Using ‘Key Performance Indicators’ to Improve the Credit Card Customer Experience

In an ideal scenario, credit card issuers would excel at servicing all aspects of the customer experience. However, data from J.D. Power’s Credit Card Satisfaction Study consistently finds that every credit card issuer has both strengths and weaknesses with regards to the level of service provided to their customer base.

And because no issuer has unlimited resources to devote towards improving the customer experience, determining which initiatives should receive top-priority becomes an important piece of strategic planning.

The 2014 Credit Card Satisfaction Study has identified 12 ‘Key Performance Indicators’ (KPI’s) which represent service behaviors that have the greatest individual impact on customer satisfaction. In other words, “if you can’t do everything right, make sure you are doing these things right.”

As a whole, the industry struggles most with educating customers on card terms (i.e. rates, fees, etc.) and simplifying the login process for online account access. Only 50% of credit card customers completely understand their credit card terms, and only 53% of customers report that it is very easy to login to their account. It is also important to note that these are two of the most impactful KPI’s, based on their potential impact on overall satisfaction.

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The KPI performance of each individual card issuer varies widely, and each has a unique set of strengths and opportunities. In order to successfully prioritize any investments towards improving customer satisfaction, it is important for each issuer to fully understand which of their metrics have the greatest room for improvement while also understanding the potential ‘impact’ of each metric.

 

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Retail Banking ‘Problem Incidence’ Highest among Customers that are Young and Wealthy

Data from the J.D. Power 2014 Retail Banking Satisfaction Study finds that the industry continues to improve upon their ability to prevent problems. In fact, overall problem incidence has declined every year since 2010.

However, data also finds that problem incidence tends to be highest among retail banking customers that are both ‘young’ and ‘wealthy’. For example, over one-fourth (26%) of Affluent Gen Y customers have experienced a problem with their personal banking institution in the past 12 months.

Perhaps more importantly, these young and wealthy customers are less tolerant of perceived ‘problems’ with their current institution – when a problem occurs, they are considerably more likely to say that they ‘definitely/probably will switch’ banks in the next 12 months.

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Young customers, such as those in the Gen Y age segment represent tremendous ‘growth potential’ for financial institutions, particularly if they are already considered to be ‘Affluent’. It is critical for financial institutions to gain a deeper understanding of the problems that these valuable customers are most likely to experience and develop correction action plans to prevent additional problems in the future.

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Customer Satisfaction with Credit Card Issuers at Record High

American Express and Discover—two credit card issuers with very different business models—tie for the highest ranking in credit card customer satisfaction, demonstrating that there is more than one path to satisfaction, according to the J.D. Power 2014 U.S. Credit Card Satisfaction StudySM released on August 26th.

The study, now in its eighth year, measures customer satisfaction with credit card issuers by examining six factors: interaction; credit card terms; billing and payment; rewards; benefits and services; and problem resolution. Overall satisfaction is at a record-high of 778 on a 1,000-point scale in 2014, surpassing the previous high of 767 in the 2013 study. Furthermore, nearly every issuer measured in the study saw an increase in customer satisfaction over the past 12 months:

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American Express, which ranked highest in each of the eight years since the study’s inception in 2007, and Discover each achieve a score of 819. However, the two companies attain the same high level of customer satisfaction using very different business models.

American Express offers 21 cards aimed at different customer segments—some with annual fees and some without—and an array of reward options ranging from cash-back to travel rewards. Its customers tend to be more affluent, spend more and are less likely to carry a balance than customers of other card issuers. Discover’s strategy focuses on a single card with cash-back rewards and no annual fees. Discover serves a broad customer base and offers tools to help its customers manage their spending and debt, and provides its cardholders their credit score free of charge.

“This is really a tale of two very different credit card companies that both excel at customer interactions,” said Jim Miller, senior director of banking services at J.D. Power. “American Express and Discover provide great personal service when customers call in and also make it easy for customers to manage their accounts online as well as by using mobile apps.

