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Best Banking Blogs of 2012

The Financial Brand, the premier online publication for bank and credit union marketers is conducting the second most important election this week; Best Banking Blog “2012 Readers’ Choice” awards.

Our J.D. Power and Associates Banking Blog, as part of having received the prestigious “Editor’s Choice” award,  is now nominated for the “Reader’s Choice” award  for Best Banking Blog of 2012.   Your vote counts, and we would be grateful for your support!

VOTE HERE

To be recognized alongside our friends and distinguished bank bloggers Jim Marous, Ron Shevlin, Brett King, Bradley Leimer, Matt Wilcox, JJ Hornblass, Liz Lum, Chris Skinner, Serge Milman, Christophe Langois, Jim Bruene, Randy Smith and Jim Van Dyke is an honor in itself.

Congratulations to all of our fellow nominees for your continued dedication and delivery of superb insights to our banking community.

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Understanding Actual vs. Intended Customer Attrition

Did you know that customers who INTEND to switch primary financial institutions have the greatest value?

Bank customer attrition rates, both actual and intended, continue to increase. According to data from our J.D. Power and Associates 2012 US Retail Banking Satisfaction Study, intended attrition has increased significantly to 12.9% from 10.7% in 2011 after having decreased from 2010 to 2011. The actual attrition rate has steadily increased since 2010, reaching 9.6%(1) this year.

By bank size, Midsize Banks have the highest attrition rate (11.3%), followed by Regional Banks (10.3%); Big Banks (10.0%); and Small Banks and Credit Unions (7.4%).(2) While most customers who switch leave one Big Bank for another Big Bank (29%), 19% of customers switch from a Big Bank to a Small Bank or Credit Union, demonstrating customers’ willingness to trade the convenience of a large banking network for the personal service of a local small banking network or credit union.

Notes: Actual AttritionRate is based on the 2012 Financial Services Screener

Continue reading ›

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Jim Miller Joins the J.D. Power Financial Services Team

We are very pleased to announce that Jim Miller has joined our Financial Services practice as Senior Director of Banking. In this role, Jim will focus on developing and delivering high-quality insights, recommendations, and presentations for the banking practice.

Jim brings to the position expertise in both banking and customer experience that make him particularly well-equipped to lead our banking practice.  Most recently, he was President of Prime Performance, Inc., a provider of customer experience research and measurement systems specifically designed for financial institutions.

Prior to joining Prime Performance, Jim was a Senior Vice President at SunTrust, where he managed retail banking analytics, which included branch performance analysis and reporting, branch staff modeling, and sales goal and incentive management. Additionally while at SunTrust, he directed units responsible for branch network planning and customer/marketing information.

We know that you expect more from us than simply pointing our your problems. You expect us to also provide the best practices and industry expertise to actually solve them. Jim and the rest of our team bring unparalleled experience to help you achieve your customer experience objectives in a focused and results-oriented fashion. If you are interested in learning more about our approach from Jim, please feel free to contact Jim directly at James_Miller@jdpa.com.

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Acquiring and Retaining Affluent Customers

Affluent (1) customers are a key segment for financial institution, as they have greater deposit balances, more investable assets, and higher borrowing dollars. Affluent customers also have more products, on average with their primary bank than do less-affluent customers (3.5 vs. 2.8, respectively). Banks have fully realized the potential of these customers and are actively putting greater focus on not only acquiring but also retaining this key customer segment. However, these customers keep the lowest share of their funds with their primary banks, compared with Emerging Affluent and Mass Market customers. On average, Affluent customers keep just over half of their deposits (58%), 20% of investments and 61% of borrowing accounts with their primary bank.

Not only is there a large opportunity for financial institutions to capture a greater share of wallet among these Affluent customers, but financial institutions may also gain a competitive advantage by providing a superior experience for these valuable customers which will result in greater acquisition and lower defection rates. To fully capitalize on this opportunity, it is important to understand the drivers of defection and reasons Affluent customers select their bank, as well as the differing expectations of these customers and the levers banks can utilize to fully satisfy them.

(1) Affluent is defined as income of $150K or more and investable assets of $250K or more; Mass Market is defined as investable assets of less than $100K and income less than $150K; Emerging Affluent is defined as income of $150K or more and investable assets less than $250K, or, income less than $150K and investable assets of $100K or more.

Attracting Affluent Customers

Why Do They Switch?

Nearly one in 10 Affluent customers (9%) switched financial institutions in the past 12 months—a higher rate than among less affluent customers (6%). Affluent customers most commonly state uncompetitive interest rates (30%) and poor service experience (26%) as factors that influenced their decision to switch banks. The amount of churn among Affluent customers provides a key opportunity for competitor financial institutions to acquire these valuable customers.

What Do They Look For?

According to data in our 2012 Bank Customer Switching and Acquisition Study, Affluent customers who select a new primary bank do so primarily based on good prior service experience (31%)—also the leading purchase trigger among less-affluent customers. However, compared with Mass Market and Emerging Affluent customers, the reasons Affluent customers switch banks are less about convenience (branch hours/locations) and more often about products and pricing.

