Becoming a Trusted Advisor to Small Business Banking Clients

As identified in the 2014 J.D. Power Small Business Banking Satisfaction Study, one key aspect of the small business banking experience is the relationship with an assigned account manager.

When an account manager is assigned to a small business client, building a strong relationship becomes vital. Ideally, the account manager becomes viewed as a ‘trusted advisor’, which can help the bank maximize the ROI (return-on-investment) of assigning account managers to small business clients. In addition to having a significant impact on customer satisfaction, account managers that are viewed as a ‘trusted advisor’ can also drive increased loyalty and deepen the share-of-wallet customers hold at the bank.

Furthermore, the negative impact of not being viewed a trusted advisor is profound, as satisfaction levels are actually lower than when no account manager is assigned at all (643 vs. 723, respectively, on a 1,000-point scale).

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Data from the Small Business Satisfaction Study also identifies clear steps that small business account managers can take to develop a strong relationship with their clients and improve the perception of them as a trusted advisor, including:

-Take time to engage clients and understand their business

-Initiate contact with clients throughout the year to discussed needs and/or recommend solutions

-Promptly reply to any inquiries from clients and show ‘concern’ for their needs

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The 2014 J.D. Power Small Business Banking Satisfaction Study was released on October 28th, 2014.

 

 

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The Impact of Customer Service on Wait Time Satisfaction

Financial institutions often have staffing and queueing models in-place to minimize customer wait times and improve the efficiency of interactions. However, there are still instances where customers are forced to wait in-line at a branch or are placed on-hold before speaking to a call center representative. When traffic is high and customer wait/hold times are necessary, financial institutions can offset wait-time dissatisfaction by providing quality service once the interaction begins.

For example, the chart below looks at call-center satisfaction among credit card customers that waited at least five minutes before speaking to a call center representative. On average, all credit card customers waiting five minutes before speaking to a rep. have a satisfaction score of 775 (on a 1,000-point scale). However, when a customer waits five minutes and is then greeted in a friendly manner by their call center rep., satisfaction increases to 795. And when a customer waits five minutes, is greeted in a friendly manner and the phone rep had their account information ready prior to joining the call, satisfaction increases further to 827. Finally, satisfaction increases even more when the rep. offers additional assistance and thanks the customer for their business – when all four best practices displayed in the chart below are provided, satisfaction among customers waiting five minutes increases from 775 to 835.

Source: 2014 J.D. Power Credit Card Satisfaction Study

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Similarly, among retail banking customers, simply greeting customers as they enter the branch can significantly improve satisfaction with wait-times in the teller line. In the chart below, satisfaction among customers who waited 3-4 minutes but received a greeting when entering is 8.60 on a 10-point scale, which is higher than customers that did not have to wait but did not receive a greeting when entering the branch (8.39).

Source: 2014 J.D. Power Retail Banking Satisfaction Study

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Incidence and Impact of Perceived Mortgage Servicing ‘Problems’

Based on data from the 2014 J.D. Power Primary Mortgage Servicer Satisfaction Study, the percentage of customers reporting a ‘problem’ with their servicer has declined slightly over the past year (25% reporting a problem vs. 27% in 2013).

Across the individual problem types, there were noticeable reductions in problems such as:

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Escrow account information

Repayment/forbearance plan/short-sale.

Conversely, there was a considerable increase in the percentage of fee-related problems reported by mortgage customers (17% vs. 3% in 2013). In response to this, mortgage servicers must ensure that their customer service representatives are well-educated on fee-application policies and are also provided a level of ‘empowerment’ that will allow them to resolve inquiries during the initial contact from a customer.

And while fees are now the most commonly reported problem, it is also important to note that the ‘negative impact’ of fee problems in the mortgage servicing industry is less profound than other types of problems experienced (-22 index points). Perceived ‘customer service’ (-212 index points) and ‘loan modification’ (-132 index points) problems are most impactful, providing mortgage servicers with further evidence of the need to ensure high quality and consistent customer service.

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Awareness and Usage of Website Functionality Helps Drive Satisfaction among Self-Directed Investors

Data from the J.D. Power 2014 Self-Directed Investor Satisfaction Study finds that customer satisfaction can be significantly impacted by improving the awareness and usage of website functionality.

