Three Ways to Lower Customer Effort and Increase Loyalty

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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:

  1. 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.
  2. 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.
  3. 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.

Data is the Secret Weapon for Successful M&A

The topic of data and analytics at financial institutions typically focuses on how data can be used to enhance the consumer experience. As the volume of M&A in the banking industry intensifies to 180 deals this year, first-party data is a critical asset that can be leveraged to model and optimize M&A decisions.

There are more than 10,000 financial institutions in the U.S., split in half between banks and credit unions. That’s a lot of targets for potential acquirers to sift through, and it can be difficult to determine the right potential targets. That’s where a bank’s own first-party data can come in handy. Sean Ryan, principal content manager for banking and specialty finance at FactSet, notes that “calculating overlap among branch networks is simple, but calculating overlap among customer bases is more valuable — though it requires much more data and analysis.” Here are two examples of how that data can be used to model and select the right targets:

  • Geographic footprint. There are two primary camps for considering footprint from an M&A perspective: grabbing new territory or doubling down on existing serving areas. Banks can use customer data to help determine the optimal targets for both of these objectives, like using spend data to understand where consumers work and shop to indicate where they should locate new branches and ATMs.
  • Customer segmentation. Banks often look to capturing market share from consumer segments they are not currently serving, or acquire more consumers similar to their existing base. They should use data to help drive decision-making, whether their focus is on finding competitive or synergistic customer bases. Analyzing first-party transaction data from a core processor can indicate the volume of consumers making payments or transfers to a competitor bank, providing insights into which might be the best targets for acquisition. If the strategy is to gain market share by going after direct competitors, a competitive insight report can provide the details on exactly how many payments are being made to a competitor and who is making them.

The work isn’t done when a bank identifies the right M&A target and signs a deal. “When companies merge, they embark on seemingly minor changes that can make a big difference to customers, causing even the most loyal to reevaluate their relationship with the company,” writes Laura Miles and Ted Rouse of Bain & Co. With the right data, it is possible that the newly merged institution minimizes those challenges and creates a path to success. Some examples include:

  • Product rationalization. After a bank completes a merger, executives should analyze specific product utilization at an individual consumer or household level, but understanding consumer behavior at a more granular level will provide even greater insights. For example, knowing that a certain threshold of consumers are making competitive mortgage payments could determine which mortgage products the bank should offer and which it should sunset. Understanding which business customers are using Square for merchant processing can identify how the bank can make merchant solutions more competitive and which to retain post-merger. Additionally, modeling the take rate, product profitability and potential adoption of the examples above can provide executives with the final details to help them make the right product decisions.
  • Customer retention. Merger analysis often indicates that customer communication and retention was either not enough of a focus or was not properly managed, resulting in significant attrition for the proforma bank. FactSet’s Ryan points out that “too frequently, banks have been so focused on hitting their cost save targets that they took actions that drove up customer attrition, so that in the end, while the buyer hit the mark on cost reductions, they missed on actual earnings.” Executives must understand the demographic profiles of their consumers, like the home improver or an outdoor enthusiast, along with the life events they are experiencing, like a new baby, kids headed off to college or in the market for a loan, to drive communications. The focus must be on retaining accountholders. Banks can use predictive attrition models to identify customers at greatest risk of leaving and deploy cross-sell models for relationships that could benefit from additional products and services.

M&A can be risky business in the best of circumstances — too often, a transaction results in the loss of customers, damaged reputations and a failure to deliver shareholder value. Using first-party data effectively to help drive better outcomes can ensure a win-win for all parties and customers being served.

Overcoming Cultural Challenges In M&A

Culture is fundamental to the success of the deal, so it’s top of mind for bank leadership teams working with Richard Hall, managing director for banking and financial services at BKM Marketing. In this video, he explains why transparent, candid communication is key to retaining customers and employees, and shares his advice for post-pandemic strategic planning.

  • Ensuring a Successful Integration
  • Retaining Customers and Employees
  • Formulating a Strategy for 2021

No Time for Complacency


valuation-1-31-18.pngThe bank industry is no stranger to change. In just the past few decades, deregulation, telephone banking, ATMs, the internet and mobile phones have all caused banks and bankers to adjust how they approach their trade. But while the fundamentals of banking have remained the same throughout all of this, with the changes confined largely to the way banking products are delivered, one gets a palatable sense from attendees at Bank Director’s Acquire or Be Acquired conference this year that the industry is on the verge of a more transformational realignment.

