A decision to switch banks is often driven by a mix of frustration with the previous bank and attractive offerings from the new bank.
Attracting new business within the retail banking industry is unique. While there are several variables that can “pull” customers toward a new bank, data from our J.D. Power and Associates 2013 Retail Banking Satisfaction StudySM has found that customers generally will not switch banks unless they are also “pushed” away from their prior relationship.
While poor service and high fees are most likely to push customers away, branch convenience, promotions and recommendations help to attract customers to a new bank.
What are you doing to protect your current relationships?
The 2012 U.S. Bank Customer Switching and Acquisition Study is based on multiple evaluations from 5,062 customers who shopped for a new banking account or new primary financial institution during the past 12 months. Below are some highlights from the study, as well as links to how the industry experts are reacting to the results:
- Acquisition of new customers by smaller banks and credit unions has increased by 2.2 percentage points to an average of 10.3 percent in 2012 (from 8.1 percent in 2011).
- Among big banks, regional banks and midsize banks, switching rates average between 10.0 and 11.3 percent, while the defection rate for small banks and credit unions averages only 0.9 percent, a significant drop from 8.8 percent in 2011.
- 9.6 percent of customers in 2012 indicate they switched their primary banking institution during the past year to a new provider. This is up from 8.7 percent in 2011 and 7.7 percent in 2010.
- Fees are the main reason customers shop for a new primary bank. In particular, one-third of customers of big and large regional banks cite fees as the main shopping trigger.
- Regardless of bank size, more than one-half of all customers who said fees were the main reason to shop for another bank also indicated that their prior bank provided poor service.
- In capturing customers who are shopping for a new bank, several of the more successful banks achieve higher acquisition rates through the use of promotions and cash incentives.
- At one of the highest-performing big banks, 19 percent of customers indicate promotions were the reason they selected their new bank.
How are the industry experts reacting to the results of the J.D. Power and Associates 2012 U.S. Bank Customer Switching and Acquisition Study?
Los Angeles Times
Credit Union Times
WONKBLOG by The Washington Post
The Financial Brand
Bank Marketing Strategy
For more information regarding the J.D. Power and Associates 2012 U.S. Bank Customer Switching and Acquisition Study, please contact Holly Zagresky at Holly_Zagresky@jdpa.com
Next week, we’ll be releasing our 2012 Bank Customer Switching and Acquisition Study (SM). This study will explore the triggers that cause customers to shop for a new bank or a new account, their perceptions of bank brands, and how they make their purchase decision. The study will also include information on those who switched primary financial institutions in the past 12 months.
The customers of the top 25 financial institutions in the industry, as well as customers of small banks and credit unions are targeted in this study.
Focusing on the stages of the purchase process, the 2012 Bank Customer Switching and Acquisition Study will answer the following questions:
- The Shopping Process – Who is shopping? What prompts a customer to shop? What are they shopping for?
- Awareness – What drives greater awareness?
- Consideration – How are customers shopping? What impacts a financial institution’s consideration? Why are financial institutions avoided?
- Selection – What drives shoppers to select a financial institution?
- New Account Initiation and On-Boarding – What are the new account initiation best practices? What experience differences improve share of wallet?
To receive a copy of the press release when it’s available, or to learn about how J.D. Power and Associates can help you integrate the Voice of the Customer into your products and services.
This special 5-part “how to” blog series will detail the fundamentals of branch account sales and service delivery including:
- Needs Assessment
- Ensure products meet customer needs
#2 Needs Assessment
Completely understanding customer needs and recommending products that fully meet those needs!
- Increases customer satisfaction and the likelihood to purchase more products in the future
- Directly impacts product penetration at that first meeting
- Ensures stronger alignment with and better customer understanding of products’ overall value, pricing and features
- Penetration for credit cards and savings accounts—those most likely to be sold at the initial point of sale—is significantly higher when customers perceive their needs have been “completely” identified, however, only 52% of customers indicate having needs understood and appropriate recommendations made
Source: J.D. Power and Associates 2011 Retail Bank New Account Study. ©2011 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
How: Ask the Right Questions to Find the Need and Build Value
Ask Open Ended Questions
- An open ended question is the chance to clarify the customer’s needs
- Includes general customer inquiry questions
- Keeps the conversation going because it forces an explanation
- Can’t be answered with a yes or a no
- As the level of trust is increases, the answer will get longer
- Sample open ended questions should include: What brought you into the bank today? Where are you currently banking now? What do you like best about your current bank? What do you like least about your current bank?
Be a Great Listener
- In a sales conversation, be careful not to start talking too soon
- Ask the questions people want to answer (listen and plan for the next question)
- Be a good listener, not a bad talker
- The customer should do most of the talking
- Be an active listener and take notes. It shows the customer you not only heard what they said, but also care about their needs enough to scribe them.
