“A CBC report earlier this week about TD employees pressured to meet high sales revenue goals has touched off a firestorm of reaction from TD employees across the country — some of whom admit they have broken the law at their customers’ expense in a desperate bid to meet sales targets and keep their jobs.”
TD Bank Group’s response:
In an emailed response to Reuters regarding the CBC story, TD Bank Group said, “The environment described in the media report is very much at odds with how we run our business, and we don’t recognize it from our own perspective, experience or assessments.” >
And TD Bank’s stock performance that day.
What can CEOs and Senior Marketers learn from this experience?
From a business standpoint, it is important to note that TD Bank Group is an amazing business operation with $1,177B in Total assets, 81,978 employees, an impressive 14.2% Total Shareholder 5Y CAGR vs. 12.6% for its Canadian peers for the same period and a Common Equity Tier 1 capital ratio of 10.4%. The organization outperforms many leading Canadian and North American peers.
While the accuracy of the media coverage of TD Bank may not have been verified by independent third parties nor is the coverage in the scope of this article, it is important for Management Teams to understand the risks associated with product cross-promotion strategies. A consistent challenge identified by CEOs to Arcus in our research has been integration of business units and product portfolios into a seamless customer experience with unified customer support and marketing channels.
Building a Customer-Centric Business Model for Financial Services is a complex endeavour and Arcus can state with some confidence that very few organizations have figured out how to deal with the problem. How far should integration go? How can product portfolios be aligned with client expectations. What levels of engagement are appropriate for each product? How do product life cycles align within each product cluster based on consumer behaviour and interactions with each product category?
Cross promotion strategies have generated significant shareholder value in many sectors including financial services, telecom and others. It is an effective strategy to strengthen customer loyalty. However, the impact on a brand’s reputation can also be disproportionate and severe if the strategy isn’t stress tested for good-better-best outcomes.
Some insights from Arcus’s Dec 2016 financial services research survey of 329 senior bank executives:
- Cross-selling is a priority for a majority of banks but most enterprise-wide cross-selling strategies are in their infancy. These strategies do not have an integrated set of incentives to cross-sell and are more likely to have limited visibility and fragmented brand loyalty across product portfolios.
- The credit card business is likely to be a separate business unit vs. the retail business (mortgages, loans, and other personal lending products).
- Due to secure, longer life cycles, mortgages have not been a priority for banks to increase customer satisfaction and retention. Even though this is probably the most significant relationship between banks and customers.
- Technology redundancy is another problem. Most bank IT platforms have been designed around business, operational, and support silos. While some progress has been made to integrate shared services and support, these silos are largely intact especially in connecting client-facing staff insights and customer behaviour analytics.
Five actions for management teams
Here are five actions for management teams to consider to address the risks associated with augmenting revenue per customer with cross-promotion strategies.
1. Conduct a “what if” risk scan within a scenario planning strategic framework.
It is astonishing how many organizations barrel through their annual strategic planning processes without looking at good-better-best outcomes. An Arcus survey of 1463 senior executives found that just 4% of organizations have looked at calibrating the outcomes of their strategic plans. Without a calibrated strategic plan, organizations are deploying plans on unrealistic outcomes and 0-1 scenarios.
2. Look at the “People Side” of implementation within the cross-promotion strategy
Does the deployment plan include a robust feedback loop from client facing staff? How often is satisfaction data collected from both front-line staff and clients? Are both data points correlated for patterns and aligned with product revenue growth? For example, our research of 240 organizations indicates an early sign of elevated risk is when sales and satisfaction indicators diverge. For example, when front-line staff satisfaction drops while revenue of cross-promoted products grows. Some organizations have moved to align client feedback with employee compensation. Sun Life Financial Inc. is moving to tie employee compensation to client feedback for 21,000 employees with 25 percent of of annual incentive rewards based on client feedback.
3. Develop a decision support framework to facilitate accelerated “issues management”.
A contingency plan? Most companies consider them to be unnecessary. Of course, how often do black swan events occur? Almost never. But when they do occur, they can have devastating consequences not just for an organization’s reputation but also for individuals in the eye of the storm. So how does one prepare for such events without consuming inordinate resources? Go back to #1 above. If you start with a robust scenario planning framework, potential black swans would be in your considered-set and you would have a contingency plan for such unlikely scenarios.
4. Get executive team buy-in on a contingency plan.
A plan is only as good as the funding behind it. Without adequate funding and evidence of executive buy-in, it will be difficult to execute a plan quickly. Running through hoops to address budget gaps in an ongoing crisis is not the most efficient way to manage such a situation. Hence, ensure you have a line item in your budget for contingency and scenario planning. What does that mean? It means you have a 5-10% buffer in your research and product marketing budget to address contingencies.
5. Stress test business unit and product line revenue growth targets
Are your targets too ambitious? Arcus recommends “stretch” targets for a range of brand and marketing performance metrics such as trial, share and sales targets. Most marketers understand and probably have implemented this framework. But few really operationalize the framework. Stretch targets are usually 20% above base (minimum) targets. With a calibration of 5% intervals to the top performance level.
What are the common challenges organizations face to improve their culture and product marketing performance? What challenges have you faced within your product portfolio/business unit? Read more research and insights from Arcus.