Part two in a three-part series on building effective customer relationship management.

Pursuing the right growth strategy is a crucial aspect of customer relationship management. Financial institutions are usually very good at defining their strategic objectives (improve profitability, increase net interest and noninterest income, etc.). However, when it comes to outlining their growth strategies, many institutions struggle to identify the best means for achieving growth.

5 potential growth strategies

There are five key ways a financial institution can pursue customer growth—by retaining existing customers, saturating existing customers, acquiring new customers in its current markets, expanding into new markets, or expanding into new products and services.

A smart institution adopts a mix of strategies so that if one falters, there are still others in place to support growth. The institution needs to uncover the best ways to meet customer needs, fueling both customer acquisition and retention while differentiating itself and its offerings from competitors.

To select the right strategic mix, an institution must gather up both market research and competitive intelligence. Armed with this information, it can then address four fundamental questions.

Where are we today?

An institution should have an understanding of its existing customers and the products it offers. It should recognize its current market position (geographically and demographically) and be able to identify where the competition stands.

The goal is to gather insight, build a model of what the marketplace looks like, and determine the institution’s current market share within that model.

Some of this critical information is readily available within the organization, though perhaps it hasn’t been tapped to support an actual market share analysis. Other information, such as competitive intelligence, can be purchased or gathered in the course of doing business.

In any case, having quality information is essential and valuable to the institution. By leveraging good information, an organization can create a powerful competitive advantage. By failing to use information that has been collected or relying on outdated data, an institution misdirects its efforts and money is simply wasted.

What are the potential opportunities?

With full knowledge of its current market position, an institution can then identify its best opportunities for growth. Will expanding geographically provide great potential? Is it possible to be competitive in a newly identified market? What cross-sell opportunities exist in the current customer base? What adjunct services or products might be introduced?

Overall, the empirical data—compiled, sorted, and clearly laid out—will help an institution see where opportunities are waiting to be explored.

What are the rewards, payoffs, ROI?

With each potential opportunity comes the need to determine its would-be profitability. To do so, an institution must look at aligning resources to support its strategic choices and examine the impact such choices will have throughout the organization. Will there be a need to invest in new equipment, process changes or people? Are there financial benefits in shifting customer service activities or transactions from relationship managers to a call center?

What are the barriers to achieving the results?

Obstacles and challenges must also be evaluated, particularly related to operations. A growth opportunity might seem attractive at the outset, but after an institution considers the impact on its people, processes, and technology, the barriers may outweigh the rewards.

With the valuable insights gleaned from these critical questions, an institution can be better prepared to choose an effective mix of growth strategies that’s just right for its circumstances.