Features Tell & Benefits Sell Service
- Features are important and should be explained clearly. Brochures list features, but don’t simply read from the brochure all account features that exist. Explain the ones that are most important to the customer and speak to them in your own words.
- The customer will not buy bank services because of the features alone like min balance to open account or fees.
- Translate account features into benefits, specifically ones that are most important to them.
- Use figures and perform demonstrations to help translate abstract claims (features) into concrete understandable service points (benefits). For example, demonstrate online banking or calculate for the customer an actual cost savings benefit using real rates.
This is post #2 of a special 5-part “how to” blog series on the fundamentals of branch account sales and service delivery. If you missed it, click here to read post #1 on Greeting Customers.
Just like with couples, the relationship between retail banking customers and their financial institution is complex. As with any relationship, a healthy connection between two parties is one that develops over time and is typically based on mutual respect, trust, honesty and support.
Most of us know that it takes effort for healthy relationships to work! Whether we like it or not however, breakups do happen and in the case of bank customers, they get over them quickly and move on to another bank relationship.
The following are a few valuable insights about why retail bank customers may break up with you and how you can implement a few change initiatives to maintain a healthy connection with your customers….to avoid the bank break up.
Reason #1: Callous Communication – Problems become a customer’s biggest problem
Problem prevention needs to be a high priority for all financial institutions, given the incidence of problems (22% of customers¹ indicate experiencing a problem) and the significant impact that problem incidence has on overall customer satisfaction.
- Ensure customers understand fee structures, deal honestly with them and explain the fees right up front – it improves awareness of fees and minimizes complaints.
- Engage new customers during account initiation to identify their needs and sell them the products that meet those needs …..it lowers the incidence of future problems if they are happy from the start.
- Empower bank representatives (branch and call center) with the necessary authority, and provide proper training that will allow them to address any customer misunderstandings at the first point of contact. It will eliminate confusion for future problems.
 J.D. Power and Associates 2011 Retail Banking Satisfaction Study
Reason #2 – Unmet Needs – You’re not giving them enough of what they want Continue reading ›
The use of the internet and mobile devices to monitor account information and conduct routine transactions continues to rise across all the consumer financial services businesses that J.D. Power and Associates measures, from bank to brokerage accounts, from credit cards to mortgages. However, customers overwhelmingly still prefer an in-branch, in-person setting to open new accounts and establish new banking relationships. Both satisfaction with the account opening process and likelihood to use for future products are significantly higher when accounts are opened in person.
This special 5-part “how to” blog series will detail the fundamentals of branch account sales and service delivery including:
- Needs Assessment
- Ensure products meet customer needs
#1 Branch Greeting
- Greeting customers upon entrance to the branch has a significant impact on overall satisfaction and satisfaction declines by 95 points when customers are not greeted.
- Financial institutions need to encourage all branch employees to take responsibility for ensuring that customers feel welcome and acknowledged, as this not only impacts overall satisfaction but also minimizes the impact of longer wait times customers may experience in the branch.
- Interestingly, overall satisfaction is higher among customers who were greeted upon entrance yet waited 10 minutes or longer in line to see a teller, compared with customers who waited 1 minute or less in line but were not greeted upon entrance (736 vs. 733, respectively, on a 1,000-point scale).
- Mitigating dissatisfaction with long wait times is particularly important for Large banks2, as average wait times are significantly higher (3.5 minutes), compared with Medium and Small banks (2.4 and 1.9, respectively).
- Instituting best practices around branch greeting, since they are behavioral, can be implemented with minimal cost beyond training and coaching. Also consider including these elements within incentive programs.
Follow the five second rule: ALWAYS Acknowledge a customer within 5 seconds of entering the lobby
Stand Up if You Are Sitting!
- Shows respect
- Projects professionalism
- Ask for customer name and use it
Anyone Can and Should Greet a Customer
- Do it before they ask a question
- Make eye contact
- Be sincere
If available, engage the customer in conversation
- Customer will tell you why he/she is in the bank
- Customer will typically ask the first question
- Thank the customer by name
- Ask the customer if there is anything more you can assist them with (other than the reason for the visit)
The Hand-Off to Another Employee (if applicable)
- Escort the customer to the appropriate branch employee
- Do not shout out to another employee across the branch to direct the customer
- Give a brief intro including customer name and needs
This past weekend, I visited an actual bank branch for the first time in over 6 months. As part of the MTV generation (the late half of course), I witnessed the introduction of the home computer, the growth of the video game era, the boom of cable television and the construction of the information superhighway we refer to as the internet. Growing up on digital technology, it’s probably not a shocker that I prefer to do much if not all of my banking via online channels whenever possible or available.
