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.
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.
While all businesses would likely consider customer satisfaction a ‘nice to have’, many question whether investments towards improving the customer experience will actually result in a positive impact on the bottom-line. Across multiple industries, analysis of consumer data collected by J.D. Power shows a clear relationship between high customer satisfaction and improved financial indicators.
Specifically within the retail banking industry, highly satisfied customers tend to hold a greater share-of-wallet with the institution and also report significantly higher scores related to loyalty and advocacy.
Early 2014 performance indicators are encouraging for credit card issuers, as customer satisfaction is on track to reach its highest level since the inception of the J.D. Power Credit Card Satisfaction StudySM in 2007. And while the Target data breach may have impacted consumer willingness to make electronic purchases, data finds that issuers can use ‘attractive’ rewards offerings to drive higher levels of personal credit card spend.
As expected, customer perceptions of reward attractiveness vary based on their preferences, which are driven by customer demographics and psychographics. For example, comparing two airline co-branded credit cards may show significantly different demographic profiles. One of the cards may frequently attract customers that are younger, less affluent, and less educated, while the other tends to attract older customers that have multiple children living in their household.
Understanding these segmentation differences (i.e., life style, life stage, hobbies/interests, spending habits, etc.) can help issuers design more appealing reward programs. If an issuer determines that a specific airline credit card attracts customers who frequently travel internationally, the issuer could add rewards associated with foreign travel or potentially partner with a hotel chain to allow additional earning opportunities. Another example is a bank-branded card that attracts sports enthusiasts, in which case a credit card issuer could add access to sporting events as a redemption option or partner with leading online ticket retailers to allow customers to pay for tickets using rewards.
Lastly, educating customers on the details of rewards programs is critical in order to maximize the impact on spend. And while it is important to inform customers about all program terms (as indicated in the chart below), lack of awareness regarding the types of rewards available has the greatest individual impact.
Data from J.D. Power’s 2013 Small Business Banking Satisfaction Study finds that Product Offerings satisfaction declines significantly as a customer’s tenure with the bank increases. Customer perception of product-related communication (or lack thereof) is a key driver of the satisfaction differences noted across different customer segments.
Analysis of customer verbatim comments may indicate that banks are more focused on communicating with newer business customers, in an attempt to ensure satisfaction and ultimately increase loyalty and cross-sell potential. Conversely, longer-tenured customers may feel ‘forgotten’ as the level (or quality) of communication received from their bank decreases over time.
It is important for financial institutions to stay in-touch with their business customers, particularly those with longer tenures, as those customers appear to be more critical of their bank’s attempts to communicate with them. And it is especially important to focus on engaging tenured business banking customers that DO NOT have an assigned account/relationship manager.
Data from the first three fielding periods of J.D. Power’s 2014 Retail Banking Satisfaction Study finds that customer satisfaction is at its highest level since the study originated in 2007. This is consistent with data from other industry sources, which also identifies improvements across the customer experience.
The improvements in retail banking satisfaction also mirror trends in customer sentiment, as consumers continue to feel more positive about the economy and their personal financial outlook. Similar trends have previously been noted in J.D. Power’s Full-Service Investor Study, which also sees a relationship between economic prosperity and customer satisfaction.
The full publication of the 2014 Retail Banking Satisfaction Study, which will include aggregated data from all four fielding periods, releases on April 29th, 2014.
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.