Tuesday, May 19, 2009

J.D. Power bank survey gives banks blueprint for customer satisfaction & increased deposits.

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The headline for the new J.D. Power 2009 Retail Bank Satisfaction Study out yesterday screamed that “customer commitment to retail banks declined for a second consecutive year.” Hidden in that dire report was a blueprint for success. One that pointed to increased customer satisfaction and increased deposits. The smart bank marketer just needs to read between the lines.

While the official news release on May 19th from the renowned marketing information company noted some excellent facts, it was the podcast by Michael Beird, director of the banking practice at J.D. Power, that imparted some positive plans for bank marketing. In the current environment, marketing execs may believe that it’s easier to focus on financial goals and shy away from customer satisfaction. But it’s actually customer satisfaction that affects profitable deposit growth.

J.D. Powers analyzed six factors: transactions, account statements, account initiation/product offerings, convenience, fees and problem resolution.

The study found that only 35% of customers are highly committed to their retail bank in 2009 compared to 37% in 2008 and 41% in 2007. Understandably highly committed customers . . .
- use more products
- give more referrals
- are less likely to switch to another bank

Increased satisfaction = increased deposits.
But what’s more crucial is that “customers reporting the lowest levels of commitment in 2009 happen to be those with deposit balances that are 15 percent higher than average,” said Beird in the news release. “With this in mind, it is crucial that banks take steps to address this steady decline in customer commitment, as moving just 5 percent of customers from low and moderate levels of commitment to high commitment can mean additional deposit growth of more than 2 percentage points higher than average.”

In other words, banks ranking in the top half of the customer satisfaction survey had 2 to 5% greater deposit growth.

What drove customers away from their banks?
In a word, fees. One in 3 customers who switched banks in the past year did so because of fees, especially the rising cost of overdraft fees.

How can banks improve customer satisfaction?
Resolve problems quickly seems to be the answer. In addition, the banker should initiate follow-up contact to ensure customer satisfaction. The customer shouldn’t have to continue to follow-up until a satisfactory resolution is achieved.

“Banks with high brand image scores typically engage in practices that focus on strong communication with customers, such as welcoming them to the branch office or following up on problems,” said Beird. “By focusing on aspects most critical to the banking experience, banks can win the favor of their customers, which can lead to considerable financial rewards.”

When customers have a problem, it’s how it is handled that affects their customer satisfaction. In fact, how it’s resolved affects attrition and customer retention. Forty-four percent of customers who are at risk for switching banks reported they had at least one problem with their accounts over the last 12 months, as opposed to 7% of loyal customers who reported they had a problem.

Besides having their problems resolved quickly, customers are also attracted to the number of conveniently located branches and availability of online transactions.

The secret of bank marketing. . .
communicate, communicate, communicate.

Proactive communication played an important role with banks who performed well in customer acquisition, cross-selling and retention . . . key goals in any bank marketing program.

Beird points out that a needs assessment during initial account opening and outbound follow-up within 3 days results in average deposit balances that are 17% higher than other customers. And, customers must feel that questions asked are specific and relevant rather than routine.

The report also broke down how specific banks performed by region. Check out the graph accompanying their news release or view the detailed regional bank ratings charts.

The lesson for community bankers.
While the study highlighted larger banks in each region, community bankers can use the information to beef up their own bank marketing programs. Initiate a needs assessment campaign for new prospects with relevant questions, follow-up with new customers promptly, set-up a customer satisfaction program and be pro-active in resolving problems. Follow these suggestions and you may be on top of that next J.D. Powers survey.

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