| Householding the Schwab Way |
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"While our financial performance has been gratifying, all of us at Schwab are committed to enhancing the customer experience even further. By making it easy for customers to reach us at any time of the day or night, by offering a broad line of investments and services, by assisting investors with 'Help and Advice the Schwab Way,'and by giving independent investment managers the very best in trading and operational support, we are redefining the investing experience."
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| When Charles R. Schwab pioneered the discount brokerage business three decades ago, no one in the industry thought it would work. Today, Charles Schwab Corporation has a customer base of more than three million households with $400 billion in assets invested. And because Schwab is focused on customer relationship management, the numbers are steadily growing. |
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| A case in point: Schwab has developed a "help and advice" service to meet the needs of a new generation of prospective customers — with a new online customer information system to support it. This service is relatively new to Schwab, but the idea of tracking and responding to customers' needs is not. Knowing what customers want from Schwab is the job of the company's database and relationship marketing group, where Maury Ostroff is director of database development for strategic marketing. "Good household- and customer-level information is the cornerstone of our strategy," says Ostroff, who worked with Innovative to implement Innovative's household linking capability at Schwab. |
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Revolutionary Growth
Schwab's customer base has grown more diverse over the years. In the beginning, the typical Schwab customer was a financially savvy individual who knew where to invest and didn't need or want the help and advice of a high-priced broker. Schwab's approach was no-frills. It executed the customer's trades efficiently and at the right price. In the Schwab vernacular, this was the first "revolution." The second "revolution" was when Schwab developed the mutual fund supermarket. This invited a new breed of customers — those who wanted to invest in the stock market, but perhaps lacked the knowledge or interest to pick their own stocks. With Schwab's OneSource Funds, these customers could easily invest in a number of mutual funds and track their investments with a consolidated statement from Schwab. |
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| Schwab's help and advice service has become the third "revolution." This consulting service targets customers at the opposite end of the investment spectrum from those who Schwab has historically served. These customers want financial planning and retirement planning advice from Schwab. And Schwab is obliged to provide it. |
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| Troubled by the decline of corporate pensions and the future uncertainty of the U.S. social security system, Schwab's founder and namesake says it is Schwab's mission to see that every American has a retirement plan. To reach this goal, Schwab employs customer service professionals whose jobs are to educate and help people make informed decisions about how to invest. Schwab's customer service representatives consult with customers, generate research reports, and discuss the ups and downs of various investment strategies based on an individual's financial circumstances and goals. But they won't recommend specific stocks or securities. |
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| "No one is paid on commission," says Ostroff. "Our role is to provide a service, not to get a customer to trade." |
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Innovative Household Linking
"To render appropriate help and advice," says Ostroff, "the front line needs to have a customer's whole financial picture on the screen in front of them." |
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| Schwab's online customer information system — which uses Innovative's linking capability to provide the front line with a complete and accurate view of each household's account and balance information — is designed to support the new help and advice service. What sold Schwab on Innovative's linking process was the company's experience with an earlier generation of the software and the user control features of Innovative's product: Schwab wants its customer service representatives to be able to manually override the system when customers request changes. |
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| "The customer is always right," says Ostroff. "If a customer says he manages an account for his Aunt Sally who lives at another address, we want the customer service rep to be able to link the records. If a husband and wife want their records to be segregated, the rep should be able to unlink them on the spot." The Innovative linking capability's powerful rule-based technology allows Schwab to define, automate, and maintain control over the criteria that determines a household. The system analyzes customer information to accurately group customer records no matter how complex. And because the system compares each component of a record independently, even related customers with different last names can be brought together during Innovative's linking processing. |
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| Once Schwab determines customers to be part of a household, the Innovative linking capability maintains their linkage with a household key over time. The linking capability also remembers the records that Schwab determines to be unrelated and never links them again, regardless of similarities. This feature was another selling point for Schwab. |
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| "We don't want to undo what a customer service rep has manually done," says Ostroff. |
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Householding Evolves
Householding has evolved at Schwab. Several years ago, the company implemented Innovative's first generation linking software to group customers for analytical purposes. The software enabled the company to perform statistical modeling, track customer usage patterns, and identify marketing opportunities. It also saved Schwab the substantial costs of printing and mailing marketing materials to one million duplicate households. |
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| The acquisition of a more sophisticated household linking product is part of Schwab's strategic transformation from a no-frills, transaction-based organization to a relationship-based one. When the linking and online systems are integrated, Schwab's customer service representatives will be able to see all of the accounts related to an individual customer. |
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| Ostroff says many customers have multiple account relationships with Schwab. It's not uncommon to see a retirement account, a fund for college and maybe an account on e-Schwab, Schwab's electronic brokerage service, that someone is using to actively trade, all within the same household. |
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| Integration of Schwab's service delivery channels will comprise the next evolution of the householding system, says Ostroff. |
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| "Customers can interact with Schwab on many levels," says Ostroff. "They can walk into a branch (there are 240 in the U.S.), call the call center (there are four regional centers with toll-free numbers), or use a PC at night to execute trades." |
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| The electronically savvy customer is another growth segment for Schwab. In fact, the company's electronic brokerage business is vying with the help and advice service for the title of "third revolution." Schwab's online and householding systems will support this initiative as well — by enabling Schwab staff to effectively direct customers to alternative delivery channels. |
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| "Householding will identify all the ways a customer and household interact with Schwab," says Ostroff. "Better customers interact in multiple ways, and that's what we want to encourage: use of the entire breadth of services." |
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