A Mystery Shopper’s Guide to Improving Customer Service

five-star.jpgI’ve done hundreds of mystery shops over the years, at branches all over the country.  While I find that the branch employees I meet are generally friendly and professional, I’m frustrated in the small number of truly great mystery shop results that I get to report.  Banks spend big marketing dollars to get new customers in the door, but what happens when they get there sometimes becomes an afterthought.  My mystery shops usually follow a familiar scenario.  I’m just a guy walking into a branch to get some information about a new checking account.  That’s an important scenario for your bank to master.  Here are five tips to help your branch teams make better first impressions and improve customer interactions.

1.  Acknowledge people as they walk into your branch:

 Some branches I shop seem more like funeral homes than sales and service environments.  It’s amazing what an enthusiastic, “Good Morning!” can do to make a great first impression.  This is even more important when the branch is busy, and when people have to wait.  No one likes to wait.  A simple, “I’m sorry that we’re so busy today, someone will be with you in just a few minutes” will lower frustration and perceived wait times.

2. Tell your bank’s story:

Tell your story every chance that you get, especially with new customers.  What makes your bank unique?  Why is your bank the best choice?  During my mystery shops, I love it when I heard the words, “we’re the only bank that…”  Good banks invest in new products and services that give them a competitive advantage.  The great banks train their branch teams how to highlight that competitive advantage with every interaction.

3. Sell at the desk, not the teller line:

Sometimes during my mystery shops I’ll approach the teller line with the question, “Whom can I talk to about checking accounts?”   More times than not, this usually ends up with me receiving a brochure and a rushed sales pitch as the line behind me grows.  Instead, train your teams to escort teller line inquiries to a branch service person at a platform desk. 

There’s more privacy.  There’s more time.  And, hopefully you’ve got a customer service expert that is trained to ask a few good questions in order to make a good recommendation.  None of those things can really happen consistently at the teller line.  No one wants to answer financial questions with their neighbor standing at the teller window next door.

4. Build better sales tools:

Disclosures are not sales tools.  In my mystery shops, I still find branches that use them to explain products to me when I present myself as a new checking account prospect.  Make the effort to have a great brochure.  Make sure it’s designed to fit with the way that you’re teaching your branch teams to sell.  If you train them to ask questions, why not put a few of those questions right in the front of the brochure? 

At our company, we’re fans of tools that we call placemats.  They’re big.  They have lots of room to highlight features and benefits, and not just tiny text on a page.  Some banks laminate them and keep them at each sales desk.  Others print them on tear-away pads, and give them to each customer as a reminder of the things learned during the branch visit.

Regardless of what type of brochure you use, make sure that the branches keep them in stock and up-to-date.  You’d be surprised how many times I’ve watched branch people shuffle through drawers for brochures.  And I sometimes find old versions of brochures mixed in with newer ones. 

5. Don’t chain the pens to the desk:

Ok, maybe this last one is just a personal pet peeve.  But seriously, if I were a bank marketer, I’d love for all of my customers to balance their checkbook or sign their debit card receipts with a pen that has my logo on it.  It’s an easy brand-building tactic, and it’s cheap.

First impressions are everything.  Make a great one, and you may earn a customer for life.  We’d love to hear about things that your team has done to make great first impressions.

Originally published on December 29, 2011.

Which Fee Income Camp Are You In?

fee-income-squeeze.pngThere’s no debate: Every bank needs more fee income, as do a lot of credit unions. The only debate is how a financial institution is going about meeting this need.

In StrategyCorps’ interactions with hundreds of banks and credit unions, we’ve identified three distinct camps in the need-more-fee-income challenge.

The Do-Nothing Camp. This group of financial institutions seems to be waiting for a sign that this recent decline in fee income will eventually pass. We’re not sure if that means they believe overdrafts are going to make a comeback or the Dodd-Frank Act will be repealed, or are simply in a state of denial over the fee income body blows the industry has been dealt. This camp nearly always seems to have fee income replacement on the to-do list, just not at or near the top, and oftentimes it is easily displaced by other things that are not as hard to deal with.

