New Credit Card Customers vs. Tenured Credit Card Customers

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.

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^For each industry measured, J.D. Power utilizes a multi-regression analysis to identify and prioritize the primary drivers of customer satisfaction.

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Improving Consistency of Cross-Channel Interactions

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.

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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:

-Account initiation

-Clarity of account information

-Method of accessing secure website (PC vs. tablet. vs. Smartphone)

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Competition for Credit Card ‘Share-of-Spend’

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.

credit card switching chart

The full 2014 J.D. Power Credit Card Satisfaction StudySM, including data from all four fielding waves, releases in August, 2014.

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Who’s Switching Banks & Why?

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?

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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.

 

 

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3 Reasons Customers May Break Up With Your Bank & How to Avoid Them

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.

Prevention Tips

  • 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.
[1] 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 ›

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