Retaining Affluent Customers

When attempting to satisfy Affluent customers’ expectations and minimize attrition, it is essential to focus efforts on the areas that will have the greatest impact. The challenge with satisfying Affluent customers is not only that their expectations are higher than other customers, but also that they are not always easily identifiable as Affluent customers, especially when they visit a branch location. This means in certain areas of the customer experience, banks should be providing a superior level of service to all customers. However, when Affluent customers are identified, it is critical for banks to optimize this opportunity by providing a proactive and personal approach to ensure customers in this segment are satisfied.

Personal Interaction

It’s key for financial institutions to focus on providing a superior personal experience for Affluent customers, whether it be at the branch or over the phone. Affluent customers with high satisfaction are more likely to indicate the branch representative called them by name; reviewed account information and recommended additional products; offered additional assistance; and thanked them for their business. These are also key for interactions with the bank’s call center. Continue reading ›

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Canadians Less Satisfied With Their Banks

As appeared in The Financial Brand on August 2, 2012.  The Financial Brand, written and published by Jeffry Pilcher, is an online publication focusing on issues and advice that affect bank and credit union brands.

Canadian consumers aren’t happy with retail banks. Irritated by fees and concerned about reliability of banks, satisfaction scores are sagging.

Overall customer satisfaction with banks in Canada has declined this year, due largely to irritations caused by fees, according to the J.D. Power & Associates2012 Canadian Retail Banking Customer Satisfaction Study” released today.

The primary cause of these souring statistics? An increase in changes to fee structures. 27% of customers said they were subjected to fee changes, compared with only 17% in 2011. Overall satisfaction with fees has dropped 4.1% since last year.

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Satisfaction Scores Drag Loyalty and Advocacy Down Too

Any decline in satisfaction scores directly impacts loyalty and advocacy metrics, both of which have dropped year over year across Canadian banks. Compared with 2011, advocacy (the percentage of customers who say they will “definitely” recommend their bank to family and friends) had declined by five percentage points, while customer loyalty (the percentage of customers who say they will “definitely” reuse their bank in the future) declined by four percentage points.  Continue Reading

 

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How Banks Charge Fees Without Jeopardizing Customer Satisfaction

As banks continue to explore ways to manage the sensitivity around charging fees while minimizing the impact associated with charging those fees, it’s important to focus on the following three areas:

1.  Stability

The data from our 2012 U.S. Retail Banking Satisfaction Study shows that fee structure changes not only have a significant impact on customer satisfaction, but they also lead to an increase in problem incidence and intended attrition.  The following are some best practices banks should consider when making changes to fee structures:

  • When changes are necessary, focus on limiting the number of changes customers are forces to accept. For example, making two or three changes to fee structures per year may be more confusing and less satisfying than making multiple changes at one time.
  • When fee changes are necessary, it is critical to communicate the changes well in advance so that customers are not caught by surprise.
  • While communication of fees is mandatory, there are some other ways for financial institutions to help ensure customers are aware of changes—e.g., communicating changes more than once and preferably via multiple channels, such as mailed letter and online notification.
Source:  J.D. Power and Associates 2012 U.S. Banking Satisfaction Study

2.  Communication

The impact of communication on the fee experience goes far beyond simply providing advance notice of any changes to the fee structure. There are other best practices that banks can follow to provide their customers with more information regarding fees or information on other product pricing options available:

Account initiation: Starting with account initiation, it’s vital that representatives perform a detailed needs assessment and identify the products that meets customers’ needs. Performing a detailed needs assessment during account initiation provides a big lift in fee understanding (22 percentage point difference for “completely” identified needs) , while also providing a significant lift in satisfaction.

Online account information: It goes without saying that providing customers with clear and concise access to account information and other pertinent information via the bank’s website is crucial. Clarity of account information and Clarity of information provided on the website provide considerable lifts in Fees satisfaction, while also improving fee understanding by 16 percentage points.

Outbound communication: Proactively contacting customers three or four times per year regarding banking products and services enhances satisfaction and understanding of both fees and product offerings, without creating information overload. Study findings show that satisfaction and understanding both begin to decline when customers receive five or more proactive contacts per year. This also includes performing account reviews to ensure customers have the right products. Empowering branch tellers and call center representatives to proactively review customer accounts and make recommendations for alternative products and pricing options provides lifts in Fees satisfaction and understanding and significantly improves the bank’s Brand Image rating for being Customer driven. Continue reading ›

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Cracking The Code On 3 Major Customer Experience Trends In Retail Banking

Our 2012 U.S. Retail Banking Satisfaction Study finds there are three likely outcomes that banks must contend with during the next few years, and all have direct implications regarding the customer experience.

1. Attrition will rise, loyalty will decline

The good news? There have been marked improvements in the measurement of customer retention, loyalty, and advocacy. The bad news? There’s been a notable rise in customer churn. The J.D. Power and Associates study found an increase of two percentage points in the number of customers who say they “probably will” or “definitely will” switch banks in the next 12 months. The trending increases in less-than-loyal customers had abated somewhat in 2011, but today is 4-percentage-points worse than 2009.

What can banks anticipate from this wavering consumer loyalty? Increased switching and attrition, obviously. But consumer utilization of banking products will also drop. The study found that a higher number of customers are reluctant or unwilling to reuse their bank’s products and services in the future, nor are they comfortable recommending their bank to family and friends. This erosion in confidence will also have a notable impact on future organic growth, whether based on share-of-wallet from existing relationships or new acquisitions. After all, fewer fans of your brand means fewer evangelists advocating for your brand.  Continue Reading>

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