As displayed in the chart below, a critical first step towards acquiring new customers and/or deepening product penetration is to improve brand awareness. In basic terms, a customer cannot open an account with a given bank if they don’t know the bank exists, or if the bank isn’t top-of-mind during the initial phases of the purchase funnel.
Data from the 2014 J.D. Power Retail Banking Satisfaction Study finds that this can be challenging for many institutions, particularly those characterized as Midsize Banks (those with $2 billion-$33 billion in deposits). For example, Bank L is a Midsize Bank headquartered in the Chicagoland area and has approximately 60 branches across three of Chicago’s primary counties (Cook, Lake and Will counties).
However, study data indicates that Bank L is currently struggling with brand awareness in its home market despite their strong network of branches within the Chicago area. Specifically, when shown a list of banks and asked to identify which they were aware of, only 31% of residents in the Chicago area selected Bank L.
In this case, improving brand awareness must be a key focus of any growth strategy for Bank L. Considerations should include, but not be limited to:
- Implementing a creative and effective overall marketing campaign: This can include marketing/advertising messaging delivered via multiple avenues (TV, radio, newspaper, direct mail). Additionally, secondary research finds that many banks are utilizing new and creative marketing ideas designed to not only improve awareness, but also help differentiate the brand from its peers. In many cases, these messages promote the idea of ‘community involvement’.
- Creating and maintaining a digital presence: When seeking to improve brand awareness, particularly amongst younger demographic segments, it is critical to maintain a digital presence to help attract potential customers. Social media sites such as Facebook and Twitter must be maintained and used to effectively promote the brand, the brand’s values and any pertinent promotions currently being offered. Additionally, banks must make effective use of their own website to effectively promote their values and promotional offerings.
- Measuring/tracking brand awareness and brand image metrics: Collecting and analyzing data can help institutions measure the effectiveness of campaigns designed to increase awareness. Additionally, measuring and tracking metrics related to brand image/perception (ie. ‘innovative vs. conventional’, ‘proactive vs. reactive’, etc.) can help direct the messaging content to deliver in marketing/advertising campaigns.
With increased functionality such as mobile phone check deposits, online chat, envelope-free ATM deposits, and image-enabled ATM receipts, retail banking customers are able to fully manage their account without ever stepping into a branch or contacting the call center. While this can create significant cost savings by reducing branch traffic and decreasing the number of calls to the call center, there is also a considerable downside, based on findings from the 2014 J.D. Power Retail Banking Satisfaction Study.
Despite having similar demographics and product portfolios, self-service customers—those who have interacted only via remote channels during the past 12 months for routine transactions—are not only less satisfied with their banking experience, but are also less committed than are those who have visited a branch or called the call center during the past 12 months for routine transactions. Further, self-service customers tend to be less engaged and, in fact, are often indifferent toward their bank, as a larger percentage of self-service customers say they “probably will” or “probably will not” recommend, reuse, and switch, compared with assisted customers.
Banks that are able to elevate customer commitment levels among self-service customers can benefit from improved overall financial performance. Specifically, banks that convert 2% of customers with low commitment and 5% of those with medium commitment into customers with high commitment stand to gain $1.68 million in interest revenue from greater deposits, investments, and loans per 100,000 customers.
Analysis of study data also finds that some banks are currently more successful at satisfying their virtual-only customers. For example, as displayed in the chart below, Bank K has the lowest overall satisfaction score amongst its virtual-only customers (720 on a 1,000-point scale). Meanwhile, Bank H has the largest percentage of virtual-only customers within their population (40%), making it especially critical for them to improve the overall experience of virtual customers.
Self-service customers have different priorities and needs than assisted customers, which makes it essential for financial institutions to adjust their strategy in servicing these customers. Recommendations for additional areas of focus include:
- If you got it, flaunt it; if you don’t got it, get it. Channel features are important to this segment, and while banks often do offer the features customers want, many are unaware of them, so it is important to ensure features/services are fully marketed. Furthermore, banks should continually look to add features to meet the changing needs of customers and, in turn, to remain competitive.