In the short-term, bankers are upbeat about last year’s historic tax cut. You have to go back to World War II to find the last time the corporate income tax rate was as low as 21 percent. Few industries will benefit more than banks from this reduction, as three out of the four biggest taxpayers on the S&P 500 are banks. The net result is that profitability in the industry, measured by return on assets, is expected to increase by 20 basis points in one fell swoop.

The benefit to banks from the tax cut won’t just be on the expense side. In an audience poll on the second day of the conference, 84 percent of attendees said that they expect small businesses to recycle tax savings into new investments, be it better technology or higher wages for their employees. If this comes to fruition, it would pour fuel on the economy, pushing up wages and accelerating inflation. The desire to keep price increases in check, would incentivize the Federal Reserve to raise rates more aggressively, thereby pushing up net interest margins and thus revenue and profits throughout the bank industry.

This is one of the reasons that bankers are so optimistic about 2018. Bank stocks have soared over the past 14 months, pushing valuations up to the highest level in a decade. Bankers who own stock in their banks have seen their balance sheets respond in kind. For banks that have considered a sale, this presents a previously unexpected opportunity to cash in by drawing a markedly higher price for their shareholders from a merger or acquisition.

Yet, there are two underlying currents of concern. The first is that the improved outlook will lull bankers into complacency. With profits up and shareholders feeling rich, investors fear that bankers will feel less urgency to change. But as Tom Brown, CEO of hedge fund Second Curve Capital, reminded attendees earlier in the conference, bankers should be careful not to confuse a bull market with brains.

Banks have survived countless innovations that have washed over the industry in the past by adapting to them and incorporating them into their existing business models, but the changes afoot now, be it big data or mobile banking, strike at the very heart of those business models themselves. In a separate poll of audience members at this year’s conference, 83.5 percent of attendees said that big data is the new oil. The implication is that it could usher in changes as significant as the industrial revolution.

This is a point that Dennis Hudson III, the chairman and CEO of Seacoast Bank, a $5.8 billion bank based in Stuart, Florida, drove home in an interview with Bank Director. Customers are becoming less sticky. Many customers no longer walk into branches and younger generations in particular now value banks less for the ability to store money and more as the means to facilitate secure, real-time payments. Banks that don’t adapt to these realities could find themselves in the same situation as horse buggy drivers who dismissed the automobile as a toy for hobbyists.

When you also factor in the maturity of the consolidation cycle, which could leave under-performing banks with few suitors and competing against bigger and more sophisticated rivals, this may be one of the worst times in the history of banking to grow complacent. Consistently throughout the conference there was talk of the haves and have nots. The haves are banks that earn industry-leading returns and thereby serve as attractive acquisition targets or are in a position to be serial acquirers in their own right. The have nots, on the other hand, are banks that lag the performance of their peers, lack the resources to devote to innovation and could thus find themselves standing alone when the proverbial music stops playing.

Further underlining this point is that, for the first time, the nation’s biggest banks are growing customers organically, attracting them with simple and sophisticated mobile banking offerings and competing aggressively for consumer deposits as they comply with new liquidity requirements. This is a meaningful inflection point. Previously, community and regional banks benefited from the acquisitive ways of the biggest players in the industry, which shed customers as the banking behemoths worked to digest their acquisition targets. But now, with the three biggest banks in the country locked out of the acquisition game as a result of the 10 percent cap on deposits, they are focused inward, bringing them into more direct competition with smaller banks.

The overarching takeaways from this year’s gathering of over 1,000 bankers are accordingly twofold. The near-term looks promising for banks, with more money hitting the bottom line from the recent historic tax cut. But banks should use this to accelerate their transformation into the financial institutions of the future, not as an excuse to rest on their laurels and buy back stock.

The Perfect Complement: Community Banks and Alternative Lenders


lenders-2-8-17.pngArmed with cost and process efficiency, greater transparency, and innovative underwriting processes, alternative lenders are determined to take the lending space by storm. Alternative small business lenders only originated $5 billion and had a 4.3 percent share of the small business lending market in the U.S. in 2015. By 2020, the market share of alternative lenders in small business lending in the U.S. is expected to reach 20.7 percent, according to Business Insider Intelligence, a research arm of the business publication.

