Each year, J.D. Power surveys over 80,000 retail banking customers as part of the annual Retail Banking Satisfaction Study. The study is conducted via four quarterly fielding waves.
While the primary focus of the study is the customer experience and it’s impact on satisfaction and loyalty metrics, J.D. Power also collects and analyzes data related to consumer sentiment (i.e. ‘your outlook for our economy and ‘your personal financial outlook’).
Data from the first two fielding waves of the 2015 Retail Banking Satisfaction Study (collected in April 2014 and July 2014) finds that the outlook for the American economy continues to trend upward. In fact, there has been a consistent improvement in economic outlook since 2011, as the country moves further past the economic distress that originated in 2007/2008.
However, it is interesting to note how perceptions of the country’s economic outlook varies across the different geographic regions:
California customers are currently most optimistic, while customers in the South Central region are least optimistic.
Over the past 18 months, the outlook for the economy has improved the most among customers in the Northwest region, and improved the least among customers in the Southwest region.
Since 2011, the California and Northwest regions have seen the greatest improvements while the South Central region has seen the smallest improvement.
For reference, the regional definitions associated with the Retail Banking Satisfaction Study are displayed in the graphic below.
Based on data from the 2014 J.D. Power Primary Mortgage Servicer Satisfaction Study, the percentage of customers reporting a ‘problem’ with their servicer has declined slightly over the past year (25% reporting a problem vs. 27% in 2013).
Across the individual problem types, there were noticeable reductions in problems such as:
Escrow account information
Conversely, there was a considerable increase in the percentage of fee-related problems reported by mortgage customers (17% vs. 3% in 2013). In response to this, mortgage servicers must ensure that their customer service representatives are well-educated on fee-application policies and are also provided a level of ‘empowerment’ that will allow them to resolve inquiries during the initial contact from a customer.
And while fees are now the most commonly reported problem, it is also important to note that the ‘negative impact’ of fee problems in the mortgage servicing industry is less profound than other types of problems experienced (-22 index points). Perceived ‘customer service’ (-212 index points) and ‘loan modification’ (-132 index points) problems are most impactful, providing mortgage servicers with further evidence of the need to ensure high quality and consistent customer service.
Data from the J.D. Power 2014 Self-Directed Investor Satisfaction Study finds that customer satisfaction can be significantly impacted by improving the awareness and usage of website functionality.
For example, ensuring that customers are aware of ‘financial planning tools’ can improve Website satisfaction by 87 index points (on a 1,000-point scale). Taking it a step further, ensuring that customers actually use ‘financial planning tools’ can drive an additional improvement of 28 index points.
Awareness of website features can also vary widely across the different firms measured in the study. Therefore, it is critical for each firm to understand where their customers may require additional education on website functionality or additional encouragement to actually use certain features.
For firms that have already invested valuable resources in the development of website functionality, it is critical for them to educate their customers on the available offerings and encourage usage. Failure to do so may impact the ROI (return on investment) they receive from expenditures dedicated to the website. Effective marketing campaigns, website tutorials and personal demonstrations are some methods available to firms looking to increase website awareness and/or usage.
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.
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.
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.
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.
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.