For example, ensuring that customers are aware of ‘financial planning tools’ can improve Website satisfaction by 87 index points (on a 1,000-point scale). Taking it a step further, ensuring that customers actually use ‘financial planning tools’ can drive an additional improvement of 28 index points.

Awareness of website features can also vary widely across the different firms measured in the study. Therefore, it is critical for each firm to understand where their customers may require additional education on website functionality or additional encouragement to actually use certain features.

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For firms that have already invested valuable resources in the development of website functionality, it is critical for them to educate their customers on the available offerings and encourage usage. Failure to do so may impact the ROI (return on investment) they receive from expenditures dedicated to the website. Effective marketing campaigns, website tutorials and personal demonstrations are some methods available to firms looking to increase website awareness and/or usage.

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Using ‘Key Performance Indicators’ to Improve the Credit Card Customer Experience

In an ideal scenario, credit card issuers would excel at servicing all aspects of the customer experience. However, data from J.D. Power’s Credit Card Satisfaction Study consistently finds that every credit card issuer has both strengths and weaknesses with regards to the level of service provided to their customer base.

And because no issuer has unlimited resources to devote towards improving the customer experience, determining which initiatives should receive top-priority becomes an important piece of strategic planning.

The 2014 Credit Card Satisfaction Study has identified 12 ‘Key Performance Indicators’ (KPI’s) which represent service behaviors that have the greatest individual impact on customer satisfaction. In other words, “if you can’t do everything right, make sure you are doing these things right.”

As a whole, the industry struggles most with educating customers on card terms (i.e. rates, fees, etc.) and simplifying the login process for online account access. Only 50% of credit card customers completely understand their credit card terms, and only 53% of customers report that it is very easy to login to their account. It is also important to note that these are two of the most impactful KPI’s, based on their potential impact on overall satisfaction.

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The KPI performance of each individual card issuer varies widely, and each has a unique set of strengths and opportunities. In order to successfully prioritize any investments towards improving customer satisfaction, it is important for each issuer to fully understand which of their metrics have the greatest room for improvement while also understanding the potential ‘impact’ of each metric.

 

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Retail Banking ‘Problem Incidence’ Highest among Customers that are Young and Wealthy

Data from the J.D. Power 2014 Retail Banking Satisfaction Study finds that the industry continues to improve upon their ability to prevent problems. In fact, overall problem incidence has declined every year since 2010.

However, data also finds that problem incidence tends to be highest among retail banking customers that are both ‘young’ and ‘wealthy’. For example, over one-fourth (26%) of Affluent Gen Y customers have experienced a problem with their personal banking institution in the past 12 months.

Perhaps more importantly, these young and wealthy customers are less tolerant of perceived ‘problems’ with their current institution – when a problem occurs, they are considerably more likely to say that they ‘definitely/probably will switch’ banks in the next 12 months.

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Young customers, such as those in the Gen Y age segment represent tremendous ‘growth potential’ for financial institutions, particularly if they are already considered to be ‘Affluent’. It is critical for financial institutions to gain a deeper understanding of the problems that these valuable customers are most likely to experience and develop correction action plans to prevent additional problems in the future.

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How does being a ‘low-cost’ bank impact outcome metrics?

Many banking institutions are evaluating their current fee structures and considering modifications in an attempt to drive bottom-line improvements, while also acknowledging the potential ‘fallout’ that can arise from a change to fee structures.

Using data from the U.S. Retail Banking Satisfaction Study, J.D. Power has analyzed the topic of fees from multiple angles. Among other things, prior analysis related to the topic of fees has found that:

  • The ‘negative impact’ of monthly maintenance fees has been decreasing within the retail banking industry, indicating that customers are becoming slightly more ‘accepting’ of monthly fees.
  • Many customers pay a higher-than-average fee, yet remain highly satisfied. This is driven by the delivery of a clear ‘value proposition’ from their bank (the customer feels that the benefits they receive from the bank outweighs the cost).
  • When implemented, fee changes represent a significant risk for banking institutions. Problem incidence will increase, driving an increase in labor costs associated with problem resolution. Intended attrition also increases, especially within the first month after a change.