Being able to understand customer-associated risk by relying on alternative data and sophisticated algorithms allowed alternative lenders to expand the borders of eligibility, whether for private clients or small businesses. In fact, a Federal Reserve survey of banks in 2015 suggests that online lenders approved a little over 70 percent of loan applications they received from small-business borrowers—the second-highest rate after small banks, which approved 76 percent, and much higher than the 58 percent approved by big banks.

Coming so close in approval rates to banks and having lent billions employing a different, more efficient business model inevitably created an interest from banks. Some of the largest institutions have been taking advantage of the online lenders’ technology, but community and regional banks are still in the early stages of exploring partnership opportunities. While concerns over those types of partnerships are understandable, there are also important positive implications, which we will explore further.

Cost-Efficient Capital Distribution Channel
Online marketplaces represent an additional, cost-efficient channel for capital distribution, expanding the potential customer base. An opportunity to grow loan portfolios with minimal overhead and without the need for adoption or development of resource-consuming technology, led to a partnership between Lending Club and BancAlliance, a nationwide network of about 200 community banks. The partnership allowed banks to have a chance at purchasing the loans originated by Lending Club, and, in case those loans did not meet the requirements, they were offered to a larger pool of investors. Banks also have an opportunity to finance loans from a wider Lending Club portfolio.

Examples of partnerships also include Prosper and the Western Independent Bankers. These partnerships give more banks an opportunity to offer credit to their customers, and more consumers access to affordable loans.

Portfolio Diversification and Customer Base Expansion
Alternatives lenders can offer an easy application process, a quick decision and rapid availability of funds due to an alternative approach to the underwriting process. Use of alternative data to assess creditworthiness is an inclusive approach to loan distribution. In 2015, in the U.S., there were 26 million credit invisible consumers. Moreover, the Consumer Financial Protection Bureau suggests that 8 percent of the adult population has credit records that you can’t score using a widely-used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.

Paul Christensen, a clinical professor of finance at Northwestern University’s Kellogg School of Management, believes there are positive implications for companies leveraging alternative data to make a credit decision.

“For companies, alternative credit rating is about reducing transaction costs. It’s about figuring out how to make profitable loans that are also affordable for most people—not just business owners,” he said in a September 2015 article.

For community banks, as regulated institutions, partnerships with alternative lenders that extend credit to parts of the population perceived as not creditworthy is an opportunity to reach new consumer segments and contribute to inclusive growth and resilience of disadvantaged households.

Customer Loyalty
Two Federal Reserve researchers noted in a 2015 paper that community banks can increase customer loyalty by referring customers to alternative lenders when banks cannot offer a product that meets the customer’s needs. “By providing customers with viable alternatives? it is more likely that these customers will maintain deposit and other banking relationships with the bank and return to the bank for future lending needs,” the researchers emphasized.

Access to Knowledge, Expertise and Technology
While the extent of integration may vary, one of the most important elements of partnerships that carry long-term organizational and industry benefits is mutual access to knowledge, expertise and technology. The combination of banks’ and alternative lenders’ different business models with an understanding of mutual strengths allows the whole industry to transform and provide the most efficient, consumer-facing model.

What Do Banks Need? More Loyalty


customer-loyalty-6-1-16.pngWhat do some of the great companies that have disrupted entire industries have in common? Think about companies such as Zappos.com, an online shoe retailer that has grown to be one of the world’s largest shoe retailers, now owned by Amazon. How about Uber and Lyft? They’ve crushed the taxi business. How about Apple, with its legions of customers more than happy to pay two or three times what competitors charge for their products? Not only have these companies simplified the buying process, but they have generated something many companies lack: customer loyalty.

As part of his speech last week at Bank Director’s Growing the Bank conference, Joseph Bartolotta, an executive vice president at $9.6 billion asset Eastern Bank in Boston, Massachusetts, talked about these companies and the importance of loyalty. Loyalty will generate increased spending from your customers, make them less sensitive to price and more likely to refer other customers. Loyalty will also lower your costs and reduce customer turnover, he said.

What have companies like Uber and Zappos done to generate loyalty? Zappos has a 365-day return policy and will pay the costs of return shipping. Not only are Uber and Lyft generally cheaper to use than taxis, they have a payments experience that is extremely smooth precisely because there is no payments experience, Bartolotta pointed out. The companies send you a receipt via email after your ride is over, and there is nothing to sign or approve. Apple creates products that are expensive, but their loyal customers swear they are better than anything else.