“The market is ultracompetitive and credit card companies are using reward programs to make their card more attractive. However, layering on rewards is not the key to satisfied customers, rather it’s understanding your customers, knowing what motivates them and aligning rewards and benefits to their needs.”

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Functional Mortgage Servicing Websites Can Help Minimize ‘Labor Costs’

The 2014 J.D. Power Primary Mortgage Servicer Satisfaction Study published on July 29th, and customer satisfaction has improved significantly compared to 2013 study results (index score of 754 vs. 733 in 2013).

Analysis of this year’s study data has identified a new ‘Key Performance Indicator’ – whether or not a website visitor was able to resolve the reason for their visit entirely via the website.

Mortgage servicers that are able to provide their customers with a highly functional website can help minimize the number of ‘personal contacts’ received by a call center, in a branch, etc. In fact, 38% of customers visit the website in an attempt to resolve an issue or answer a question before they contact customer service.

An additional Key Performance Indicator related to the website is the ability for customers to easily locate all information and website features, which can also have an impact on minimizing ‘labor costs’. The inability for customers to find information or specific features is similar to not providing the information/features at all – eventually the customer will need to engage in a personal interaction to obtain the needed information or an answer to their question.

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It is important for mortgage servicers to allocate potential investment dollars on improving website ‘range of services’ while also focusing on ‘clarity of information’ and ‘ease of navigation’. Successful implementation of these best practices can improve customer satisfaction while simultaneously decreasing labor costs associated with answering simple questions or resolving issues/problems.

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Optimizing the Frequency of Proactive Contact for Full-Service Investors

Full-service investment firms looking to maximize the ROI of proactive outreach to their clients should be aware that the ‘demand’ for proactive outreach varies considerably by demographic segment. In other words, developing proactive outreach programs should not be viewed with a ‘one-size-fits-at-all’ approach.

The graphic below, which is based on data from the 2014 J.D. Power Full-Service Investor Study, looks at investors that are ‘highly satisfied’ with the Account Offerings available at their firm. While highly satisfied ‘Affluent’ investors report an average of 9.9 contacts from their advisor, and 7.2 contacts from their firm, high satisfaction among investors in the ‘Mass Market’ and ‘Mass Affluent’ segments can be maintained with less frequent outreach.

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Understanding the differing levels of service that drive investor satisfaction may help firms create communication strategies that meet client needs, while also managing the costs associated with proactive outreach. It is also important to note that investors across different demographic segments have different preferences with regards to the channel used for communication, and the types of information that should be provided to them proactively.

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Satisfaction with Financial Services Providers Continues to Improve

Data from waves 1-3 of the 2014 U.S. Credit Card Satisfaction Study finds that industry satisfaction (776 on a 1,000-point scale) has increased significantly since the 2013 study was published last August (767).

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This continues a trend seen in other 2014 Financial Services studies conducted by J.D. Power – the Retail Banking, Full-Service Investor and Self-Directed Investor studies all saw significant improvements in customer satisfaction.

The complete Credit Card Satisfaction Study, including all four waves of data collection, publishes on August 26, 2014.

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Opportunity for Financial Institutions to Improve Social Media ‘Shopping Experience’

Data from the J.D. Power 2014 Social Media Benchmarking Study (released in April 2014) finds that banks and credit card issuers can improve their social media presence as a potential method of driving new business. When compared to other industries measured in the study, banks and card issuers receive lower satisfaction scores related to the social media shopping experience. Currently, 36% of retail banking customers use social media as a method of gathering information (products, promotions, etc.), compared to 21% of credit card customers.

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It is also important to note, however, that banks and card issuers actually receive high satisfaction scores related to the servicing experience on social media. In fact, customer satisfaction with social media as a servicing channel is higher than all other channels commonly measured by J.D. Power (branch, website, mobile, ATM, call center).