So, it was a Saturday morning, and I needed to cash a check written on a large regional bank where I am currently not a customer. Finding a branch location was a synch, as this bank has a huge national footprint with a well-recognized and distinguished brand image. Convenience was definitely key for me, so I went with easy, and chose to visit the small branch close to my home. After all, I had passed it a thousand times on my way to somewhere else, but never had a reason to pop in.
As I entered the branch, nobody acknowledged my presence, but finding the teller line was easy……4 steps and I was already inside the roped off area waiting for a teller to motion to me that it was my turn to be assisted. In less than a minute, I got the combo hand signal and slight arm waive to “come on down”, and was greeting with a hearty “hello” by the teller. I told her I wanted to cash a check, and she promptly asked me for identification. As she processed my transaction, counted and double counted the cash she was about to hand me, I took a few moments to glance around the rest of the office to just soak up the atmosphere. I can’t help it. I’ve done thousands of retail bank and branch assessments over the years, so you could say that I’m almost conditioned to automatically make note of wait times, observe service behaviors of branch staff and read non-verbal cues of branch customers. In fact, according to the 2010 J.D. Power Retail Banking Satisfaction Study, the in-person customer experience is the largest contributing factor to Account Activity satisfaction in the entire Study!
Here’s what I observed:
- One customer was waiting to be helped on the platform while a CSR was training another CSR on the computer system. Did I mention that it was a Saturday? Did I mention that there was only one CSR on duty?
- There were no customers in line at the teller counter, yet there were 3 other tellers on duty chatting amongst themselves. Did I mention that they were chatting behind the teller counter right in front of the customer waiting to be helped on the platform?
The teller finished processing my transaction, handed back my ID with the cash and a receipt and said “thank you”.
Here’s what I wondered:
- Why didn’t the teller thank me by name or use my name at all during the transaction? After all, she had my ID, so she knew my name by now.
- Why didn’t the teller ask me if there was anything more she could assist me with? I was thinking the obvious, like why was I not already a bank customer or inquire if I would like to be. Why didn’t they want me as a customer? Did they already have too many?
- Why wasn’t I greeted by anyone when I entered the branch?
- Why was platform training being facilitated on a Saturday with no other platform staff present?
- Why was a customer waiting to be helped when almost all employees in the branch were visibly available?
Now, I know what you’re probably thinking……I’ve been conducting comprehensive branch assessments for over 15 years, so how could I possibly be unbiased in my branch observations? I’m trained to notice the subtleties of customer service and can help banks build and implement customer satisfaction programs in my sleep, so maybe my observations were exaggerated or just too critical? Well in this case, I was just an average bank customer processing a simple transaction on a Saturday morning. Continue reading ›
A lot has been said about the Bank Transfer Day recently and its success (or lack thereof). In a recent interview by the Credit Union Times, I was asked how J.D. Power’s research supports or refutes the recent noise about customers moving their banking relationships from the large banks to credit unions and community banks. I would love to say that data shows customers are embracing Frank Capra’s rendition of the struggling but good-hearted Bedford Falls Building and Loan Association (“It’s a Wonderful Life”, for those who may not see the movie a dozen times over the next six weeks), but it’s simply too early to judge. The question at the heart of the matter is whether or not customers will suddenly decide to switch banks out of fee frustration and media encouragement? Obviously the big banks feel that at least their better customers will not while credit unions hope the opposite is true. While it is still too early for J.D. Power to define a point of view on the voice of the customer on this issue, there are some data points from the 2011 Retail Banking Study which may lead us to make some bets.
If we just look at customers who are largely dissatisfied (satisfaction under 600, based on J.D. Power’s 1,000 point scale) AND have had at least one problem or complaint in the last year, 55% of them STILL say they probably or definitely will NOT switch banks in the next 12 months! Whether it’s because of the hassle associated with switching or just because their bank still meets their needs, if these customers won’t switch, how likely will it be that a general satisfied customer will go out on a Saturday morning and move their accounts just because of a threatened $5 fee or online encouragement? If those dissatisfied customers in the Retail Banking Study are further segmented by income, there is still little support for the either argument as High, Moderate and Low income groups vary by only 4 percentage points on their inclination to NOT switch banks.
However, if problems are taken out of the equation and those dissatisfied customers are instead viewed by whether or not they have been charged a maintenance fee in the last year, inclination to switch does change. 30% of unhappy customers (overall satisfaction < 600) who have not been charged a monthly fee say they probably or definitely WILL switch banks in the next year. However, that number jumps 13 percentage points, to 43%, if a customer HAS been charged at least one monthly fee over the last year. That could argue in favor of the Bank Transfer Day resonating with customers who are already dissatisfied with their existing banks.
