CRM investment yields dividends

National Australia Bank receives international acclaim
for its advanced analytics capabilities.

by Keith Power

Australia's largest financial institution, National Australia Bank, was founded in 1858 during the pioneering-some may even say romantic-days of Australian folklore. However, the bank's long history and strong sense of tradition have not kept it from changing with the times.

In fact, the National has been something of a pioneer itself. Long before many of its competitors, the bank realized the need to become customer-centric, both for retail and business customers, and it has since set the pace in adopting CRM strategies and technology around its relationship banking model.

Since the late 1980s, the National has taken an integrated approach to better understanding its customer base and managing its business by using information at the customer level. The bank established one of the first customer information databases in Australia, and in the early 1990s joined forces with Teradata to take the National's CRM strategy to the next step.

At the heart of the National's CRM program these days is its National Leads engine (a Teradata Warehouse with CM3-previously known as Teradata Relationship Optimizer-sitting on top of the Teradata Database with inputs from Teradata Warehouse Miner, SAS and an Oracle data-store). It identifies and generates sales leads based on changes and events in a customer's transaction pattern. The National also has extensive capability and expertise in capturing and predicting customer needs and potential behaviors. In addition, National Leads serves as a communications gatekeeper, managing the frequency and content of communications with customers across a variety of channels.

The National developed the solution in 1998 in conjunction with Teradata, using the Teradata Relationship Optimizer. Although the Teradata Relationship Optimizer initially was developed at the National's request, Teradata has since incorporated its functionality into the Teradata CRM solutions.

Since that time, the National and Teradata have extended the product's capabilities through the development of the National's CM3 system, which the bank implemented in June 2003. This new system has helped speed up sales, allowing for continuous processing of dialogues with customers. It also helps implement supporting messages across secondary marketing channels, enable customer preferred channel contact and manage sales dialogue across multiple channels simultaneously.

National Leads has won a number of awards, with the latest being in December 2003 when the bank was announced as the gold winner of the 2003 National Center for Database Marketing (NCDM) Database Excellence Awards (see "Australian bank wins the gold," Teradata Magazine, March 2004). The National is the only Australian organization to win this accolade.

Teradata Magazine spoke with Charles Lawoko, the National's head of Customer Relationship Management, about the bank's award-winning CRM journey.

Q. What were the origins of the National's CRM efforts?
A. The whole journey started around the National developing the capability to manage our business at a customer level rather than at an account or product level in order to understand where the customer's profitability and extent of the relationship with us lies.

A lot of companies still look at information at an account or product level, but that isn't the total relationship the customer has with the company. You have to consolidate the customer information and do all the analytics and understanding of customer behavior at the customer level.

When we first managed to set up what is usually referred to as a 'customer information file,' modern relationship database technology did not exist. I think the National saw there was a great need to be able to consolidate information about the customer in one place.

The natural progression then was that if you have information about the customer at a customer level, you want to be able to manage relationships and manage marketing programs at a customer level. That's when Teradata came in, around 1994.

Q. Why did you choose Teradata?
A. Most campaign management systems back then were just based around being able to send direct mail, but being a large financial services institution, we wanted to be able to manage campaigns and communications with customers that were both multi-channel and multi-step. That means we could initiate a campaign or discussion with a customer via one channel, and that might step into another channel. For example, we might send you, as a customer of the National, a letter saying that when you respond to that letter, a banker will call you.

All of that needed to be managed by one set of software, and at the time there wasn't really anything available to do that. That's partly why we had to build this solution jointly with Teradata, which was the right fit.

Q. How does National Leads operate?
A. If you identify an opportunity, you want to be able to do something about it very quickly and disseminate that information to the right channel. National Leads allows us to do that. It runs every night looking for opportunities at the customer level, rather than at the account level. One key differentiator is that it uses transactional data rather than just summarized data. We are tracking our transactional database on a daily basis and watching the heartbeat of the customer.

Our Teradata-based CM3, along with specialized event detection, will pick up if a customer does something that we think is out of the ordinary or personalized (for that customer). Once we identify such opportunities, we can act overnight and let our bankers know so they have hot leads waiting for them in the morning, rather than them having to cold call. When bankers log in to the system they access their leads from us via a Teradata-to-Siebel frontend application, which they also use to pump Teradata-coded information back into National Leads.

Q. What sort of processing levels are we talking about?
A. When National Leads first went in we had about five campaigns running at any given time. Now, on average, we run between 300 and 500 individual campaigns every night-we have sometimes run more. Our software touches a transactional table that is on the order of billions of rows. Every time somebody does a transaction with us in any of our systems, any information that we consider relevant gets pumped into the National Leads system. National Leads also has access to historical information along with predictions and other analytics stored in our global data warehouse.

Q. Who uses the information?
A. All of our relationship bankers and some of our call centers, and obviously we can send information directly to customers via channels that don't involve human beings, such as mail, e-mail and the Web. The number of people would be in the thousands.

