Distribution Channels Committee Newsletter Issue 2 – Third Quarter 2005

Distribution Disadvantaged? Cozy Up to Your Best Customers
by Yvonne Boisvert, PFPC Marketing and Distribution Services

Distribution issues – how to grow and prosper, how to gain greater market share faster and better, how to bring more value to the marketplace – are “equal opportunity” challenges. They create problems for all investment firms, from small to large, and indeed, cross all industries.

In today’s “knowledge-based” economy, a true understanding of the market and customer intelligence is the key to solving distribution challenges. Executives in every industry must assess the market accurately and then make decisions that will drive their companies’ performance to the high levels necessary to retain satisfied customers and to attract profitable new business.

According to a study released by Accenture earlier this year, nine out of ten U.S. executives say they need stronger business intelligence capabilities, with better analysis and insight. When 150 senior leaders were asked about their companies’ biggest growth impediment:

• 54% attributed it to uncertainty in the financial markets and economy overall or geopolitical and regulatory uncertainty in key markets
• Other impediments included:
  - Changes in the customer base
  - Changes in skill sets of the talent pool
  - Constant technological innovation and change

In the financial services industry, numerous advisors in the intermediary channel are dealing with similar CEO issues because these financial advisors are running their own businesses. Distributors – in competition to reach the most successful advisors – are also realizing that an attractive product line up alone is not the answer. Firms need to gain a much better understanding of the “advisor as their customer,” and in turn, the advisor’s book of business.

At PFPC, what we have seen with our own client base – a broadly diverse group of asset managers and distributors – is a growing need for “customer-centric” solutions that require analysis of the customer/prospect and advisor life cycles. And this includes market segmentation, customer profiling and predictive modeling for both their shareholder base and advisor channels.

A disciplined approach to market segmentation can help you monitor and analyze the answers to the critical business questions that will drive an informed distribution strategy. These questions include:

• Who are your most profitable customers, advisors?
• What is your market penetration by region and sales rep?
• What seasonal variations do you experience?

Answers to questions such as these can help distributors pinpoint new revenue-generating opportunities and improve operational efficiencies. All of which lead to faster problem solving and decision making at the strategic, operational and tactical levels.

Most firms, however, cannot unlock the door to customer information easily. This is often because of the way organizations have grown or been restructured over the years. Key data is scattered in different divisions or across multiple sources, which then must be consolidated and analyzed at a baseline level before it even gets into a decision-maker’s hands.

Today, some departments are just able to look at “transactional” type reporting – the “columns and rows.” Others are able to ask for “what if” analysis based on historical information, while still others can take the analysis to a first level “decision-making” step.

Yet, what is really lacking is the “dynamic” or predictive level of understanding the data – the ‘What do I do now based on pervasive, real-time data?’ To meet these market needs and help our clients address distribution challenges more effectively, we recently developed a suite of analytical and segmentation solutions. The suite provides a flexible framework for decision-making that is consistent from the individual, to local markets to the national level. It also provides firms with the ability to “up shift” or “downshift” across markets. And in keeping with the today’s knowledge-based economy, this dynamic analysis focuses on a holistic view of a firm’s business that addresses both customer value and profitability concerns.

But segmentation and customer profiling are not an end alone – they are the foundation for developing effectively targeted marketing plans. Analysis of market and customer segments enables informed decisions about the intensity of distribution activities in a particular segment that will result in marketing effectiveness and true ROI.

For more information about the Distribution Channels Committee, contact the Committee co-chairs:

Martin Griffn, PFPC Inc.
martin.griffin@pfpc.com

Sue Ellyn Idelson, Fidelity Investments
Sue.Ellyn.Idelson@fmr.com

To contribute content for upcoming newsletters, contact Ellen Weinraub at NICSA at eweinraub@nicsa.org.