How to pivot to a wedge strategy to drive customer acquisition and growth

The post-COVID-19 world calls for a customer-focused strategy that enables hyper-personalization and a customer-centric P&L.

As financial institutions (FIs) enter the post-pandemic world, they face a consumer landscape undergoing sudden and radical change. Growth, for many FIs, has been elusive amid a sluggish economy and fierce competition from nimble FinTech players. Customer expectations have been transformed to make “anywhere, anytime” banking the norm. And in the face of economic insecurity and financial confusion, customers want a solution that helps them meet financial goals and critical life needs. 

To succeed in this new environment, banks will need to create models that put the customer, not products, first. FIs that demonstrate empathy and are able to translate it into personalized experiences will emerge as winners in the post-COVID-19 world. We’ve seen the approach work — Amazon, Peloton, Spotify and many other customer-forward firms have revolutionized their industries. 

Why are financial institutions here?

FIs have historically lived in silos and operated on an inside-out basis, meaning they focused on creating products and solutions to fit their lines of business rather than fitting their lines of business to the customer. This approach resulted in one-size-fits-all banking experiences where customers were left to self-serve products and where customized bundles and solutions were nowhere in sight.

The inside-out strategy fundamentally limits integration across products, services and features, and leads to inconsistent experiences and value delivery. This is the primary impediment to crafting personalized solutions. Put in simpler terms: banking the old way can’t produce the stuff people want nowadays. 

Banks have three challenges to address:

• The inability to curate products and services, resulting in generic, undifferentiated capabilities
• An incomplete understanding of a customer’s finances, limiting the space for personalization and genuine, holistic advice
• A disconnected experience across products, limiting lifetime value potential and reinforcing the belief that banks don’t know their customers

So what should financial institutions consider as they embark on this journey?

FIs need to build a new ecosystem, one that focuses on personalized service offerings that engage a single customer group at a time — what we call a "pivot to the wedge" strategy.

The benefits to that strategy are that it:

• Allows banks to be sympathetic to customer pains and actually provide a service that helps them
• Facilitates a “build once and use many” system by improving upon, rather than designing anew, a bank’s infrastructure
• Creates the potential for a halo effect that drives value across segments

Our approach to activate the wedge strategy 

Anchor your ecosystem in holistic, hyper-personalized experiences

FIs must identify new value propositions for their customers — organizing around the sale of products is not effective in the current landscape. It will take lifestyle-based offerings to make a difference. The customer, not the product, will be the P&L.

For FIs, this will require a major rethink of their businesses. Institutions will need to invest in data and analytics capabilities to put themselves in their customers’ shoes and explore new partnerships, business models and value-added experiences. Then, they’ll need to synthesize these ideas into an integrated offering aimed at improving their customers’ financial well-being.

Perhaps the biggest task will be achieving hyper-personalization at scale and tailoring efforts to feel timely, relevant and credible. This requires analysis of transactional and behavioral data and an adoption of open platforms so that information can flow to trusted partners. “Closed-loop, data ecosystems” can help realize hyper-personalization at scale because they enable a continuous learning cycle for artificial intelligence to serve customized and contextual experiences, content, offers, recommendations and insights.

Transform your business model to put the customer at the center

Create personalized value propositions

To start, FIs should define their wedge strategy — their integrated value proposition — to target a specific audience of customers or primary needs. They should then reach that wedge with capabilities most relevant to their value propositions. For example, if a bank identifies that recent graduates care about savings and debt management, the bank should tailor its online services to make savings and debt management easier for this group and tie those capabilities to the lifestyle and life stage priorities of that audience.

This method allows FIs to build momentum through quick wins, while simultaneously establishing a process that tests, learns and adapts based on customer feedback. The result: FIs can create network effects to drive greater value across segments, allowing each dollar invested into the business to go further.  

Invest in your data ecosystem: customer insights enable hyper-personalization

To truly serve an audience-of-one, you need to place data in the hands of decision-makers. Some of those decision-makers might even be algorithms.

Machine learning can enable personalization at scale, synthesizing large quantities of data to recommend products to customers based on current interests and circumstances. The goal is to engage clients with the right content, at the right moment, in the right space. Personalization can and should exist across channels — from online and mobile experiences to targeted emails and text messages to AI-powered chatbots. Additionally, front-office staff should have access to the resulting data so that customer experiences are seamless between the digital and physical realms.

However, to pull off a successful personalization strategy, FIs must also invest heavily in data security and data governance. Personalization is about adding value to a customer relationship rather than just marketing more effectively.

Shift from product-centric P&L to customer-centric P&L

Your customers are your competitive advantage, not your products. Customer-centricity shifts value away from profit pools that are based on a product or line-of-business (LOB) model to a customer-need-based revenue model — any other outcome isn’t customer-centric. This breaks the traditional, siloed structure of financial institutions and creates a framework to aggregate products and services into curated solutions. The downstream impacts will be profound, touching marketing, distribution, underwriting, finance, operations, technology, risk and compliance. What’s more, new KPIs and metrics will come along with the change, fundamentally transforming how businesses consider their success.

Let the facts drive the decision-making

Collaboration between a financial institution’s business, technology and marketing leaders is key to customer-centricity, but the process is more powerful when informed by rigorous data analysis and qualitative research. A modern approach to user research, rapid concept testing and experience delivery will help banks focus on their “Minimum Awesome Proposition” (MAP), not just their MVP. “Viable” is not a synonym for “good.” This test-and-learn mentality means bad ideas fail fast, and good ones are accelerated for approval. 

The authors would like to recognize Puneet Singh, Managing Director, Ernst & Young LLP for his contribution to this article.