customer value drives growth at nordea...

Case Study

Customer Value Drives Growth at Nordea BankThe multinational financial services firm uses arelationship banking model to unify its operationsand ensure it’s long term success.

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CustomerThe Executive Journal by Peppers & Rogers Group

Strategist

Reprinted from Customer Strategist. ©2010 Peppers & Rogers Group. All rights protected and reserved. 2

Multinational corporations with numerous operating groups can all

too easily adopt disparate cultures, processes, and technologies

over time. Creating a common strategy and rallying point is essen-

tial to maintaining a unified, holistic enterprise that will thrive and

endure—and is exactly the approach Nordea Bank took to ensure

the success of the merger that launched the organization, and that

it uses to this day to assure its long-term business success.

Nordea provides corporate merchant banking, retail banking,

and private banking to approximately 9 million customers,

including 5.9 million e-banking customers. It operates more than

1,400 branches in Sweden, Denmark, Finland, Norway, the Baltics,

and Poland, and a 24/7 call center. As of September 2009 its

assets were €488 billion.

The company was born from the mergers of Merita Bank in Finland,

Nordbanken in Sweden, Denmark’s Unibank, and Christiania Bank og

Kreditkasse in Norway in 2000.

Nordea’s executive team decided

that the company’s growing pains

would be diminished by devel-

oping a common customer-centric

focus among all the branches in

every country. It built a relationship

banking model, the lynchpin of

which is a tiered segmentation

strategy based on customer value.

“We have been on a journey

toward being a customer-centric

bank with a customer-centric

strategy,” says Claes Tell, head

of sales and development for

Nordea’s retail banking division. “That is a strong inheritance from

the banks within the merger. The starting point was to take the

customer-centric view to create our operating model. That is, of

course, not easy. Our bank, like many other banks, has very strong

product units that are still eager to push their products to

customers. Therefore, we needed to set up an organization and

operating model to support our customer-centric view in the way

we treat customers. That is done at a central level, but also in how

we treat individual customers.”

Customer value tiersRobust customer data and advanced technologies afford the

bank endless segmentation possibilities. However, for that

segmentation to be understood and acted on at the branch

level, it must be a simple model that is easily communicated.

“It’s difficult to talk to the line organization when you have many

layers of customers that are constantly changing,” Tell says.

Consequently, every Nordea retail banking customer is assigned

to one of three customer value tiers: Gold, Silver, or Bronze. The

segments are based on volume of interactions and number of

products owned.

An active customer with at least one product is automatically

placed in the Bronze segment. Customers with at least €6,000

in interaction volume and more than three products are part of

the Silver segment, and Gold customers are those whose inter-

action volume is greater than €30,000 and who have purchased

more than five products.

“We cover large markets and we have a large customer base,”

says Tell. “It’s important from a growth perspective that we

focus on the right customers and retain the right customers.

That’s the foundation for the segmentation. By doing so we

make sure to allocate our most valuable resources—Personal

Bank Advisors—to the right customers, according to the value

they bring and the size of their business. We are very much

Customer Value Drives Growth

at Nordea BankThe multinational financial services firm uses a relationship banking

model to unify its operations and ensure its long-term success.

by Elizabeth Glagowski

Volume 2 • Issue 1

Challenge: Nordea Bank

wanted to differentiate

how it treats its most

valuable customers.

Solution: Customer cen-

tricity and a relationship

banking model guide the

corporate culture and

help build strong and

profitable relationships

based on customer value.


focused on addressing the right customers with the right

resources.”

As a result, each value tier has a specific treatment strategy that

is adhered to in each interaction channel, Tell says. Bronze

customers receive “simple service at a fair price,” according to the

company’s annual report. Silver customers, meanwhile, receive

favorable pricing on products and personal service when needed.

The top-tier Gold customers are offered the best prices for prod-

ucts, priority access in the branch and call center, and are

assigned a Personal Bank Advisor (PBA) who meets with them

individually at least once a year for “360-degree meetings” to

review and update their financial portfolio.

Tell says upwards of 30 percent of Nordea’s retail banking

customers fit into the Gold customer group. He says the bank

employs approximately 4,000 Personal Bank Advisors across its

branch network, with at least one advisor per branch. “It’s very

easy to capture customer insight and do targeting, but to have real

effect we very much rely on the efforts of PBAs out in the

branches,” Tell says. “We give them the tools and messaging they

need to meet and treat the right customers.”