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Minimizing Investor Dissatisfaction with ‘Poor’ Investment Performance

Data from the 2014 JD Power Full-Service Investor Satisfaction Study finds a significant increase in the number of investors reporting that their portfolio performance was ‘better-than-expected’ (driven by healthy market performance throughout 2013). Accordingly, overall investor satisfaction also improved significantly, as good financial performance tends to drive investor satisfaction.

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However, history tells us that market performance fluctuates and that a ‘downturn’ is likely at some point in the future. In preparation for this, financial institutions and advisors should identify behaviors that can help mitigate dissatisfaction with ‘poor’ portfolio performance. In turn, minimizing dissatisfaction may help prevent investor attrition and/or the transfer of assets to competitors.

Once the behaviors are identified, focus should be placed on implementing new processes and/or training programs to ensure that the institution and its advisors are capable of providing the optimal level of service to their clients.

Key methods of minimizing investor dissatisfaction with ‘poor’ portfolio performance include:

Building a strong ‘advisor-investor’ relationship

Developing a clear financial plan

Discussing and incorporating risk tolerance

Clearly communicating reasons for investment performance

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The Negative Impact of Mergers and Acquisitions

Past analysis conducted by J.D. Power has found that mergers and acquisitions, if not managed properly, often result in significant declines in both customer satisfaction scores and Brand Image ratings. From the very beginning, customers of the acquired bank are likely to have negative perceptions of the brand to which they’re forced to switch, which amplifies any tactical problems that arise from the adoption of new banking policies, processes, and products.

Prior analysis has also found that retail banking customers typically react negatively to change, particularly when it disrupts their previous pricing structures or general routines. While fee changes are a major source of frustration among customers during a merger/acquisition, simple developments such as changes to online banking, account statements, and product services/features are also causes of frustration. Acquired customers experience more problems than current customers as they struggle to familiarize themselves with the processes and culture of a new financial institution.

Data from the 2013 Retail Banking Satisfaction provides a good case study to examine the potentially disruptive impact of M&A activity. BMO Harris had purchased M&I in 2010, and the conversion process lasted until late 2012. In turn, the 2013 Retail Banking Study found that BMO Harris experienced the largest declines across the industry for both overall satisfaction and the Brand Image rating for Good reputation.

Further, the impact of the merger on both Brand Image ratings and satisfaction scores was more pronounced in certain segments of BMO Harris Bank’s customer base, including geographic location. Given that M&I was headquartered in Milwaukee, it is not unexpected that customer frustration with the merger was significantly more negative in Wisconsin than in Illinois or within the Chicago CSA, which is the home market of BMO Harris. Additionally, decreases in both Brand Image ratings and satisfaction scores were larger among different demographic segments at BMO Harris.

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However, data from the first three fielding waves of the 2014 Retail Banking Study shows that BMO has done a solid job of addressing the initial problems and taking corrective action to improve the customer experience. Whereas their overall satisfaction score had decreased by 55 index points in the 2013 study, the first three waves of the 2014 study finds that BMO’s score has rebounded significantly (increase of  45 index points).

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Building Investor-Focused Relationships

Data from the J.D. Power U.S. Full Service Investor Satisfaction Study clearly shows that good market performance influences satisfaction.  However, it’s the development of strong relationships with investors that determines which firms thrive. Firms must ensure that advisor actions align with investor expectations and, thus, strengthen both loyalty and advocacy.

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Keys to building strong relationships include:

Ensure financial planning activities clearly define a strategy based on key needs and goals. As the relationship progresses, plans must adapt to changes in both the investor’s life circumstances and the broader financial environment.

Tailor the communications approach to the unique needs of the investor instead of using a “one-size-fits-all” approach. Investors want to believe their advisors understand them and their needs, which begins with interacting via their preferred method.

Build transparency into all interactions. Two key issues for all investors are whether they are making as much as they can and whether they are paying too much. Ensuring there is clarity in both areas will help to build trust.

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