Banking, with a few exceptions, doesn’t necessarily generate a lot of loyalty. In a Gallup poll in 2015, only 25 percent rated the honesty and ethics of bankers high or very high—behind funeral directors, accountants and journalists. (But don’t despair, bankers rated higher than real estate agents, stockbrokers and members of Congress.)

Bartolotta listed a couple of practices that he thinks have hurt the customer experience in banking. A common industry practice of ordering check and debit transactions from the highest dollar amount to the lowest generated a high level of overdraft fees in the years leading up to the financial crisis, but it led to widespread customer dissatisfaction. Customers revolted and filed class action lawsuits. Another is the practice of a continuous overdraft fee that occurs until the customer comes out of a negative balance.

Bartolotta also tries to steer away from the use of asterisks and fine print in company marketing materials and brochures. Bankers may say, for example, “Yes sir, we disclosed this to you at the time of the account opening. It was in the document you received.” Communication, including in such documents, should be in plain language, avoiding acronyms and industry lingo, such as “RDC” for “remote deposit capture.”

In addition, banks should do everything they can to avoid making customers jump through hoops. If you are contemplating a new product or service, bring a literal chair into the room where the discussion is taking place and label it “customer,” he said. Make sure, in other words, the customer is always a part of the discussions about any products and services you provide.

What banks generate loyalty as described? Columbus, Ohio-based Huntington Bancshares does with its bank’s asterisk-free checking account. The checking account for The Huntington National Bank is free with no minimum balances. Anyone who overdrafts the account gets a notice and a 24-hour grace period to right the error before being charged a fee.

Bartolotta used his own mutual as another example. Eastern Bank had been sending emails to customers who closed accounts asking them why they were leaving. They got back several responses from customers who said, ‘I didn’t close my account. You did.’” It turned out that Eastern Bank, like a lot of banks, was charging a recurring fee on inactive accounts and then closing those accounts when they ran a zero balance. Many customers never opened their account statements and didn’t know what was going on. To change this, Eastern Bank began warning customers when they were about to be charged an inactivity fee, and giving them options to avoid the fee and even close the account, if they chose. The helpfulness was a huge improvement.

There’s room for improvement in the reputation that the banking industry enjoys. A lot of small, community banks already follow these customer-friendly practices. It would helpful if the entire industry did.

The Battle Is Back On for Checking Customers


As I was driving to a meeting the other week listening to the radio, I heard back-to-back commercials from two different banks about checking accounts. The first was a super-regional bank promoting that they would pay me $250 to move my checking account to them. The second, one of the mega banks (a top five bank in asset size) promoted a similar message but upped the incentive to $300 to switch.

When I got home later that day, I found a direct mail offer from another mega bank upping the incentive to $500.

CHASE500_card2.jpg

I looked closer at the conditions of these incentives and found a similar nuanced strategic objective. These banks (and a few others I found online making similar offers) are clearly not returning to the days of “open a free account, get a free gift.” They aren’t looking for just consumers willing to switch their account to a free account with no commitment other than the minimum balance to open requirement (usually less than $50).

Rather, they are looking for those willing to switch their relationships that require a certain level of funding and banking activity (direct deposit, mobile banking activation, etc.) to earn part or all of the cash incentive. And these banks aren’t offering a totally free checking account.

Recognizing this as the objective, I perused a major online marketing research company to look for competitive responses from community financial institutions and found hardly any similar monetary offers. Those that were similar were mainly promoted just on their respective websites.

So what do these large banks know about these types of offers that community financial institutions don’t know (or deem important enough) to mount a credible competitive response? Reading and listening to presentations made to stock analysts by big bank management reveal that they know they can simply out market smaller community financial institutions, which don’t have or want to devote the financial resources for incentives at these levels.

They also know these smaller institutions’ customers, namely millennials, have grown disenchanted with inferior mobile banking products, and are looking for superior mobile products that the larger banks typically have. They are capitalizing on a growing attitude taking place in the market regarding consumers who switch accounts — 65 percent of switchers say mobile banking was extremely important or important to their switching decision, according to a survey by Alix Partners.

So by out-marketing and out-innovating retail products, larger banks know the battle is on to attract profitable or quick to be profitable customers, traditional ones right down to millennials who never set foot in a branch, by offering an attractive “earned” incentive to move and providing better mobile products along with a wider variety of other retail products and services.

Now community bankers reading this may be thinking, “That’s not happening at my bank.” Well, you better double-check. Last year, 78 percent of account switchers nationally were picked off by the 10 largest U.S. banks (and 82 percent of younger switchers) at the expense of community banks. Community banks lost 5 percent of switcher market share and credit unions lost 6 percent, according to Alix Partners.

