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 / Spring 2004 / Issue 34(originally published by Booz & Company)


Smart Customization: Profitable Growth Through Tailored Business Streams

Focus: Smart Customization at Bank of America

Although the advantages of smart customization are perhaps most obvious in manufacturing, because there is a direct and fairly immediate payoff when factory costs are aligned to customer value, services firms can also gain enormously from it. Providing services requires more ad hoc touch points with customers than does manufacturing and requires more flexible systems for delivering products; thus, service businesses are more fraught with complexity risk and more open to opportunity than slower-moving manufacturing businesses. But to succeed, service companies, like manufacturers, must consciously balance the cost of complexity against the value of variety, reconciling the benefits of volume sales growth against the accretion of overhead and indirect cost expenditures.

Those trade-offs were bedeviling Bank of America’s Global Treasury Group, a $4 billion business unit that conducts cash management services (wire transfers, lockbox, foreign exchange transactions) for institutional clients, many of them multinational companies with multiple locations and points of contact. Like most financial-services companies, Bank of America (BoA) tended to segment customers by asset size and by how much business they did with the bank. More active customers got more attention from sales and marketing staffs, who tried to up-sell new services to them, than did smaller, less profitable accounts. But service and support provided to customers on a day-to-day basis was the same for transaction-oriented customers and for customers with deeper needs. After signing up a client — whether a large account or a small store — Global Treasury tried to ensure customer loyalty by offering high-touch customized services, through a service-desk environment. The variety of customized service that a customer could expect was endless and so, it seemed, was the cost of providing it.

“We tried to be all things to all clients,” says Lisa Margosian, senior vice president for global client services at BoA Global Treasury. “We knew we were underserving some clients, but we couldn’t always identify them. And we knew we were overservicing some, and it was too costly. What we built for the most demanding clients dominated everything we did. Too much energy and resources were offered to all clients indiscriminately. Some clients commented on how costly our service model must be. Yet others told us that routine tasks took 45 days to get done.”

Although the division was quite successful, future profitability pressures loomed. Global Treasury was a tight-margin commodity business, and technological advances promised to continue to pressure the margins. Management was convinced that customer service was a fundamental way for the business to distinguish itself from its four large rivals, which each had about the same market share as Bank of America. Getting the equation right was crucial to the division’s continuing competitiveness.

Bank of America, together with a Booz Allen team, undertook a comprehensive review of its business streams in Global Treasury. The teams reviewed customer segments, demands, and servicing simultaneously, asking such questions as, “How many different groups are touching this client? Who is furnishing what to whom? How do clients use servicing and implementation?”

Ms. Margosian recalls, “We wanted to find simple ways to do the simple tasks, and at the same time cater to clients based on needs. We wanted to look across all functions and channels, and bring this together in a model that allowed us to deliver more to our clients who really needed the highest touch, less to others, yet maintain the best quality standards for all.”

Global Treasury created three distinct customer service streams, segmenting clients according to service needs: basic (a quick, mostly self-directed product for accessing account information and conducting transactions); alliance (an ongoing relationship with customer service representatives who help with transaction processing and proactively contact clients when an account issue needs to be addressed); and strategic (consultative services with highly trained bank representatives who offer expertise in managing accounts). Multiple channels were designed to support these service streams. For all clients, Bank of America encouraged migration to self-service for simple tasks. For those with higher-order needs, call centers and service pods were designed.

When this process is complete, it’s anticipated that 60 to 80 percent of Bank of America’s customer transactions will flow through the simpler channels — easier and faster for clients, and cheaper for the bank.

Global Treasury forecasts that it will eliminate 20 percent of its customer service costs; initial metrics indicate that client satisfaction — driven by the new levels of account management convenience and flexibility — is as high as or higher than before the bank reengineered. The three tailored business streams allow Bank of America to realize full value from its customers while keeping the costs of complexity to a minimum.

“This approach is getting us scale where we need it, but allows differentiation where it’s important,” Ms. Margosian says.

— Atul Kamra

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  1. Leslie H. Moeller, Sharat K. Mathur, and Randall Rothenberg, “The Better Half: The Artful Science of ROI Marketing,” s+b, Spring 2003; Click here.
  2. Tom Hansson, Jürgen Ringbeck, and Markus Franke, “Flight for Survival: A New Business Model for the Airline Industry,” s+b, Summer 2003; Click here.
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