The “Fee-ectomy” Camp. A fee-ectomy is simply charging a fee for the same thing(s) that have been given away for free for a long time and with no corresponding additional value. As the name implies, the extraction of more fee income from customers on this unfair exchange of value basis is seemingly an easy and convenient way to generate more fee income. That is, until it starts causing significant heartburn for customers, provides negative headlines in the media and prompts the politicians to start politikin’. (Think $5 debit card fee.) This camp is comprised primarily of the larger banks that must feel the industry is basically an oligopoly, given their acceptance and commitment level to this fee income pricing strategy. Unfortunately, the by-product of the fee-ectomy strategy is an increased, or at least an ongoing, level of distrust for all banks that eventually breeds things like “bank transfer day” and unflattering customer reviews on Facebook.

The Back-to-Basics Camp. For years the industry talked about relationship banking, but never got around to doing much about it as the lucrativeness of overdrafts from free checking drowned out such discussion. Now smart financial institutions are genuinely trying to figure out what this means as a way to restore fee income by charging new fees for added value and also trying to cure the thousands of unprofitable accounts rather than firing them with arbitrary and value-less fees. This back to basics camp is approaching the fee income challenge by designing products with new features customers gladly pay for (for example, cell phone protection), marketing in a purposeful way that customers actually notice, creating better connections with customers through customized e-communication and reinforcing product education and sales training to frontline branch staff.

It’s pretty obvious which of the three camps will be the winner here (hint, it’s not the first two). But as those institutions that have adopted a back-to-basic strategy will attest, it’s not the passive way or the easy way. However, with clearly superior financial results and much happier customers, it is proving to be the right strategy for banks and credit unions that genuinely commit prioritized time and resources to addressing this issue.

Is cutting branches the best answer when times are tough?

map.jpgBank of America is slashing 30,000 jobs, which one bank analyst estimated would lead to the shuttering of 600 of the bank’s branches, as the bank tries to reduce expenses in a sputtering economy and in the midst of an avalanche of bad mortgages. London-based HSBC already announced it was selling nearly 200 branches in the U.S. to First Niagra Financial Group.

On the other hand, JPMorgan Chase & Co. is doing quite the opposite: it announced plans earlier this year to add 1,500 to 2,000 bank branches in the next five years. Many of them will be in California and Florida, hotspots for the last mortgage meltdown.

Is this lunacy, or is JPMorgan up to something smart?

Of course, a lot will depend on how the next five years turns out.

But the simple idea of cutting branches to save money isn’t necessarily the brightest, according to research by New York City-based First Manhattan Consulting Group. The bank consulting firm did an analysis of branch consolidations and found wide discrepancies in how successful branch consolidations were.

The hitch is that cutting branches can also cut into revenues, and banks often underestimate this impact.

The typical branch’s direct expenses equal only about 25 percent of the revenues it produces.

According to First Manhattan:

  • Deposit loss within the first two years following a consolidation ranges from as much as 55 percent or more to as little as less than 5 percent of the closed branch’s portfolio. Based on our analysis of over 500 consolidations, we estimate that 60 percent of branch consolidations resulted in a negative NPV (net present value) because of higher than acceptable (revenue) attrition.
  • Beyond short-term runoff, consolidations also have longer-term effects on revenue momentum. Following a 3-year stabilization period, a typical branch that absorbs the customers of a nearbyclosed branch experiences a decline in revenue growth of 4 percentage points per year relative to local market performance. However, here again, averages can be misleading and some banks outperform while others really suffer.

JP Morgan says the 1,000 branches it has opened since 2002 have contributed as of this spring $148 million to the bottom line and brought in 2 million new checking accounts.

Because of the time it takes for new branches to be profitable, JPMorgan is seeing its plans as a “significant long term investment for growth.”  A chart in the bank’s investor presentation shows the new branch build becoming profitable in 2018 or 2019.

“Yes, we are concerned about technology reducing the need for physical branches, but all our research shows that we still will need branches to serve our customers,’’ CEO  Jamie Dimon writes in his 2010 annual report. “While use of the Internet and ATMs has skyrocketed, branch traffic essentially has remained steady. Over time, branches may become smaller, but we still think they will remain essential.”

JPMorgan had 5,340 bank branches at the end of the second quarter. Bank of America has about 5,700 branches. Don’t be surprised if JPMorgan soon becomes the biggest bank in America.