- Be proactive, not reactive. Self-service customers place great importance on product offerings and tend to be critical of their bank’s value proposition; therefore, financial institutions need to proactively communicate with these customers and ensure they are aware of all product features/services and fully understand how and when fees will be incurred. Moreover, banks should consider implementing programs in which bank representatives and advisors proactively reach out to self-service customers to provide advice related to their financial needs.
- If it’s broken, fix it. It is critical for banks to minimize the occurrence of problems. To achieve this, banks should focus on reducing the problems that not only have the greatest impact on satisfaction and retention, but also those that occur most frequently. Banks need to collect and analyze customer and employee data to determine root causes of problems and revise processes that are ineffective or problematic. Furthermore, banks have an opportunity to improve their rates of problem resolution via remote channels. The level of service that is provided via all channels needs to be optimum; however, banks need to pay close attention to service levels by remote channels (email/online chat) ensuring consistent and effective resolution of issues. Additionally, banks need to understand which problems can’t be fully resolved using a remote channel and revisit policies and procedures to improve the effectiveness of these channels.
 High commitment is defined as providing combined ratings of 17-20 points based on responses to the four commitment statements; medium commitment is defined as providing combined ratings of 12-16 points based on responses to the four commitment statements; low commitment is defined as providing combined ratings of 11 points or less based on responses to the four commitment statements.
 Assumes a 3% interest margin
Data from the 2014 J.D. Power Small Business Banking Satisfaction Study finds that approximately one-third of small business banking customers also have a personal relationship with their primary business banking institution.
These types of ‘cross-functional’ relationships are beneficial for financial institutions. First and foremost, the institution is holding a greater overall ‘share-of-wallet’. Additionally, business banking customers with a personal account report significantly higher satisfaction, loyalty and advocacy metrics (compared to business customers who do NOT also have a personal relationship). However, analysis of study data finds that some banks are struggling to maximize the full ROI of a cross-functional relationship.
For example, as illustrated in the chart below, Bank A is currently not receiving the same positive ‘lift’ when their small business customers also hold personal banking accounts.
Additionally, study data finds that the ability for Bank A to cross-sell their small business customers on personal accounts is lagging peers.
There are many potential reasons why a small business owner is unwilling to hold personal accounts with their business banking institution, including but not limited to:
- Business institution may not be located near the customers home
- The customer has a long-standing relationship with their personal institution and is currently satisfied
- ‘Conflict of interest’ – some customers just want to separate their accounts
Regardless of the reason, the ability for the financial institution to provide excellent service and build trustworthy relationships is vital towards the goal of cross-selling business banking customers on personal accounts.
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.
The ‘value’ of female investors is growing. As the percentage of females graduating college and opening small businesses increases, so does the proportion of America’s investable assets held by the female population. For investment advisors and firms, their ability to satisfy the unique needs of female investors will help them capture a greater share of the investable assets held by the female population.
Data from the 2014 J.D. Power U.S. Full-Service Investor Satisfaction Study helps to identify some underlying characteristics of female investors. For example, women investors tend to place more value on a ‘trusting’ relationship with an investment advisor, and are more likely to collaborate closely with their investment advisor.
Data also indicates that women investors are more ‘critical’ of advisors that fail to engage them in discussions regarding their investment goals, strategies and performance. For example, when an advisor fails to fully educate a client on their investment portfolio, the negative impact^ on satisfaction is significantly greater among females than males (-104 vs. -76, respectively, on a 1,000-point scale).
Key takeaways for investment firms and advisors and to consider:
-Firms need to review the way they recruit, train, team and incent advisors to better align with behaviors that will drive stronger long term client relationships with an increasingly diverse set of financial decision makers
– Advisors need to be proactive in developing a meaningful dialogue with women clients to establish personal goals and provide a clear ongoing understanding of how performance connects with those goals
^ ‘Impact’ is defined as the difference in satisfaction when the service best practice is met vs. not met
Data from the 2014 U.S. Primary Mortgage Origination Study (released in November 2014) finds that mobile apps have an opportunity to emerge as an important interaction channel for customers.
