Valley

By Mariette Johnson Wharton

In the vast majority of schools, the educational system is centered on hard skills in academic areas such as math, leaving many socio-cognitive skills that relate to interpersonal success in the dust. Every good program will attempt to inspire the squishy skills of creativity, resourcefulness and discipline, but often the teaching required to successfully collaborate with other individuals is sorely missing. Sure, we might be encouraged to work on group projects but very few of us innately have the interpersonal know-how to reap the rewards of real teamwork. We are after all each of us individuals with different needs, interests, and capabilities but frequently the rush to divide tasks overlooks the process of recognizing, embracing and appreciating what makes each of us unique. Unfortunately, we not typically taught to look for and harness each other’s attributes and to improve interpersonal skills in school.

According to Forbes, in 2015 McDonald’s commissioned an economic research study revealing that these non-technical skills contribute about £100 billion to the UK economy. This study found that 97% of employers believed soft skills were important to their current business success, while over half were of the mind that skills such as communication and teamwork were more important than academic results and yet, 75% pointed to a gap of these same soft skills in the workforce. If hiring managers select employees based on academic success and technical skills, it is no surprise then that non-technical skills are underrepresented in the workforce.

Columbia University professor Jonah Rockoff asserts that intangible skills are notoriously difficult to evaluate on a large scale, hindering attempts to collect and share best practices. Admittedly, it is difficult to assess non-technical skills, but performance reviews can and should evaluate interpersonal ability in a 360-degree format, capturing creative problem-solving, empathy for others and a wide range of other soft skills. It may take a cultural shift, but we should be measuring what we know matters: how we treat each other. We know intuitively that soft skills are essential to teamwork, productivity, and innovation and are crucial to delivering top-notch customer service, don’t we? (If you need hard evidence, see the summary of extensive research on the link between social sensitivity and effective teamwork at Google here.)

Service-oriented businesses cannot afford not to hire for, measure and manage non-technical skills. Given the widespread lack of academic training in the less technical domains, businesses can also not afford to leave such skills underdeveloped.

What gets measured gets managed - Peter Drucker

Need help measuring your soft skills or company’s customer service delivery? Contact us.

Soft Skills

Organizational Development

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Service: The Dots Are Connected. Are Yours?

by Mariette Johnson Wharton

If it seems like we are continuously pounding away on the subject of service, well, it’s because we are. It’s not that it is an overlooked topic, but it’s one that seems to need broadening in a company’s approach to its operations. As we all know, service is not simply the sales interaction as a customer walks into a store, or contacts a support agent or browses a website. It starts with brand, ends with the termination of a service or the disposal of a good (or does it?) and includes every touch point in between. One area that can be subject to disconnection from a service mindset is the delivery of a service or good or other operational aspects that perhaps management feels falls outside the realm of customer service. The same goes for the quality of a product or service. Beware this thinking and allow an example or two to illustrate the point.

Once a company has captured a customer, having succeeded well enough at projecting a solid brand image, delivering adequate service, marketing or merchandizing its offerings sufficiently and offering perceived value, the customer could be in a for a surprise in the delivery and receipt of the offer, potentially undermining the whole experience. Let us look at something that perhaps seems unimportant to management in the customer experience: the delivery policy, where the rubber meets the road and the wheels can easily fall off, leaving customers frustrated. One major retailer, Crate & Barrel, has a different policy than competitor Room & Board, as an example. Crate & Barrel’s policy requires customers to cancel a delivery appointment 72 hours before the date to avoid a $35 fee, yet it notifies customers of the delivery window 24-48 hours before the scheduled appointment date, effectively putting the customer in a bind. It has been known to deliver well in advance of the delivery timeframe as well, creating additional burden on the customer and undermining any goodwill that may have accumulated from attentive customer care during the shopping experience. Contacting the customer after a transaction does not equate to offering a reasonable delivery policy to begin with. By contrast, Room & Board has a more flexible appointment cancellation policy, does not exact fees for cancellations and has been known to arrive within the appointed window. Pricing and product quality aside, which company would you rather shop with? Companies tend to create these types of operational policies by department, instead of integrating them and taking a strategic approach. This leaves the customer feeling as though they are not dealing with the same company all the way through.

Even worse than disappointing policies, though, is poor product quality. On the Consumer Affairs website, it turns out that Crate & Barrel has a one-star rating of Consumer Affairs Unaccredited with complaints ranging from wobbling, cracking, sticky-taped products to missing delivery dates and improper credit card charges. Once a customer has experienced poor quality or service, no amount of excellent merchandising or customer service can save the brand image. An excellent delivery process does not suffice. After all, the greatest customer service insult is a product or service that fails to meet expectations.

If you are in charge of your company’s brand, operations or service, are you coordinating with other departments? Does your vision of delivering top-notch service consider the full customer experience from brand awareness to comparison shopping to delivery and disposal or termination and beyond (assuming potential repeat business)? Is it truly customer-centric, considering the customer’s needs, aspirations and obstacles? Customer service has to be consistent and inclusive across all interactions with the customer, creating a seamless experience through various touch points. Map out your customer’s journey and find out. If you need help, T. Aloise & Co. have extensive experience designing and conducting research and analysis on service.