Findings from the 2014 J.D. Power U.S. Primary Mortgage Origination Study reinforce that shifting market conditions have led to new dynamics:
- Purchase has become the majority
- New Home Purchase: 57% in 2014 vs. 36% in 2013
- Refinance: 43% in 2014 vs. 64% in 2013
- The average age of respondents is younger in 2014 than in 2013
- The average age of respondents is 3 years younger in 2014 than in 2013 (45 vs. 48, respectively)
- The proportion of respondents age 35 or younger has risen sharply to 36% in 2014 from 25% in 2013
One theme that remains consistent, however, is the importance of transparent communication throughout the process. In turn, financial institutions that can maintain clear and consistent communication with their mortgage customers are more likely to ease the confusion and anxiety often associated with the origination process (particularly amongst younger or first-time purchasers).
First and foremost, it is critical to completely educate customers on ALL aspects of the process and product terms. As displayed in the chart below, successful communication regarding these topics can significantly improve customer satisfaction, yet the industry has considerable room for improvement. Currently, only 45% of customers feel that all aspects of the process and product terminology were ‘completely’ explained to them.
Additionally, it is critical for loan representatives to provide frequent status updates related to the approval and closing processes. Both of these best practices also carry a significant impact on customer satisfaction:
Although mortgage origination customers are increasingly looking to use multiple channels/methods at different phases of the origination process, it is critical for financial institutions to maintain a consistent focus on personal interactions with their customer base:
- Clear and accurate expectations must be set from the outset and reinforced throughout the process. A lack of transparency at any point in the process can create stress and concern that can harm the relationship.
- Face-to-face interactions are a key channel used by younger, first-time buyers to obtain information and learn about the process. Front-line associates must be prepared to act as an advisor and counselor.
- From limiting paperwork and preventing duplication of effort to providing proactive updates, minimizing customer effort is at the heart of a great experience.
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.
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.
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.
By definition, self-directed investors tend to have a less ‘personal’ relationship with their investment firm compared to other investors. Because of this, there is less opportunity for firms to personally engage clients and educate them on available products and services, thereby placing greater importance on the onboarding phase of the relationship. Firms that can successfully onboard new clients stand to benefit from improved satisfaction that may ultimately lead to increased loyalty and propensity to invest.
Educating new clients on the tools and resources available to them is a primary goal of the onboarding process. Data from the 2014 J.D. Power and Associates Self-Directed Investor Study finds that increasing awareness (and usage) of available tools can significantly increase investor satisfaction.
Study findings also indicate that encouraging customers to use one set of tools drives increased awareness and usage of additional tools. For example, familiarizing self-directed investors on basic tools, such as investing basics or budgeting tools, drives greater usage of more advanced tools such as asset allocation or financial planning.
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?
Banks should understand that the account initiation process does not end after customers have opened their accounts and the initial interaction with bank representatives has concluded. New customers presume ongoing value, and have come to expect a personal follow-up contact from the bank shortly after the initial interaction.
We offer the following tips to help you maximize the on-boarding experience:
Timing is critical
While ideally the follow-up contact should occur within 2 days after the account is opened (8.46 satisfaction rating for overall account initiation, on a 10-point scale), our data shows that a contact within 2-7 days after account opening also results in high levels of satisfaction (8.31), but notably declines when the contact occurs after 7 days (7.87).
Pick up the phone
Follow-up phone calls result in the highest levels of account initiation satisfaction (8.44), followed by other methods including email and mail (8.03). Satisfaction declines to 6.78 when no follow-up is received.
Data sourc: 2012 U.S. Retail Banking Satisfaction Study. ©2012 J.D. Power and Associates The McGraw-Hill Companies, Inc. All Rights Reserved.
Save the sales pitch for later
Don’t treat the initial follow-up contact as a sales opportunity, but rather as a contact strictly related to the accounts that were recently opened, with the bank representative thanking the customer for their business….or offering to answer any questions related to their current products and fees. Immediate follow-up contact is also the perfect opportunity to confirm a customer’s e-mail address (for future communication) or ensure a customer has successfully activated online banking and online bill pay services. After all, the initial selling or cross-selling should have already occured during account initiation.
Although the follow-up contact should not be a sales pitch, customers who do receive a follow-up contact from their bank are more likely to open additional accounts, such as money markets, credit cards, home equity loans, personal loans etc. later on, once a relationship has been established.
The bank rep should make contact
It is important that the follow-up contact be made by the same bank representative who originally opened the account(s), as this type of relationship building results in a significant increase in satisfaction with the account initiation process (8.62 vs. 7.74 for contacts made by other bank personnel).
The bottom line:
Follow-up with a phone call to all new customers as soon as possible after the account(s) are opened. Welcome them by thanking them for their business, answering any additional questions……..and save the cross-selling for a later date after they’ve already been “on-board” for a while.
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.
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 ›