So what do you think? Did Bank Transfer Day make enough of an impact among customers and banks to make a difference? Was Bedford Falls’ Building and Loan able to get new customers because they told everyone to switch from the big bank? We will clearly know more in the weeks and months ahead.
While the above video pokes fun of the current debit card fee debate, and humorously defines the potential for future fee types, we wanted to provide our readers with some sound customer satisfaction data and best practices around fees from our 2011 J.D. Power and Associates Retail Banking Satisfaction Study. The data highlights we provide below spotlight what makes customers happy or unhappy with regard to charging fees, and we thought it would also be useful to provide some tips and pointers for those banks considering a change to their current fee structures.
Tip #1: Avoid Frequent Changes in Fee Structures
82% of average bank customers were satisfied with their banks’ fees when there were no changes made to fee structures in the past 12 months as compared to only 18% of average bank customers being satisfied when there were 1 or more changes made to bank fees in the past 12 months.
- Customers are happier when fees don’t change often
- Infrequent fee changes limit the occurrence of fee-related problems for which employees will need to spend time resolving
- Avoid changing fees more than once a year if possible
Tip #2: Be Proactive About Communicating Fee Changes to Customers
Only 16% of average bank customers were satisfied with fees changes when they were not notified of changes in advance, compared to 84% of average bank customers that were satisfied with fee changes when they were notified of changes in advance.
- Notify customers about fees far in advance, preferably, at least 3 months
- Provide a clear and concise explanation of the new fees, and don’t burry the explanation in a 50 page, bank jargon filled account disclosure
- Be clear about the value they’ll realize for the additional fees being charged. Higher fees without enhanced value for the customer will have a greater negative impact on overall customer satisfaction
Tip #3: Perform a Needs Assessment at the Time of Account Opening
The impact of a proper needs assessment at account initiation to ensure a customer is placed in the right account at the time of account opening is often overlooked. Of the 57% of average bank customers who received a complete needs assessment at the time of account opening, 42% of them understood the fee types and account types up front, and only 7% of them reported having a fee related problem.
- Make sure the needs of the customer match the account type they receive up front. It will save employees time having to solve fee related issues because of account type misunderstandings
- Even a partial needs assessment at the time of account opening is better than not doing one at all….and will minimize the chances of having to change the account type to the proper one later down the road
- Spending 5-10 mins properly assessing the needs of the customer up front will likely result in happier customers, even should their fees change again next year
The video used in this blog post was not created by J.D. Power and Associates, the McGraw-Hill Companies, Inc. nor does it represent the thoughts and opinions of J.D. Power and Associates, the McGraw-Hills Companies, Inc. This video is used for entertainment purposes only.
All data in this blog post: © 2011 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
Average bank customers, referred to in this blog post represent the industry average sample of the following: Large Banks=475 branches or more and at least $50 billion in deposits; Medium Banks=125 – 474 branches and more than $10 billion in deposits; Small Banks=less than $10 billion in deposits.
Everyone probably remembers that one kid in school who just never fit in or was not accepted by the other kids in the class. Maybe he was too smart…or shy…or short…or tall. But whatever the reason, he just didn’t fit in. Gym class was the worst, of course. When it came time to choose up teams, the kids would fight over who would have to take him onto their team. For the last kid chosen, the gym teacher would often have to assign him to one team or the other while the other kids groaned or complained how unfair it was. Childhood is a painful time and not knowing how or where you fit in can be a troubling feeling that creates stress, sadness, confusion and frustration.
That situation is typical of what Small Business owners go through with their banks. It often starts off well enough, with the Customer Service Rep making the customer feel like the bank values his business. He gets introduced to the staff and even has a wonderful bank calendar for the office! Life seems great, at least until something goes wrong, or questions arise….maybe the first statement arrives with a few surprise fees. He calls the 800 number on the statement but gets transferred around because it’s ‘a business account’ and the agent cannot access those accounts. After several frustrated calls, the customer soon discovers that Small Businesses often get lost in the banking ‘abyss’.
What’s going on? Many banks lack a strategy on how to handle the Small Business owner. He may be assigned to the Mid-Market or Commercial Division, in which case his $2M annual sales is a rounding error compared to average accounts in Corporate. Or he is assigned to the branch, but his needs are more complex than the average consumer and the branch staff lacks the focus, time or capacity to take the time to understand his needs. In other words, no one wants to choose the Small Business owner for their team and the gym teacher ends up assigning him to a team by default. Continue reading ›