When considering whether or not to increase/decrease monthly fees associated with checking accounts, it is important for banks to fully weigh the pro’s and con’s of the change. On one hand, an increase in the percentage of customers charged a fee (or an increase in actual fee amounts) can positively impact revenue.

However, as displayed in the chart below, data finds that banks who position themselves as a ‘low cost’ institution enjoy bottom-line benefits such as lower ‘cost-to-serve’, greater loyalty and greater share-of-deposits. Additionally, customers of ‘low-cost’ banks are significantly less likely to open additional accounts/products outside of the bank.

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The decision to implement/increase/decrease fees should be unique for each and every banking institution depending on their overall strategic plans. It is critical, however, that they fully understand all potential ‘tradeoffs’ for any decision that is implemented. Analysis of consumer behavior and customer satisfaction data can be an extremely valuable tool to use when determining the appropriate cause of action.

 

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Functional Mortgage Servicing Websites Can Help Minimize ‘Labor Costs’

The 2014 J.D. Power Primary Mortgage Servicer Satisfaction Study published on July 29th, and customer satisfaction has improved significantly compared to 2013 study results (index score of 754 vs. 733 in 2013).

Analysis of this year’s study data has identified a new ‘Key Performance Indicator’ – whether or not a website visitor was able to resolve the reason for their visit entirely via the website.

Mortgage servicers that are able to provide their customers with a highly functional website can help minimize the number of ‘personal contacts’ received by a call center, in a branch, etc. In fact, 38% of customers visit the website in an attempt to resolve an issue or answer a question before they contact customer service.

An additional Key Performance Indicator related to the website is the ability for customers to easily locate all information and website features, which can also have an impact on minimizing ‘labor costs’. The inability for customers to find information or specific features is similar to not providing the information/features at all – eventually the customer will need to engage in a personal interaction to obtain the needed information or an answer to their question.

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It is important for mortgage servicers to allocate potential investment dollars on improving website ‘range of services’ while also focusing on ‘clarity of information’ and ‘ease of navigation’. Successful implementation of these best practices can improve customer satisfaction while simultaneously decreasing labor costs associated with answering simple questions or resolving issues/problems.

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Optimizing the Frequency of Proactive Contact for Full-Service Investors

Full-service investment firms looking to maximize the ROI of proactive outreach to their clients should be aware that the ‘demand’ for proactive outreach varies considerably by demographic segment. In other words, developing proactive outreach programs should not be viewed with a ‘one-size-fits-at-all’ approach.

The graphic below, which is based on data from the 2014 J.D. Power Full-Service Investor Study, looks at investors that are ‘highly satisfied’ with the Account Offerings available at their firm. While highly satisfied ‘Affluent’ investors report an average of 9.9 contacts from their advisor, and 7.2 contacts from their firm, high satisfaction among investors in the ‘Mass Market’ and ‘Mass Affluent’ segments can be maintained with less frequent outreach.

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Understanding the differing levels of service that drive investor satisfaction may help firms create communication strategies that meet client needs, while also managing the costs associated with proactive outreach. It is also important to note that investors across different demographic segments have different preferences with regards to the channel used for communication, and the types of information that should be provided to them proactively.

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‘Corporate Leadership’ a Key Driver of Satisfaction and Retention Among Financial Advisors

Based on findings from the 2014 J.D. Power Financial Advisor Satisfaction Study, about 87% of Employee advisors and 93% of Independent advisors say they either “definitely will” or “probably will” remain at their current firm for the next 1 to 2 years.

‘Loyal advisors’ are more likely to cite ‘cultural values/benefits’ as a primary reason to remain with their firm, compared to ‘neutral advisors’. Specifically, study data finds that ‘Corporate Leadership’ has a key role to play in improving advisor loyalty through clear and effective communications of the firm’s core values and strategy.

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Additional analysis identifies some key differences in brand perception among ‘loyal’ and ‘neutral’ financial advisors – ‘loyal’ advisors are more likely to perceive their firm as ‘customer-focused’, ‘collaborative’ and ‘flexible’.

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