Strapped with a wide range of financial burdens, it is tempting for financial institutions to consider pricing changes in an attempt to improve bottom-line performance. However, any changes must be weighed carefully, and the potential business threats must be clearly understood.
Data from JD Power’s Retail Banking Satisfaction Study finds that Overall satisfaction declines significantly when fee changes are implemented, and more importantly, intended attrition levels are three times higher among customers that experience a fee change, compared to those whose fees remain stable.
Pricing changes can also be costly to banks if not handled effectively, through the allocation of resources required to handle customer complaints related to the change. Nearly one third (32%) of customers that experience a fee change contact their bank with a problem and, on average, problems require 1.9 customer contacts to be resolved. Therefore, for every 100,000 retail banking customers that experience a fee change, bank personnel will receive 60,800 contacts. In comparison, for every 100,000 retail banking customers that do not experience a fee change, bank personnel will receive 19,000 contacts.
Estimating that bank representatives can handle 6.5 customer contacts per hour, and that their labor cost is $40 per hour, fee structure changes may result in an incremental labor cost of $257,231 for banks to absorb.
Although data suggests that fee changes have a lagging effect on customer satisfaction (the full impact isn’t recognized until months after the change was made), intended attrition is impacted immediately, as customers tend to ‘overreact’ to a new charge. Therefore, it is particularly critical for financial institutions to minimize the initial bitterness experienced by customers, as this time period represents the greatest risk of attrition.
Lastly, failing to ensure that all customers are fully aware of a fee change in advance can significantly impact customer satisfaction, loyalty and problem metrics. In order to successfully mitigate this problem, banks need to focus on over-communicating the change to ensure the message is fully received by their customer base
Financial institutions should begin the process of communicating fee changes immediately after the decision has been made. The appropriate messaging and delivery methods must be identified, and investing in quantitative or qualitative market research to aid in decisions should be considered. Lastly, the timeframe of the change must kept top-of-mind. Initial communications should begin months before implementation, and because the risk of customer attrition is highest within the first month after a pricing change, banks should place heavy focus on preparing all types of employees on how to handle any immediate backlash from customers.
Credit card issuers need to ensure that proactive outreach campaigns directed at current customers fit the evolving ‘digital world’. Failure to do so may not yield a positive return on the resource expenditures associated with customer communications.
Data from the 2013 Credit Card Satisfaction Study finds that nearly half (46%) of credit card customers did not read/use the most recent proactive communication they received from their issuer, thereby pointing to a potential ‘waste’ of resources spent by card issuers.
However, study findings show that the method used to deliver communications may have a positive impact on whether customers choose to read/use the information. For example, customers are most likely to read/use information provided electronically (emails and text messages), and are least likely to read/use information delivered by standard mail.
Issuers should consider revisions to their communication strategies, focusing on digital delivery of messages. This may also require issuers to rethink the content of their messaging and focus on delivering information in a more concise manner.
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.
Problem prevention should be a focus area for all credit card issuers. Analysis of data from the 2013 Credit Card Satisfaction Study finds that when customers experience a problem, overall satisfaction and customer retention metrics decline significantly.
Preventing the occurrence of problems may also help reduce operational costs. For every 1-percentage-point reduction in problem incidence, issuers may be able to save nearly $230,000 for every 1 million cardholders.
Issuers should consider the implementation of a problem tracking or problem management systems. Problem tracking provides continual analysis of problem-related customer contacts, potentially helping issuers identify and prioritize processes that can minimize the occurrence of problems. Problem management may include multiple inputs, such as problem contact data, survey data and employee feedback, and is designed to guide issuers on the development of systems to both prevent problems from occurring, and to maximize the effectiveness of resolving problems that do occur.
In case you missed a few of our recent online events and complementary research reports, we’re including them for you here. We promise, just like the day after 1/2 price Halloween candy, it’s not a trick. Just a heartfelt way for us to treat you, our loyal banking fiends and fans for your continued support. Enjoy!
What Do Small Business Owners Expect From Their Bank?
This exclusive webcast provides an inside look into the results of our J.D. Power and Associates 2012 US and Canadian Small Business Banking Satisfaction Study that will be released next week. Below are only some of the many issues discussed during the webcast:
How customers’ perceptions have changed since 2011
The latest trends emerging in the small business banking industry
Which factors are having the biggest impact on customer satisfaction
The Dividends of Improving Best Practices for Social Media Research
In this whitepaper, we’ll show you that without well-established and proven guidelines on query construction and data extraction, very different results and conclusions can be obtained by different analysts attempting the same social media data search.
In extreme cases, analysts can create such highly divergent queries that the associated data leads to different answers to even simple questions, such as:
Which brand is my main competitor?
Is Product1 more of my brand’s conversation this month centered around product?
Is the sentiment expressed toward my brand this month more or less positive than the sentiment expressed toward my brand last month?
