I often talk to bank and credit union executives and the topic of increasing the loyalty of customers/members frequently comes up.
The typical reasoning is that increasing customer satisfaction by going above and beyond leads to increased loyalty. While it certainly makes sense, especially in a highly regulated vertical like financial services, it is not always the best area to focus on. Indeed, a different measure has been steadily gaining popularity and is often a better fit for banks: customer effort. If customers encounter difficultly in resolving their issue, they are much more likely to look for solutions from different institutions. On the other hand, if it’s easy to resolve their issue, they will appreciate the financial institution more. This, in turn, leads to increased wallet share and overall loyalty.
Customer effort, or CE, can be measured through survey results like customer satisfaction or net promoter score asking customers if they agree or disagree with the following statement: “[The institution] made it easy for me to handle my issue.” Customers score their effort on a range from 1 if they strongly disagree to 7 if they strongly agree. The individual scores are averaged to get the overall institution average; an average score of 4 or less is considered poor, and scores of 5 and higher are considered good. The advantage of CE score as compared to customer satisfaction and net promotor score is that it can be used to measure the experience as a whole, but can also focus on specific experiences: the usability of a specific page on the company website or interactive voice response that prompts customers to speak to an automated phone system.
The insights gleaned from deploying CE scoring can be quite interesting. For most customers, banking is a necessity and there are a plethora of institutions to choose from offering a similar range of products and services. This implies they choose who they bank with partially based on the perceived effort needed to use the services. Traditionally, this meant choosing the bank with conveniently located branches; increasingly, it means choosing institutions with robust online and self-service offering. The expectation is that banks should do simple things well and make things easy. When there is a problem, helping customers solve it quickly and easily is key.
Here are five insights from institutions employing CE scores:
- Customers dislike having to contact the bank multiple times and needing to answer repetitive questions multiple times. They also don’t like switching from one service channel to another to get their problem resolved.
- Majority of customers will start with lower effort channels — online and self-service — and only opt for phone service when needed. Calling is seen as a higher level effort.
- Customers are willing to put in more effort when there is a perception of increased value for the effort, like driving to a branch to discuss important life events. But as customer effort increases, so do their expectations.
- Experiencing complications in resolving their issues makes it hard for customers to believe they are getting value for their money. They will be more likely to consider products from other competitors.
- Negative outcomes of high-effort experiences significantly outweigh any benefits of easy or low-effort experiences. In other words, customers who perceive their bank is making things “difficult” are more likely to leave than customers who are “dissatisfied” according to an NPS or CSAT score.
Here are my top three suggestions for prioritizing changes that can reduce customer effort:
- Invest in self-service solutions. Analyze feedback on CE surveys to identify specific experiences on websites and apps that could be improved with self-service.
- Adopt an asynchronous service model. Asynchronous service solutions that do not require customers to actively wait or demand their full attention throughout the interaction, like messaging and call back functionally, can significantly reduce a customer’s perception of effort.
- Use video calls. Video calls can provide many benefits of in-branch visits but require less physical effort from customers, lowering expectations on the institution.
There is significant overlap in the above suggestions and suggestions on how banks can save customers time. That’s because an investment of time is just one dimension of a customer’s effort.
Measuring customer effort can provide actionable insights into specific process and service improvements and should be a part of any bank’s customer success story. Customer perception of a difficult interaction is a good predictor of customer churn; investing in more easy experiences can improve both share of wallet and long-term loyalty.
New developments in technology have heightened bank customers’ expectations of speed, service and customization from their financial institutions—and cores are struggling to keep up.
Faced with macro-economic pressures, technology adoption decisions and quickly shifting customer expectations, banks are challenged in how to respond. Or if a response is even necessary.