I sleep better when the world makes sense. 

Despite its Lean techniques, Toyota, a customer-driven business icon, is struggling.  It makes no sense.  In my attempt to understand their sudden woes, I somehow found my way back to consumer banking and was struck by what I found when I connected seemingly disparate parts of the business environment together—the massive Toyota manufacturing defect and the bank crisis, starting with subprime.   What role does a passion for the customer play in defects of the risk, profit, and accelerator pedal varieties?

How Customer Centricity Killed the Economy, will be the title of the book that I someday write but for now, I am satisfied just to understand the role that a relentless pursuit of serving customer needs played in getting us to where we are today in consumer banking.   Customers hated the onerous process of getting a mortgage and data suggested that risks were low enough to accept fewer, if any, pieces of paper so enter low-doc mortgage.  Customers wanted to buy better homes or get into their first home faster and home values were climbing so enter pay-option arm.  We were all happy until the floor fell out from under us.

There’s more.  Within the heart of consumer banking emerged the head of Customer Experience.  This role was intended to ensure that the bank is well-equipped to understand who the customer is, create the products that they value, and deliver them in a way that they value.  The net result of these worthy aspirations was a culture of saying yes.  The yes culture, in turn, yielded an unintended result, permissiveness and sloppiness under the umbrella of customer centricity.

So among the many consequences to consider as we rebuild the foundation of consumer banking is the customer experience.  How far will we go to deliver a customer experience that exceeds expectations?  Are we willing to accept a lower overall satisfaction score?  Can we reset to lower customer expectations? Can we start saying no and preserve and grow our customer relationships?

Yes. Banks can reduce customer attrition risk by 69% by providing “willing and capable help.”  Yet, banks only provide it one-third of time when a customer brings a problem to the bank. Could missing such an obvious service standard be evidence of a major flaw in the customer experience strategy?

In our recent study, Realizing Greater Revenue From Service, we argue against customer delight using evidence including the cost to deliver it and the difficulty of executing it in the real world.  We land on the need to consistently deliver service to a baseline standard that emphasizes solid execution.  In the study, a case from Rustin Bank (pseudonym) provides a very clear and simple framework for focusing customer experience investments on only that which matters.  Basically, there are 4 steps:

1. Pick a product and understand the baseline service expectations for it.
2. Understand how well you perform against the standard.
3. Understand how well your competitors perform against the same standard.
4. Cancel all investments that achieve something other than closing that gap.

If you read this case study, you might have dismissed it as unnecessary or inconsistent with your business strategy.   I urge you to go back to it.  Above all else, Rustin demonstrates the power of trade-offs and of making tough decisions.  Push a few steps more, and Rustin shares a way to start saying no.

So, can we connect the plights of Toyota and consumer banking?  Practically speaking the answer is no.  Through a philosophical lens however, the answer is yes.  Right now, past investments in customer centricity are not paying off.   It’s argued that Toyota abandoned it for growth and blew up its brand.  Banks abandoned prudent management in the name of customer centricity and blew up the industry.  The moral of the story? Customer centricity is powerful; too little or too much can destroy a business or an industry.

Please share your thoughts on the post-crisis customer experience.