Current usage is low, with only 8% of customers indicating that they used an app during the origination process. However, as shown in the chart below, over half (53%) of customers who have not used an app during the mortgage origination process would consider using one for their next home purchase or refinance. Specifically, customers would be most interested in using an app to check status (47%), review next steps (35%) and review/confirm loan details (34%).
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.
In addition to identifying the overall weighted^ drivers of customer satisfaction within a given industry, the flexibility of the J.D. Power Index Model can also pinpoint differences based on consumer behaviors and demographics. For example, Rewards may be a vital part of the experience for one segment of credit card customers, while Card Terms may be more important to a different segment of customers.
With regards to the credit card experience, the drivers of customer satisfaction differ between new and tenured cardholders. Card Terms (e.g. fees, rates, credit limits) is a bigger driver of satisfaction amongst new cardholders (less than one year with issuer), while Billing/Payment and Interaction (e.g. website, call center representative) are bigger drivers of satisfaction amongst tenured cardholders (one year or more with issuer).
Analysis of data from the 2014 Credit Card Satisfaction Study also finds that most issuers struggle to maintain satisfaction with cardholders as the tenure of their relationship increases. As displayed in the chart below, a majority of issuers receive ‘above-average’ satisfaction amongst new primary cardholders (less than one year). However, only three issuers have above-average satisfaction amongst tenured cardholders (one year or more). This seems to indicate that the ‘shine’ of a new credit card wears off quickly, and it is important for issuers to focus efforts on maintaining satisfaction throughout the life of the relationship.
^For each industry measured, J.D. Power utilizes a multi-regression analysis to identify and prioritize the primary drivers of customer satisfaction.
With channel usage continuing to evolve within the retail banking and small business banking industries, it is important for banks to focus on delivering a consistent experience across all customer touch-points. Customers interacting with the bank via the website or call center should receive the same level of high-quality service they receive at a branch, and vice versa. However, analysis of data collected by J.D. Power finds plenty of room for financial institutions to further improve the consistency of cross-channel interaction.
One key example is with regards to Problem Resolution. As displayed in the chart below, small business banking customers report considerable differences in their experience depending on the channel used for resolving a problem. While Problem Resolution satisfaction is highest when interacting with branch personnel (tellers, business bankers and managers), there is a steep decline when dealing with call center and online representatives.
Data in the chart above is from the 2014 J.D. Power Small Business Banking Satisfaction Study, but it is important to note that similar discrepancies in cross-channel interaction are evident in all financial services studies conducted by J.D. Power (retail banking, mortgage and investment). And these discrepancies are not always related to Problem Resolution, as many other aspects of the banking experience are also prone to cross-channel inconsistency, such as:
-Clarity of account information
-Method of accessing secure website (PC vs. tablet. vs. Smartphone)
As identified in the 2014 J.D. Power Small Business Banking Satisfaction Study, one key aspect of the small business banking experience is the relationship with an assigned account manager.
When an account manager is assigned to a small business client, building a strong relationship becomes vital. Ideally, the account manager becomes viewed as a ‘trusted advisor’, which can help the bank maximize the ROI (return-on-investment) of assigning account managers to small business clients. In addition to having a significant impact on customer satisfaction, account managers that are viewed as a ‘trusted advisor’ can also drive increased loyalty and deepen the share-of-wallet customers hold at the bank.
Furthermore, the negative impact of not being viewed a trusted advisor is profound, as satisfaction levels are actually lower than when no account manager is assigned at all (643 vs. 723, respectively, on a 1,000-point scale).
Data from the Small Business Satisfaction Study also identifies clear steps that small business account managers can take to develop a strong relationship with their clients and improve the perception of them as a trusted advisor, including:
-Take time to engage clients and understand their business
-Initiate contact with clients throughout the year to discussed needs and/or recommend solutions
-Promptly reply to any inquiries from clients and show ‘concern’ for their needs
The 2014 J.D. Power Small Business Banking Satisfaction Study was released on October 28th, 2014.