Within the retail banking industry, account initiation is often viewed as a key ‘moment-of-truth’. In many cases, the opening of an account/product/service is the first interaction between customer and a bank. Other times, account initiation represents an opportunity for banks to engage tenured customers in a discussion about their evolving financial needs.
As part of the 2015 Retail Banking Satisfaction Study, J.D. Power measures customer satisfaction with the opening of banking accounts, products and services. Specifically with regards to accounts that were opened in a branch, study data finds that customers are most dissatisfied with the experience opening checking and HELOC products. Conversely, new account satisfaction is highest among customers opening personal loans and CD’s.
There are different variables driving the high and low satisfaction scores for these products. For example:
-HELOC dissatisfaction is driven by complexity of the process, as customers opening these products are significantly more likely to say the process was ‘more complicated than expected’.
-The level of engagement between bank and customer is lowest for customers opening a checking account, which often leads to lower levels of product awareness/understanding. In turn, the lack of awareness drives lower satisfaction scores.
-Opposite of the experience reported by customers opening a checking account, those opening a personal loan/line of credit indicate that the branch representative was very thorough in assessing needs and was more likely to provide useful information during the interaction.
Understanding which aspects of account initiation are most troublesome for their unique customer base can help a bank implement necessary changes. In some cases, focus should be placed on simplifying processes. Other times, providing additional training/education to staff can help them more accurately assess customer needs and provide additional value during the interaction.
In addition to identifying the overall weighted^ drivers of customer satisfaction within a given industry, the flexibility of the J.D. Power Index Model can also pinpoint differences based on consumer behaviors and demographics. For example, Rewards may be a vital part of the experience for one segment of credit card customers, while Card Terms may be more important to a different segment of customers.
With regards to the credit card experience, the drivers of customer satisfaction differ between new and tenured cardholders. Card Terms (e.g. fees, rates, credit limits) is a bigger driver of satisfaction amongst new cardholders (less than one year with issuer), while Billing/Payment and Interaction (e.g. website, call center representative) are bigger drivers of satisfaction amongst tenured cardholders (one year or more with issuer).
Analysis of data from the 2014 Credit Card Satisfaction Study also finds that most issuers struggle to maintain satisfaction with cardholders as the tenure of their relationship increases. As displayed in the chart below, a majority of issuers receive ‘above-average’ satisfaction amongst new primary cardholders (less than one year). However, only three issuers have above-average satisfaction amongst tenured cardholders (one year or more). This seems to indicate that the ‘shine’ of a new credit card wears off quickly, and it is important for issuers to focus efforts on maintaining satisfaction throughout the life of the relationship.
^For each industry measured, J.D. Power utilizes a multi-regression analysis to identify and prioritize the primary drivers of customer satisfaction.
With channel usage continuing to evolve within the retail banking and small business banking industries, it is important for banks to focus on delivering a consistent experience across all customer touch-points. Customers interacting with the bank via the website or call center should receive the same level of high-quality service they receive at a branch, and vice versa. However, analysis of data collected by J.D. Power finds plenty of room for financial institutions to further improve the consistency of cross-channel interaction.
One key example is with regards to Problem Resolution. As displayed in the chart below, small business banking customers report considerable differences in their experience depending on the channel used for resolving a problem. While Problem Resolution satisfaction is highest when interacting with branch personnel (tellers, business bankers and managers), there is a steep decline when dealing with call center and online representatives.
Data in the chart above is from the 2014 J.D. Power Small Business Banking Satisfaction Study, but it is important to note that similar discrepancies in cross-channel interaction are evident in all financial services studies conducted by J.D. Power (retail banking, mortgage and investment). And these discrepancies are not always related to Problem Resolution, as many other aspects of the banking experience are also prone to cross-channel inconsistency, such as:
-Clarity of account information
-Method of accessing secure website (PC vs. tablet. vs. Smartphone)
Data from three fielding waves of the 2014 J.D. Power Credit Card Satisfaction StudySM finds that the percentage of credit card customers ‘switching’ their primary card has increased significantly over the past year. More specifically, there is a significant increase in the percentage of customers opening a new credit card account (46% vs. 41% in 2013).
The increase is driven by ‘revolvers’ (customers that typically pay less than their total monthly balance), who cite ‘rewards’ and ‘lower interest rates’ as their primary reasons for switching.
With the competition for capturing ‘share-of-spend’ increasing, it is important for credit card issuers to improve the customer experience in an effort to improve loyalty. One key focus area is ‘rewards’, which have become a key driver of both acquisition and spending habits. In response, issuers must provide attractive offerings, market them effectively and ensure that their customers are aligned into the appropriate programs and card products. Additionally, the creation and marketing of successful rewards programs may also improve acquisition metrics by enticing competitor customers to switch their primary card.
The full 2014 J.D. Power Credit Card Satisfaction StudySM, including data from all four fielding waves, releases in August, 2014.
Data from J.D. Power’s 2013 Primary Mortgage Origination (PMO) Study identifies growing consumer demand for a more digital origination experience. Providing customers with an online option to submit supporting documents, verify receipt of their application, check status of their application and electronically sign documents can have a significant impact on satisfaction.
Quicken Loans, the top performer in the 2013 PMO study, has been among the quickest to provide a digital experience for their customers, which has helped drive their industry-best satisfaction score.
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 ›