Interview with Michael Ruckman, Founder and President of Senteo, and Tom Mouhsian, Partner and Managing Director for Eastern Europe (Las Vegas, USA).

Originally published in Russian on on June 27th, 2012”


Q: What was the purpose of founding Senteo? What unique methodology does it offer to banks?

M.R.    I have worked in consulting for many years.  In John Ryan, for instance, we were consulting in the area of banking transformation. In many ways it was consulting on “cosmetic” transformations; for instance, creation of a new brand, a new look, new branch design, and communications. Later, at PricewaterhouseCoopers, I worked in a team that participated in the process of internal transformations of banks, including operations, management model, staff development, cost optimization, risk management, etc. Basically, we took the old banking models and made them new. At the time, many Russian banks were undergoing some sort of transformation. But we could only make general recommendations. We could not go any further with our clients. These recommendations, were certainly useful in terms of contemporary best practices in banking, but many of our clients were anxious to receive specific recommendations and instructions; for example, how to implement their strategic plans.

Consultants are usually distinguished by the fact that they give a lot of paper and theory recommendations; and then they leave. I saw that there was a great demand for combining the cosmetic transformation with all the necessary changes that touch upon the internal functioning of the bank (e.g. operational efficiency, proper staff development and training, management model, and project management capabilities for implementation). So we decided to create a company that would solve our clients’ problems with a complex solution. A company that not only could establish strategic objectives for clients, but also to accompany them through the entire transformation process, step by step. It is impossible to take an old bank, and – oops! – get a new one in a week.

Almost my entire career has been associated with banking in developing countries. I’ve worked in almost 30 countries. One can easily trace the main stages of evolution of retail banks in emerging markets. Usually they start with a problem (goal) of attracting more new customers. The key at this stage is the efficiency of the sales team; the main task – to sell more banking products to maximize the bank’s customer base. Ten – twelve years ago, it happened in Russia. Banks there began to actively work with payroll projects, because it was a good way to immediately gain clientele. That led to an explosive growth in the customer base.

Then, there was a whole host of other problems: the problem of customer retention, the task of improving operational efficiency to reduce the cost of service, etc. Banks found that 80% of the acquired customer base does not generate a profit. Banks began to finally realize that their retail operations can be quite unprofitable.

Later, banks were faced with the fact that some of their customers would leave and go to a competitor. For instance, there is often a situation where customers receive their salaries in one bank but use someone else’s day-to-day banking services. Bankers began to feel that they ought to know their customers better. So, therefore, a lot of banks started to think about product personalization, customization, development of new offerings that meet the specific customer expectations, etc.

I would sum it all up in the following sequence, depicting the evolutionary development:

•    Customer acquisition, sales

•    Improving operational efficiency

•    Creating customer loyalty

We have developed a unique methodology, which is designed to help banks improve the relationship with their customers. There are many different methodologies for measuring the degree of satisfaction of bank customers. You probably already know about the Net Promoters Score methodology – one of the most popular today. The most important questions in their methodology are “Would you buy this product again?” and “Would you recommend this product to your friends?”. But in terms of measuring the relationship quality, this is not a relevant indicator, since we cannot sufficiently predict the future customer behavior. In fact, the NPS does not account for the fact that the customer can be easily susceptible to offers from other competitors. This index only reflects customer’s willingness to purchase a product today. Essentially, the NPS is a product-oriented methodology, and not necessarily a relationship-oriented one.

A good indicator for predicting the future customer behavior is the strength and quality of the relationship. As I said, there are three different cycles of evolution: attraction, retention, and relationship building. A bank customer does not dream about a car loan, he dreams of a new car. He does not need a credit card, he seeks the freedom to shop when he wants. At the first evolutionary stage the main objective is to create a reason why a customer would want to purchase a banking product. At the next stage the objective is to remove the reasons why a customer may want to leave. And, finally, at the last stage the objective is to establish a reason or reasons why that customer would want to stay with the bank and even become less sensitive to price because the value of the relationship outweighs the costs.

Following the logic in the relationship-building stage the task is to create a desire among customers to consolidate all their financial relationships in one place. The current trend in the world is that customers have ongoing relationships with multiple banks. Indeed, they can be loyal to one bank within a particular product category. For instance, one may have a credit card in one place, while the mortgage in another place, and then use another provides for a car loan, and so on. In this type of scenario, customers make their decisions primarily based on price comparison.


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