Relationship banking in actionEven in these days of high-tech self-service, nothing can replace

the benefit of an in-person meeting. “Our foundation is that of a

relationship bank,” Tell says. “Our belief is that the Personal Bank

Advisor is really key to having a close relationship with the

customer. We have the Web and the contact center, but in the

middle of this it’s very good for the customer to have a personally

assigned bank advisor there when needed.”

Personal Bank Advisors identify Gold customers and high

potential customers in the lower tiers to arrange a 360-degree

meeting. Customers are asked to prepare information about their

current financial situation and future plans both with Nordea and

other banks. The PBA reviews the customer’s situation and makes

recommendations about products and services. “This is a quite

strong value proposition,” Tell says. “We do not take a product-

oriented approach when it comes to meeting these customers. We

approach them to give them advice.”

Nordea created tools to help the PBA work with specific topics

at a 360-degree meeting. For example, if a customer is interested

in opening a savings account, the PBA can work with the customer

to access modules within the bank’s proprietary customer

management system that help explain risk and establish savings

targets. There are also modules for categories like life and

pensions and investing, and for other banking services.

Depending on the number of high-potential customers in each

branch, a PBA could be responsible for as many as 500 customers

over the course of a year. “There is an obvious need to help prioritize

who to meet,” Tell says.

Transparent segmentation strategiesWhile segmentation is not unique to the financial services industry,

Nordea made the unique decision to externally communicate to

customers the segments they are in. This creates an aspirational

relationship for those in lower tiers, and helps Gold customers feel

they are part of something special. “The communicated benefit to

customers is that we can give you our best advice through

assigning you to a PBA,” Tell says. “Secondly, there is the pricing

issue, where they know they will get the best prices if they are in

the higher segments.”

In addition to the externally communicated segments, Nordea

created internal contact policies for certain subgroups, as well.

Gold customers, for instance, are divided into two groups: care

customers and balance builders. “By putting those labels on the

customers, we have a way to communicate to our PBAs and the

branches that some customers need more attention than others,

due to the fact that they are building balances and have a greater

need for banking services,” Tell says.

Balance builders are considered to have more potential value, and

are treated with the highest priority. Care customers, while still

important, are considered a group to maintain instead of grow. “We

of course want to focus our resources on where we can find the

most potential,” Tell says.

Nordea also uses customer insight modeling based on behavior

information and other legacy data available to create other target

subgroups. “It’s a way for us to be more focused in our ambition to

meet and treat the right customers with the largest potential and also,

of course, work with customers with the largest need. We hope that

their needs coincide with our ambition to do sales.”

Nordea uses its proprietary customer management system to run

its customer insight analysis, predictive modeling, and other analyses


Strategist

Reprinted from Customer Strategist. ©2010 Peppers & Rogers Group. All rights protected and reserved.


3

Stats & Facts: Nordea Bank

Headquarters: Stockholm, Sweden

CEO: Christian Clausen

Assets: €488 billion (as of September 2009)

2008 operating profit: €3.3 billion

Customers: More than 7.7 million retail bank customers; 700,000

corporate customers

Branches: 1,400 in 19 countries, primarily Sweden, Norway,

Denmark, and Finland

Employees: 37,000

Customer areas: Corporate merchant banking, retail banking, and

private banking

Product areas: Capital markets products, savings products and

asset management, life and pensions



Strategist



at the corporate level. Customers are placed in the correct segments

and contact policy groups within the system. Nordea then pushes

that information to individual PBAs through the common front-end

system at branch. The information in the system also becomes leads

for front-end staff in the branch or contact center, as well as individual

sales messages in the online banking platform.

This integrated data approach helps keep Nordea on its customer-

centric journey across all of its touchpoints. “We have found that it’s

very important that we’re working in the same way, because that is

how we can benefit from the common framework for how to operate

in the different markets,” Tell says.

Employee relationships drive customer relationshipsNordea’s customer relationship strategy impacts employees as well

as customers. The program would have stalled if not for the buy-in

from employees in every region and every channel. That buy-in

starts at the top. “The reason for us being successful in having our

customer-centric processes implemented in every branch in every

country has been due to a very high-level commitment from the

CEO of retail banking,” Tell says. “And that has been cascaded

through the line managers.”

Buy-in happens in the field because employees’ input is valued as

an integral part of the programs’ continued evolution. Best practices

4

In early 2008 Nordea Group CEO Christian Clausen laid out a

vision of what he called Great Nordea. It is a long-term strategy

with four components:

• Profit orientation: Keep a laser focus on cost, risk, and capital.

• Ambitious vision and targets: Realize the potential of both

new and existing customer groups.

• Clear growth strategy: Expand its physical presence in the

Northern European market while strengthening relationships

with existing customers.