Q. What are some of the ways it works in practice?
A. The typical example I use is this: If a customer suddenly deposits a large amount of money-way beyond their average weekly or monthly savings-event detection will pick that up. We will then use our campaign management system to let the customer's relationship manager know about it. The customer may have won the lottery or come into an inheritance or something, and the relationship manager might be able to talk to him or her about investing that money rather than just letting it sit in a savings account.

Another example would be if a customer called and asked how much it would cost to pay off his or her home loan. The chances are either that, again, the customer has come into some money, or the customer is thinking of moving or switching to a competitor.

So if the person that the customer spoke to enters that information into the system, we will be able to pick it up that night and let the relevant people know about it the next day. If they think it appropriate, then they can then initiate some discussion with the customer about why he or she wants to switch.

We also do a lot of analytics and statistical modeling around customer behavior using Teradata Warehouse Miner and SAS Enterprise Miner, and by understanding needs and building models, we can initiate marketing programs on the basis of that.

We communicate with the customer via whatever channel we think is appropriate. It's not just sending out letters. We have successfully run a pilot on automatic teller machines (ATMs), some of which are from NCR. When customers withdraw money we are able to give them a targeted and personalized message. They won't just see a general banner, but they will actually receive a communication about something to which they can respond. And National Leads captures those responses. We know we can do it technically; we just have to decide on deployment options.

Q. How does all this translate into business benefits?
A. We have witnessed an increased share of wallet in key customer segments, and we have certainly been able to reduce our non-targeted marketing programs and some of our above-the-line marketing costs compared to, say, five or six years ago, because a lot of our marketing has become more targeted rather than typical mass-media marketing. We do (business) faster. It would be possible for some companies, if they really did want to know, to find out if somebody has rung up and asked for a pay out on a home loan. But the challenge is then, what do they do about it? And how quickly?

For a lot of companies it becomes a list in a spreadsheet that gets e-mailed or faxed to someone else to perhaps call this customer. Sometimes it takes a week to consolidate that file and then another few days to put it all together and send it to the right person to action it. I know companies that still do that, and yet we can do that overnight without human intervention.

One thing I think people also tend to overlook is that what we have here allows us to be able to monitor and determine what our sales force is doing. We can tell our bankers what they should be doing this week, and we control that by either turning up or down the volume of leads that go to them in the particular areas we want them to focus on, such as investment programs. When our bankers act on those leads, they record the feedback in the system, and we can see what's going on. It's really helping us drive our business.

Q. What have been the principle challenges along the way?
A. I think by far they have been around change management and getting our people to understand that this is a different way of doing business.

We can do all the analytics in the head office and identify and send leads to the bankers, and the banker has to trust that there is value in them. But this is not an exact science. Some leads are going to be very hot and some of them will not be. Sometimes bankers will get a lead and almost think, 'I'm going to make a sale out of this,' and they don't.

So there is major work we constantly do to get the bankers to understand this. It's an ongoing challenge because people change roles and new people join the bank, and I think there will always be a challenge partly around the adoption of technology. In hindsight, I would have spent a lot more time on change management right at the start.

Q. Teradata is one of your strategic partners. What does that mean in practice?
A. It means that we understand each other's business better, and therefore we can understand upfront how Teradata can help the National better meet our needs rather than having a purely transactional relationship. It is important for the National to understand what solutions Teradata can provide without necessarily putting out a request for information asking companies to tell us whether they can provide a solution or not every time we want to work on a big project.

We have our own technology staff who are fully trained in Teradata applications and who provide support, but we also involve some of Teradata's Professional Services people to help us when necessary.

We also own Bank of New Zealand (BNZ), and we run National Leads-type capability for BNZ from Australia. Teradata Professional Services has been involved in helping us make that a reality. Plus we are investigating ways of being able to do that for our business in the United Kingdom, again from the same Teradata platform.

Q. Would you choose Teradata again?
A. Yes. In my mind, the evidence is becoming even more overwhelming. When I travel overseas to conferences and I look at some of the largest banks and institutions that have very complex data structures, they all use Teradata. In fact, they tell me they don't really have much of a choice at this point in time.

Q. So Teradata makes sense for you both technically and cost wise?
A. No question about it.

Q. What do you think the NCDM Award you won last year says about your CRM efforts?
A. I think it says that the capability we have been able to develop over here obviously compares very favorably to the best in the world. That is quite exciting for what is, by world standards, a relatively small company.

The award also demonstrates the National's commitment to developing processes that support our CRM strategy for banking and wealth management. We were early adopters (of CRM), and we continue to do new things, a lot of which the market doesn't even know about yet. We try to push the boundaries using technology to manage our business and our customers.

However, the critical success factor for me is when our customers become our advocates. Then, I think we will really be using technology to manage relationships with our customers well, and we will also have gotten the service component right. T

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