We’d like to share with you a short video featuring elite companies recognized as J.D. Power 2012 Customer Service Champions. They all describe their stories with one common theme, and that is the importance of assuring consistency across service channels. In this video, you’ll hear from:
Rob Hibbard, Enterprise Rent-A-Car – Vice President, Airport Business Development
Dick Evans, Frost Bank – Chairman and Chief Executive Officer
Kurt McNeil, Cadillac – Vice President of Sales and Service
As economic pressures increase and companies look for ways to improve their bottom line, many brands deploy technology to support the customer experience, as well as to lower overall costs.
Some of the technologies companies use to support the customer experience include automated phone systems and interactive voice response systems. These systems guide customers through standard sales or service processes and procedures to collect information from the customer in advance of a human interaction, while others replace human interaction altogether with a self-service framework.
So which type of support do customers prefer……….human or machine?
Human! J.D. Power’s data collected between 2009 and 2011 indicates the customer experience with a customer service representative continues to have greater impact on overall satisfaction than does an automated system.
There are three practices that a company can employ to assure consistency across their service channels. These practices include:
Next week, we’ll be releasing our 2012 U.S. Retail Banking Satisfaction Study (SM).
This study will explore why its a must for banks to understand their customers’ needs on both individual and regional levels, and identify what actions they should take in order to meet their customers’ expectations.
Get an insider’s look!
Join us for the 2012 U.S. Retail Banking Satisfaction Study post-publish webcast on Tuesday, April 24th at 2:00pm EST to learn:
How the industry did overall
Which banks performed best-in-class across the 11 geographical regions
Attendees will also gain insights into key findings from the study that address:
Approaches to managing costs without sacrificing customer satisfaction, loyalty or retention
Understanding drivers of attrition and why keeping, or losing customers is not just about fees
Improving revenues and satisfaction with a value proposition that is understood and meaningful to your customers
For more information regarding the J.D. Power and Associates 2012 U.S. Retail Banking Satisfaction Study, please contact Holly Zagresky at Holly_Zagresky@jdpa.com
Top Drivers of Customer Satisfaction in the Call Center
Join J.D. Power’s resident Contact Center expert, Mark Miller, for a complimentary webinar where he’ll unveil the top drivers of customer satisfaction with the call center channel for 2012, and help us all take steps to show our customers how much we really love them.
Join us on Tuesday, March 27 at 2:00 pm Eastern (11amPT/NoonMT/1pmCT)
Understand what customers care about most
Learn why who you know is more important than what you know when it comes to providing an outstanding customer experience
Discover the three dynamics that will change, and are changing, the role of the call center forever and what to do to capitalize on this understanding
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?
Cool Hand Luke coined one of the most memorable lines in movie history. It’s also fair to say that it reflects one of the sources of problems associated with customer problems and dissatisfaction. In all three of J.D. Power’s Syndicated Banking Studies this year, there was a remarkable level of consistency among customers who completely Understand their fees, service charges, and/or account terms. This means roughly two out of three customers do not have a solid comprehension of the rules of the game for which they are held accountable. In many ways, “what we have got here is failure to communicate.”
J.D. Power’s research across these three studies demonstrate the importance associated with high levels of customer comprehension around fees and terms, and why it’s in the institution’s best interest to do everything possible to educate customers.
Customers who lack complete understanding of fees are:
Overall less satisfied
More likely to have problems or complaints
Have higher attrition or likely to switch primary providers
Educating customers about their terms and agreements must begin with account initiation. Frontline employees (branch and call center alike), however, often avoid this conversation because it’s not positive and uplifting. Customers opening new accounts often just hear about the wonderful benefits and services associated with their new accounts. After all, who would want to spoil the mood of bringing a new customer on board with talk about fees and other negative stuff?
That’s the problem. In presentations, I liken this to the well-intentioned parent who avoids having the ‘facts of life’ discussion with an adolescent child because it’s an uncomfortable and often emotional conversation. However, many (grand)parents can attest to the unfortunate consequences of not educating children early on about these facts. The same can be said about our customers. Eventually they will learn the facts about their accounts on their own…and the results are often unpleasant.
So banks and credit card issuers need to make sure they make customer education and proactive communication around fees and account terms a high priority. As for the discomfort of talking about these things….GET OVER IT!!
Frontline employees however, need to have the right resources and training to communicate effectively with customers. These include:
Simple collateral: Customers can still get the 30 or 40 page disclosure, but if they also get a 1 or 2 page summary sheet describing exactly what fees, requirements, balances, charges, etc. are associated with their accounts, it’s much more likely they will grasp at least the most important elements.
Proactive communication and listening: Representatives should not assume that customers grasp what has been described during account initiation. There are so many disclosures, policies and procedures associated with the process that their heads are likely spinning by the end of the session. Therefore, the banker needs to ask, and ask again about the customer’s understanding of key fees. Repetition is a good thing.
Follow-up in 2-3 days: Highest satisfaction occurs when the agent who opened the account calls the customer back in 2-3 days to both thank them for their business and to ask if there are additional questions. It would also be a good time to check to see if they read the disclosure (or at least the summary sheet) and to remind them of any key minimum balance or transaction requirements, etc.
If frontline employees can be trained to overcome their aversion to discussing fees and charges with customers, then a major hurdle will be overcome and it will be less likely that we will continue to have “failure to communicate!”