I T ’ S A L L A B O U T C U S T O M E R R E L AT I O N S I N T H E F I N A N C I A L S E R V I C E S M A R K E T
Recently, the Principal Financial Group was honored as holding the number one ranking in InformationWeek’s annual survey of U.S. companies making the best of use of information technology. Principal’s best use of technology centers around customer relationship management as a strategy to fuel current and future growth. Principal manages $206 billion in retirement savings, investments, and insurance for more than 15 million employees working in over 100,000 small and mediumsized businesses. Principal has a strong presence in the United States and also abroad. Principal’s international business in 2006 grew to $604 million, up nearly 17 percent from the previous year. Principal operates in such countries as India, Hong Kong, Brazil, Chile, and Mexico. All told, it managed $6.7 billion in retirement assets outside the United States in 2006. Total revenues worldwide grew 8.5 percent in 2006, to $9 billion, while profits were up 9 percent, to just slightly over $900 million. Principal’s integrated approach to portfolio development and knowing each and every customer intimately has led it to engage its over 1,000 benefits counselors and 15 million customers in a Web-based and easy-touse system that offers investment advice and gives each customer a personalized monthly snapshot (on paper as well) of their retirement outlook. What’s the role of information technology in all of this? As CIO Gary Scholten explains the big picture, “Our main purpose for IT is helping Principal grow, but the mantra we have is to help it grow responsibly.” Nonetheless, the nitty-gritty of IT is where the real money is made. Principal collects and analyzes huge amounts of information on each customer. Using that information, Principal can then sell them retirement plans, adding additional financial service products such as mutual funds and insurance. In the realm of insurance, for example, Principal can determine which of its customers would benefit most from fast-growing add-ons like vision, dental, disability, and life. The company even has a series of “milestone” financial service products. These allow Principal to offer advice to customers about moving money among funds and financial products as they near retirement or perhaps have children going off to college. To support this, Principal has gathered extensive information on each customer such as age, marital and family status, salary, and benefi ts. Within the IT infrastructure, Principal has invested heavily in technologies that support fast turnaround times for transactions. Gary estimates that Principal processes almost 1 million online transactions per day (that’s only 1 for every 15 customers). These transactions are processed and posted in record time, giving customers the satisfaction of real-time financial transactions. 14
1. How are Principal’s efforts an excellent example of the implementation of customer relationship management? In what ways has Principal developed significant knowledge and insight into the wants and needs of its customers?
2. With respect to the use of information technology, is Principal focusing on a top-line or bottom-line initiative? Perhaps a combination of both? Justify your answer. Within the context of the RGT framework (described in Chapter 1), what is Principal’s focus?
3. Within the context of Porter’s three generic strategies, is Principal mainly focusing on overall cost leadership, differentiation, or focus? Pick only one and justify your answer.
4. Principal really offers only services to customers; that is, it has no physical products to sell. How would Principal make effective use of an ERP system, while not needing modules such as manufacturing, transportation, and logistics? As more and more companies focus on only service offerings, do you see a need for a service ERP that targets companies like Principal?
5. If you were to consider the financial services needs of a customer over his or her entire lifetime (after college), what specifi c information would you want to know about a customer? We identified information such as age, marital and family status, salary, and benefits. What five other information “milestones” would you want to track?