Cape Town, 16 Apr 2015
The financial services industry in South Africa is an exciting sector. Despite the small size of the market, the offering in South Africa has the same diversity as the larger international markets and is, in some cases, more innovative and advanced.
The opportunity in South Africa and the rest of Africa for the sector remains significant, as increasingly less affluent markets are being tapped into. Nevertheless, success and growth are often hampered by the complexity behind products, and more importantly, by the consumers' inability to understand, differentiate and access services.
Lack of offering understanding hinders success rates
From a customer perspective, it appears many service providers seem to be offering the same product for more or less the same price. This results in confusion, slow uptake, ongoing customer attrition between competing brands or limited loyalty at best.
The spectrum of businesses in the financial sector spans many sub-sectors, including banking, short-term and life insurance, investment, loans and retirement and offers a great opportunity to create unique service bundles. However, success rates in this area are somewhat disappointing. This is contra-intuitive to the fact that customers, more than ever, are keen to find unified service providers that can address their needs with better context and hence provide better service at a better price point.
Success lies more in engagement, less with actual product
The gap is less in the products themselves but more in the way those are offered to consumers and the lack of engagement capabilities and processes around them. Most companies in the sector don't have a compelling consumer engagement strategy, framework and roadmap with a clear value proposition for customers.
The result is that the basics around what makes the product special, such as: "how can I try it?", "is it working for me?", "do I need to adjust anything?", "am I making the most of it?", "is there anything else I need?" are not being addressed by the current product offerings. This is either not possible to address or requires much one-on-one effort.
Today's customer wants to understand value, be in control
To a degree, these questions used to be answered by intermediaries, but consumer expectations have changed. Consumers today believe that products need to be simple and intuitive, and that knowledge transfer should be provided through online tutorials, videos, mobile apps and financial tools such as visual calculators, as part of a product sales or customer care cycle, without having to pay ongoing high commissions to a middleman. At the end of the day, you don't pay your GP commission. You make an appointment when you need to and only pay for the visit and the required medication - and that's it.
Mobile consumer engagement key to success
Consumer engagement is so critical to attract the right customers, encourage the right behaviour and create ongoing loyalty. In South Africa, consumer engagement relies increasingly on mobile. This is an obvious trend, as access to mobile surpassed 90%; smartphone penetration is getting closer to already exceeding 40%; and more than 60% of people are accessing digital content, such as e-mails, on their phones rather than on desktop computers.
While average annual advertising budgets in South Africa often vary between R20 million to R500 million and help no doubt with brand and product awareness, the effort is poorly applied to building inter-linkages between media channels and consumers. The latter should be used to build communities of purpose and enable rich, personalised and relevant consumer interactions. This can be used to drive consumer education on value perception, leading to better conversion rates in sales and assist with brand and product loyalty.
Companies need to move to outside-in approach
Interestingly enough, most companies have plugs into digital channels, be it SMS, e-mail, mobile Internet or even mobile apps. But, having access to channels and using them effectively are two different things that can be miles apart. Companies need to transform from inwards-facing design to an outside-in approach, ie, starting with the customer value proposition. The customer touch-point areas of sales, marketing and customer care need to also become part of the same consistent value planning and engagement plan. This is not a once-off endeavour. It takes continuous effort that includes measurement, innovation and ongoing, small incremental enhancements.
This means redesigning existing products, redeploying people and re-engineering traditional processes. It also means embracing customer-owned technology more to make products more personal and relevant, eg, built-in phone sensors, telematics, taking customer digital intelligence into account as well as leveraging data from current service usage to innovate and improve services.
This is a massive challenge for companies in the traditional financial services space. Grapevine has been working with a large number of financial service providers and their executives over the last 10 years, and the challenge internally is really big. The business itself, IT and operations are still, more often than not, resisting the change and are trying to compromise by adding or changing building blocks instead of changing intrinsic business DNA.
When companies realise the importance and potential returns from mobile consumer engagement, it becomes an obvious vision to implement. What makes it easier is that many of the required ingredients are often in the building and much of the required investment can come from a redirection of existing efforts.
Using existing budgets more effectively
For example, a mobile application is not a solution by itself, but an opportunity to create a radioactive brand-in-your-pocket. With such a capability, correctly implemented media spend can shift to more interactive, relevant and less expensive digital channels to drive the building of communities and create valuable digital relationships with existing and potential customers.
Instead, what has been happening is that many companies have spent the money on building a mobile application to tick the box, but the app has no interaction capabilities beyond the built-in functionality. As a result, it offers a limited path for engagement, and in Grapevine's experience, is a cul de sac that is typical for the traditional inside-out approach.
Maintaining a digital relationship does not require immense effort, but valuable ongoing interactions enable customers to build trust and allow companies to learn and respond to customer needs faster with less effort. Once consumers feel they are in good hands, and are given enough control and foresight into future value, they are more willing to extend their product portfolio, and, by default, offer better retention and increased loyalty to a brand.
The same applies to sales, where current funds can also shift somewhat to build educational tools, such as apps, that can convert the traditional business push mentality of financial services into a customer pull approach, driven by the customer. Similarly, customer care processes can be simplified and made available to customers as tools with incentives to use self-service, which in return reduces internal effort for support and brings down the cost of service.
Let's start with the business, brand, consumer, IT dimensions
A good way to start is to look at the business, brand, consumer and IT dimensions and create a strategy that embraces the unique value of a service provider to consumers to ensure a win-win between the customer and company from the word go. Once the value propositions for the consumer are clear, it's much easier to add engagement layers onto products and services and leverage technology and available means, be it internal digital channels, or social media.
Each time Grapevine works with companies, it's amazing to see how many of the required ingredients are in the building already to create a long-lasting consumer engagement. However, it is mind-boggling to realise how little focus is being given to this area, despite the amount of money that is being spent in the name of the customer every month.
Locally and internationally, mobile consumer engagement is a growing trend. According to Forrester Research, growth in this space is significant and is envisaged to grow globally to US$32 billion by 2018.
Given the great need for financial services in Africa, and the large footprint of mobile, it poses a great opportunity for financial services to create better, more relevant and engaging products with big potential impact on consumers and their own bottom lines.
Share