Chief Investment Officer
what do wealth management, private banking and hotels have in common
Wealth Management and Private Banking are lines of business that rely primarily on service for differentiation. While the product line and pricing are important considerations in initial selection, it is inimitable service that ensures sustainability and customer retention. The question is, how does a bank create a tangible competitive advantage through outstanding service? It is a question we have struggled with for ages.
This issue is critically important for many reasons:
- Outstanding service decreases price sensitivity
- Outstanding service meaningfully lengthens retention; this is particularly relevant to the wealth management business since customer acquisition is difficult and the sales cycle very long, so replacing existing customers is most challenging
- Outstanding service leads to word-of-mouth referrals, which are truly priceless, especially in this space
Operationalizing this concept isn't easy, since customers are very different, as are their expectations. Something that will delight one might offend another. Hence, standardizing behaviors isn't the answer. In other words, creating a calendar of contacts by type and frequency for various levels of customers by profitability might be easier to implement for us, but might miss the mark entirely from the customer's standpoint.
Luxury hotels face the same problem. Their product is somewhat differentiatable by the property itself (akin to your investment track record, for example), but the ultimate "win" is 1:1 marketing at the individual customer level. Sounds like mission impossible? Think again.
I'm writing this while on a plane in India, having just left Hyderabad. We stayed at a top-end hotel that was the palace of the sixth Nizam (ruler) of this area. The property is truly breath-taking. And yet, our decision to return to India within the year, including to Hyderabad, had little to do with the hotel itself. Let me share some examples:
- Upon arrival we were greeted by a selection of beverages. The hotel was already informed of my preference for sparkling water with lots of lemon juice, but offered several kinds of sparkling water, plus a few local iced teas for Dick. The display was opulent. We felt pampered. The cost: one bottle of Perrier and one of local iced tea.
- During the visit I broke my camera. They took it immediately to be repaired, while offering an alternative camera to ensure I wouldn't miss any pictures during the sightseeing.
- Our room was permanently stocked with Perrier and lemon juice.
- I worked out at the gym after dinner one night. It was closed but they opened it at my request. The next night the gym was well lit, pre-air-conditioned, and a guard posted at the door given the lateness of the hour to ensure I could exercise in comfort.
- I mentioned we are going to the local market to shop for spices. Upon departure we were stunned by a gift of a dozen spices especially packed for us. (Estimated cost - $4).
As you consider these activities which made us feel like the seventh Nizam, they all had several aspects in common:
- They were inexpensive. None of the gifts or attention showered upon us required any meaningful capital or staff investment.
- They were 100% customized.
- They involved keen observation skills by the staff.
- They were anticipatory. We never had to ask for anything. The learning was instant and immediately institutionalized.
I learned from the Taj Hotel in Hyderabad that institutional learning is 100% possible. Here is how:
- We had a "relationship manager", someone who took care of us and found out about our particular preferences. That person, Nikam, wasn't with us all the time, and he wasn't a highly experienced hotelier either. He was 24 years old, 2 years out of college. But he knew what to look for.
- The RM entered our preferences into the hotel's database and communicated them widely throughout the hotel and its sister hotels elsewhere. Consequently, anyone we met already knew that Mrs. Bird, the lady with the long hair, likes her Perrier with lots of lemon juice. Or that we both love food. So pleasing us became much easier for anyone in the system.
- The RM also communicated any specific preferences (e.g. I mentioned scones one day, and they appeared on the breakfast table with lightly whipped cream as I like; or we expressed preference for local cuisine, so every morning they prepared a special local breakfast item for us) to all impacted parties kitchen, spa etc. Like a call report, he disseminated new information through the (CRM) system to other lines of business. Thusly, when we communicated with any waiter, they already knew how to pamper us. They didn't have to ask whether we have any food allergies. They already knew about Dick's nut allergy.
- Our picture was also posted in the CRM system so that anyone on staff knew who we were. So we felt important and recognized, being special guests of the hotel, rather than just paying customers.
- The hotel showered us with small acts of kindness. They gave me another comb noticing my long hair, or extra conditioner and towels to accommodate it. They put more fabulous English cake in the room since they saw me inhaling it earlier. As mentioned before, none was too costly, but all were special for us. NOTE: I'll never forget the wealth management outfit we were with for a few years that kept sending us pecan pie for the holidays every year in spite of the fact that I mentioned Dick's severe nut allergy in conversation numerous times. Eating that pie could literally kill Dick. This is an excellent example of paying no attention to the individual customer needs, and it made us feel like unappreciated customers. We knew that, despite all the nice words, they had no idea who we were.
In sum, The Taj managed to institutionalize our relationship through special training of relationship managers and the effective use of technology. Both can be used to add value to clients and build lasting relationships.