• Strong customer-oriented values and culture: Use customer

centricity as a competitive advantage for customers and a cul-

tural foundation for employees.

The turbulent economy of the past 18 months created some

roadblocks. Weak economic activity and low interest rate levels,

combined with economic uncertainty, make targets harder to

estimate. In addition, there is a higher risk for loan losses and

increased funding costs, as well as higher capital requirements

than ever before, all of which work against an aggressive

growth strategy.

Not surprisingly, in the 2008 annual report Clausen said,

“Nordea sticks to its organic growth strategy and keeps up the

strong business momentum, but adjusts the speed of execution.

The way forward will follow the ‘middle of the road’ with cost,

risk, and capital management receiving higher priority.”

While the idea of Great Nordea is that of a never-ending jour-

ney, the company has achieved results from its 2009 plan to do

more business with existing customers, selectively capture

business opportunities with new customers with solid credit

profiles, and rein in costs.

On the cost side, the company accelerated efficiency pro-

grams in the branches and reduced staff by 2 percent, prima-

rily through retirement and voluntary exits. The company also

put a firm grip on the growth of risk-weighted assets through

the application of caps in business units and close monitoring

of the gap between lending and deposit volumes. As a result

cost/income ratio was down to 48 percent in Q3 2009 from 53

percent in Q3 2008.

On the customer relationship front, Nordea’s customer

focus produced a record high level of 360-degree meetings,

up 100 percent from the year before. In addition, Nordea

reported that the number of Gold and private banking cus-

tomers increased by 158,000 in 2009.

In the midst of financial instability, the company continues to

grow. Nordea’s income was up 11 percent and risk-adjusted

profit rose 22 percent for 2009.

Nordea is preparing a prudent growth strategy for 2011–2012,

launching a number of initiatives to contribute to its long-term

financial goals, including growing income, improving efficiency,

and enhancing IT performance.

“Nordea came out of 2009 in an even stronger position,

despite one of the most challenging years for decades,” Clausen

said. “Our customer-oriented values and relationship banking

strategy have stood the test of the difficult market situation.

“By moving even closer to customers and helping them find

solutions in the recession, we strengthened our reputation and

improved customer satisfaction compared to competitors.”

The Ongoing Journey Toward “Great Nordea”


from individual branches in all markets are shared

throughout the organization to help make improve-

ments. Additionally, employee incentive schemes are

tied to customer satisfaction, sales, balanced score-

card, and the implementation of the processes. “The

main thing has been to make sure everyone works in

the same way,” Tell says.

Nordea’s top executives receive weekly and

monthly reports from the branches to monitor

progress and performance. “We have been very firm

on following up, and have been walking the talk when

it comes to implementing any updated processes at

every branch,” Tell says.

The bottom lineNordea’s journey toward customer centricity has already produced

impressive bottom-line impact. Income per Gold customer is three

times higher than Silver customers, which ties revenue directly to

customer relationship strategy. In addition, more customers are

moving into the Gold segment. New Gold customers increased 5

percent from Q3 2008 to Q3 2009, even during the brunt of the

global recession.

Customers in the higher value tiers are also more satisfied. In one

market, for example, Gold customers on average rate Nordea a 79

in customer satisfaction, compared to 75 for Silver and 70 for

Bronze. Gold customers with an assigned Personal Bank Advisor on

average rate Nordea higher than other customers in specific areas

such as price/value, loan products, and savings advice. In addition,

customers who have met with their PBA rate Nordea higher than the

ones who have not. In one market, Tell says, general satisfaction for

Gold balance builder customers who have met with their PBA was

77 compared to 67 for the control group.

Tell admits that there is still much more to do to become a truly

customer-centric organization. In the short term, next steps include

bringing new customers into the program and improving customer

intelligence.

Tell’s advice for others looking to improve customer value and

segmentation: Don’t make it too complicated. “You need to be

down-to-earth and concrete in your strategy and in your execution,

and it must be in line with the organization’s maturity level. You need

to be committed to the strategy you have chosen.” �


Strategist



5

> Elizabeth Glagowski is managing editor, interactive, at

1to1Media. Contact Elizabeth at [email protected]

Segment

Private Banking

Gold

Silver

Bronze

anking

Customers, 000’s

100

2,600

1,300

3,600

Criteria

Assets > €150K

Volume > €30KNo. of products<5

Volume > €6KNo. of products < 3

Active customer

Value Proposition

The best Nordea has to offer

Named advisor; priority inaccess; guaranteed best price

Personal service when needed; favorable price

Simple service; fair price

Segmentation and Value Proposition—Household Customers


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