And once these larger banks get these relationships, they aren’t losing them. Take a look at JPMorgan Chase & Co. Chase Bank has driven down its attrition rate from over 14 percent in 2011 to just 9 percent in 2014 (an industry benchmark attrition rate is 18 percent). Also from 2010 to 2014, it has increased its cross-sell ratio by nearly 10 percent and average checking account balances have doubled.

With this kind of financial performance (not only by Chase but nearly all the top 10 largest banks), a negligible competitive marketing response from community institutions and a tentativeness to prioritize enhancing mobile checking related products, their cash offers from $250 to $500 to get consumers to switch accounts is a small price to pay.

Combining this with well-financed and marketing savvy fintech competitors also joining the battle to get customers to switch, the competitive heat will only get hotter as they attack the retail checking market share held by community institutions slow to respond or unwilling to do so.

So community banks and credit unions, what’s your next move?

Using Technology to Grow Your Customer Base


For many community banks, continuously communicating with their customer base can be challenging given limited resources and rising compliance requirements. In this video, Michael Tipton of emfluence discusses how using an automated messaging platform for new accounts can help banks cultivate and grow customer relationships.


Transforming Customers into Lifelong Champions—as Quickly as Possible


3-28-14-Sutherland.pngThanks to e-commerce stars like Amazon and Zappos, consumers expect exceptional, real-time customer service every time—whether they’re buying books, boots or a mortgage.

Do it right and your customers will come back again and again, even trumpet you on social media. Disappoint them or move too slowly, and they’ll rant about you to their 10,000 Twitter followers. Even if they like you, they can be quick to abandon you to sample your competitor’s cool new app.

How can you respond to customer needs at both ends of the urgency spectrum: instantly, with transactions conducted 24/7 on mobile devices, and over the long haul, ready to respond as a customer moves from college, to home buying to retirement?

Creating Loyalty for Life
Keeping customers engaged for years and less susceptible to competitors’ pitches means offering products that sync with key milestones. Those include savings and checking accounts, student loans, debit and credit cards, auto loans, mortgages, insurance, home-equity loans, child-focused savings plans for their kids, college savings plans and retirement planning.

Consider the loyalty created with first-time homebuyer programs. One example is the First Home ClubSM, a matched savings program administered by the Federal Home Loan Bank of New York. For every dollar a pre-qualified customer saves over a 10- to 24-month period, participating lenders match $4 for a one-time payment of up to $7,500 in matching funds that may be applied toward the down payment or closing costs on a home.

Technology-Driven Competitiveness
But technology is forcing banks to do much more. Those lifestyle-sensitive products must be personalized and delivered quickly and easily, says Joseph J. Buggy, senior vice president and chief strategist at Sutherland Global Services.

Witness digital-wallet and virtual-currency solutions like Isis, Bitcoin, Square, PayPal and Google Wallet. Tech-savvy young people are quicker to snap a smartphone photo of a paper check for deposit than to visit a branch.

Banks are struggling to embrace customer expectations for mobile self-help solutions, Buggy says. And yet they must move quickly, with customers adopting mobile banking five times faster than they adopted online banking back in the 1980s.

Customers want the same experience when accessing their bank, whether via personal computer or smartphone, Buggy says, and the technology is there to allow banks to offer that. Many banks, though, immersed in replacing core systems, have hesitated to invest in syncing Internet- and mobile-based platforms into a single interaction channel.

Leveraging Social Media
With Facebook boasting a billion users and Twitter many millions, engaging with new and existing customers means moving into those spaces effectively. Banks large and small are using social media to promote services, respond to customers, recruit employees and even supplement crediting decisions. Soon, customers may check balances and conduct bank transactions via social media.

Buggy advises banks to take a clear position on social media and commit only to the channel(s) the bank can staff 24/7. A static account with outbound-only communication, where you are promoting your bank but not interacting with customers, is worse than none, he says.

“It’s more forgivable, from the customer’s perspective,” Buggy adds, “to not have a Twitter handle at all than to have one and not respond quickly to it.” Particularly with Twitter, “the demographic using it expects the interaction to be close to real-time.”

