Given the pace of change in the contemporary business environment, it’s easy to focus almost all attention on short-term trends and pressures. New mobile initiatives? Check. Expanding into new markets? Sure. Rethinking the retail banking approach? Absolutely. But it’s also important to periodically step back and assess the big picture, if only to identify what might have worked earlier but isn’t any more.
In that context, a new report from J.D. Power & Associates offers an interesting, and perhaps contrarian, outlook on common beliefs and practices in the banking world. Titled, “Improving the Return on Investment in Bank Customer Satisfaction—Focusing on What Really Matters,” the study shines a light on issues may seem obvious but have slipped off the radar. This has potentially serious implications for many corners of the industry.
In the past few years, conventional wisdom in general and industry policies in particular have favored initiatives around increased advertising and severe cost cutting, among other areas, to boost revenue. The new analysis from J.D. Power, however, reveals that despite the business justification for these moves, they do more to bring customers in than to keep them engaged, and this in turn hurts margins. By contrast, there’s a clear connection between enhanced customer satisfaction and a bottom-line boost. In fact, even a 50-point increase on a 1,000-point satisfaction scale could drive an 8.5% boost in pre-tax revenue.
So what can banking institutions do to keep customers happier? Many of the study’s recommendations are quite specific and tactical. In fact, that may be the point of such an exercise—a step back to gain a strategic view of the big picture helps uncover problems with the details.
Banks clearly need to place greater emphasis on maximizing account opening and onboarding activities, such as by highlighting account pricing and other features available, specifically in response to unique customer needs. It’s been found that share of wallet typically doesn’t grow much after the first year. Failing meet the most basic needs, such as those around understanding account fees and terms during initial contact, sets the groundwork for a relationship that can’t be enhanced or even sustained—new customers become former customers very soon.
Next, with Baby Boomers moving into retirement mode, it’s vital to broaden relationships with customers and increase awareness of, for example, investment opportunities. Here’s one stat that should be on the mind of every banking professional: Just by providing financial advice, banks can increase their share of investable assets by 11 percentage points.
And if you want to find banks with the highest attrition rates, look for those that take too long resolving customer problems. We don’t live in fantasyland—there will always be problems, and we have to deal with them. But in an age of technology-enabled instant gratification, the window for resolution is getting smaller. Customers know that many alternatives are just a click away.
None of this is to suggest that big-picture strategies should be set aside—in a time of enormous change, banks need to make bold moves in all areas, from infrastructure implementations and mobile apps to refocused retail approaches. But there are times when it’s important to do the same things better, and the new study helps provide exactly that focus.