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:
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.”
Many banking institutions are evaluating their current fee structures and considering modifications in an attempt to drive bottom-line improvements, while also acknowledging the potential ‘fallout’ that can arise from a change to fee structures.
Using data from the U.S. Retail Banking Satisfaction Study, J.D. Power has analyzed the topic of fees from multiple angles. Among other things, prior analysis related to the topic of fees has found that:
- The ‘negative impact’ of monthly maintenance fees has been decreasing within the retail banking industry, indicating that customers are becoming slightly more ‘accepting’ of monthly fees.
- Many customers pay a higher-than-average fee, yet remain highly satisfied. This is driven by the delivery of a clear ‘value proposition’ from their bank (the customer feels that the benefits they receive from the bank outweighs the cost).
- When implemented, fee changes represent a significant risk for banking institutions. Problem incidence will increase, driving an increase in labor costs associated with problem resolution. Intended attrition also increases, especially within the first month after a change.
When considering whether or not to increase/decrease monthly fees associated with checking accounts, it is important for banks to fully weigh the pro’s and con’s of the change. On one hand, an increase in the percentage of customers charged a fee (or an increase in actual fee amounts) can positively impact revenue.
However, as displayed in the chart below, data finds that banks who position themselves as a ‘low cost’ institution enjoy bottom-line benefits such as lower ‘cost-to-serve’, greater loyalty and greater share-of-deposits. Additionally, customers of ‘low-cost’ banks are significantly less likely to open additional accounts/products outside of the bank.
The decision to implement/increase/decrease fees should be unique for each and every banking institution depending on their overall strategic plans. It is critical, however, that they fully understand all potential ‘tradeoffs’ for any decision that is implemented. Analysis of consumer behavior and customer satisfaction data can be an extremely valuable tool to use when determining the appropriate cause of action.
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.
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.
Data from J.D. Power’s U.S. Retail Banking Satisfaction Study finds that younger investors have greater willingness to open investment accounts/products at their primary retail banking institution.
For example, among Affluent Investors, 37% of those in the Generation Y age cohort hold a mutual fund/annuity with their primary retail bank. Conversely, only 9% of Affluent Investors in the Pre-Boomer age cohort hold a mutual fund/annuity with their primary retail bank.
On one hand, this could be good news for ‘banking’ institutions looking to increase their share of investable assets held. On the other hand, traditional ‘investment-only’ institutions may be at risk of losing valuable asset share moving forward.
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.
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.
Based on findings from the 2014 J.D. Power Financial Advisor Satisfaction Study, about 87% of Employee advisors and 93% of Independent advisors say they either “definitely will” or “probably will” remain at their current firm for the next 1 to 2 years.
‘Loyal advisors’ are more likely to cite ‘cultural values/benefits’ as a primary reason to remain with their firm, compared to ‘neutral advisors’. Specifically, study data finds that ‘Corporate Leadership’ has a key role to play in improving advisor loyalty through clear and effective communications of the firm’s core values and strategy.
Additional analysis identifies some key differences in brand perception among ‘loyal’ and ‘neutral’ financial advisors – ‘loyal’ advisors are more likely to perceive their firm as ‘customer-focused’, ‘collaborative’ and ‘flexible’.
Data from three fielding waves of the 2014 J.D. Power Credit Card Satisfaction StudySM finds that the percentage of credit card customers ‘switching’ their primary card has increased significantly over the past year. More specifically, there is a significant increase in the percentage of customers opening a new credit card account (46% vs. 41% in 2013).
The increase is driven by ‘revolvers’ (customers that typically pay less than their total monthly balance), who cite ‘rewards’ and ‘lower interest rates’ as their primary reasons for switching.
With the competition for capturing ‘share-of-spend’ increasing, it is important for credit card issuers to improve the customer experience in an effort to improve loyalty. One key focus area is ‘rewards’, which have become a key driver of both acquisition and spending habits. In response, issuers must provide attractive offerings, market them effectively and ensure that their customers are aligned into the appropriate programs and card products. Additionally, the creation and marketing of successful rewards programs may also improve acquisition metrics by enticing competitor customers to switch their primary card.
The full 2014 J.D. Power Credit Card Satisfaction StudySM, including data from all four fielding waves, releases in August, 2014.
By definition, self-directed investors tend to have a less ‘personal’ relationship with their investment firm compared to other investors. Because of this, there is less opportunity for firms to personally engage clients and educate them on available products and services, thereby placing greater importance on the onboarding phase of the relationship. Firms that can successfully onboard new clients stand to benefit from improved satisfaction that may ultimately lead to increased loyalty and propensity to invest.
Educating new clients on the tools and resources available to them is a primary goal of the onboarding process. Data from the 2014 J.D. Power and Associates Self-Directed Investor Study finds that increasing awareness (and usage) of available tools can significantly increase investor satisfaction.
Study findings also indicate that encouraging customers to use one set of tools drives increased awareness and usage of additional tools. For example, familiarizing self-directed investors on basic tools, such as investing basics or budgeting tools, drives greater usage of more advanced tools such as asset allocation or financial planning.
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).
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.
With the continued acceptance of digital banking channels, it is important for financial institutions to ‘keep up with the times’. Even banks that promote personal service as a key part of their value proposition need to devote investment resources to their digital channels. Failure to do so may put the bank at risk of losing customers that represent future growth potential (ie. Millennials), who have already shown a preference for digital interaction.
Data from the 2014 Retail Banking Study provides an interesting case study on the impact of investing in digital channels. As shown in the graphic below, ‘Bank A’ has been investing heavily in digital channels while ‘Bank B’ has not. Bank A has seen a greater lift in customer satisfaction, driven by their technology improvements. It is also important to note that, despite a heavy investment in digital interaction, Bank A has also been able to significantly improve the branch experience.
The chart below provides further evidence of the impact of investing in digital channels, as interaction scores for Bank A are significantly higher than those at Bank B. Additionally, the negative ‘gap’ in digital satisfaction between Bank B and the industry average has widened considerably.
Finally, the real impact of investing in digital channels is shown below, as Bank A has seen their key loyalty and advocacy metrics improve, while Bank B has seen declines.