Must-Have Customer Service Qualities
Banks have little choice but to meet customer demand for:

  1. 24/7 mobile access
    Banks not “open” around the clock will lose market share to whatever entities allow customers to transact business from their devices at 3 a.m.
  2. Single dashboard/single login interfaces that show the breadth of a customer’s interactions
    Credit cards, mortgages and insurance may be separate operations inside your organization, but the customer doesn’t care. She wants to reach all of her accounts from one screen.
  3. Inquiry resolution that’s quick, accurate and painless
    When communicating with you, do your customers prefer live chat, mobile apps, online self-help or social media? Are you using traditional interactive voice response (IVR), which requires the customer to type in lots of numbers when calling you on the phone, or have you moved to voice-enabled IVR, which is easier on the customer? How do your customers prefer to have complex questions or complaints resolved? Do snail mail and personal visits still have a place in your customer service strategy?

In a follow-up article, we’ll focus on finding the best ways to listen to your customers to ensure you’re serving them expertly—both in the moment and over the long term. For more information on this topic, see Sutherland’s white paper “The New Age in Customer Service.”

Five Ways Banks Can Build Mutually Rewarding Customer Relationships


thumbs-up.jpgIf you think about the people in your life that you are closest to, chances are they’re the ones that you’ve shared the most experiences with. Those experiences build the involvement needed to grow relationships—between people and also between people and brands. Because there are few things as personal as money, banking is an industry that has a huge opportunity to engage people in experiences that build lasting and mutually rewarding relationships. Yet it’s a segment that has low satisfaction rates (44 percent were extremely or very satisfied with their bank in an October 2011 Harris Poll).

To better understand the opportunity, we commissioned a study on people’s attitudes toward their bank and most importantly, how they felt their bank felt about them.

One big discovery is the difference between the way people feel about their bank and how they perceive their bank feels about them. About 39 percent of people surveyed feel indifferent toward their bank—they neither like, love nor loathe it. But when asked how they feel their bank feels about them, 54 percent feel their bank is indifferent toward them and another 6 percent feel their bank loathes them. I doubt there are many human relationships that could survive under that scenario.

When asked how open to switching banks people were, 30 percent said they are very likely or indifferent/open to switching—that means nearly a third of customers are vulnerable on any given day. A Harris Poll looked even worse for the bigger banks: 46 percent of JP Morgan Chase & Co., 40 percent of Bank of America Corp. and 54 percent of Wells Fargo & Co. customers are extremely or very likely to change their bank. When you consider an American Bankers Association study found that it’s seven times more expensive to replace a customer than to keep them, it seems that the opportunity and the need to build stronger relationships is very real.

Here are five ways banks can build mutually rewarding customer relationships and become a champion for them:

Champion customer needs by focusing conversations on “what they want to do” rather than “what we have to sell you” which just furthers the feeling that the customer doesn’t matter. Banks can rewrite the language used by everyone in the bank to reflect the needs and the power of their customers. One example is Opus Bank. The bank was founded on the belief that strong businesses build strong communities and everything they do supports people with the vision to drive job growth, including their tagline, which is a call to “Build Your Masterpiece.”  

Give people credit for knowing how they like to use their money by creating a culture of choice that allows people to customize their accounts and services.  While many aspects of financial products are regulated, banks could let people choose the other services they value. Where one person might value free wire transfers, another might prefer something entirely different.

Be a valuable resource that champions people’s desire to do something with their money. Think Nike+ for money. Offer financial management tools that help people set goals, track their progress using their account data, and get rewarded for their achievement. This could be a great opportunity to tie in commercial banking partners like retailers and restaurants in each geographic area. We are beginning to see new banks (e.g., Simple) emerge that leverage technology to not just make transactions easier but to actually empower the consumer.

Create communities for customers to share financial advice with each other and with the bank. Banks can show that they embrace customers as people (not just their money) by adopting the behaviors of sociable people, i.e. by being accessible, interested in what people have to say, and providing inspiration to help them achieve what they want to with their money. Regional banks like Umpqua Bank have done a great job of using technology to create a personal touch outside the bank. In contrast to the 98 percent of social media commentary about banks that is negative, theirs is 99 percent positive and almost to the point of fostering a “my bank is better than your bank” pride.

Empower employees to act in the best interest of their customers and reward them based on their personal contributions to the relationships they have. This is particularly important as customers switch to online banking and each interaction takes on more importance.

While creating these kinds of experiences may not directly sell more banking products, they have real business value. They build involvement with your customers and that involvement will lead to deeper relationships that are more mutually rewarding and profitable.