Consumers Wary In Wake of Financial Crisis
Personal insecurity was an undercurrent of third quarter interviews in the National Consumer Banking Study conducted by The MSR Group in September; the height of the nation’s financial crisis*.
Twelve percent of US consumers reported they are likely to move existing accounts to a different financial institution within the next twelve months. The reasons: Sixteen percent cite market uncertainties and the stability of their bank and another nine percent say they don’t want all their money in one bank.
Although the recent Emergency Economic Stabilization Act of 2008, which temporarily raises the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor, is intended to ease these concerns, The MSR Group will continue to monitor the situation and report on any changes.
*Events occurring around the time of our interviews:
- September 7—US Government takes over Freddie Mac/Fannie Mae
- September 14—Bank of America announces purchase of Merrill Lynch
- September 15—Lehman Brothers files for bankruptcy
- September 16—US Government announces loan to AIG
- September 20—President Bush proposes $700 billion bailout for the nation’s banks
- September 26—JP Morgan Chase purchases Washington Mutual’s banking assets
- September 29—Citigroup announces purchase of Wachovia
Making Your Website Work
According to the 2008 Independent Community Bankers of America (ICBA) Community Bank Technology Survey, eighty-nine percent of community banks maintain an Internet banking site that allows their customers to conduct banking transactions, up six percent from 2006. Consumer use of online banking has increased eleven percent during this same period of time. However, between first quarter 2007 and third quarter 2008, customer satisfaction scores related to online banking have declined an average of four percent.
The reason for the disparity may come as a surprise to many banks: online support. The MSR Group’s National Consumer Banking Survey consistently shows that customers find a lack of online support to be a major dissatisfier. Yet results of the ICBA study show that a full fifty-six percent of banks have “No Interest” in offering a customer service FAQ area on their website and a disturbing eighty-four percent have “No Interest” in offering live chats with customer service representatives.
In order to make your website work for you, it must work for your customers. Many bank websites have been developed or redesigned with a primary focus on security. Of course, safety is a major concern for both banks and consumers, but if your bank’s website doesn’t also focus on usability and ease of use—while offering the services needed by customers—it isn’t really working.
Across the US few online banking users consider their bank website to be performing at an excellent level. Banks that capitalize on this opportunity will come out ahead in the customer loyalty quest. Eighty-three percent of customers who rate their bank’s website as Excellent on all of these attributes are Advocates.
Stopping the Switch or Just Delaying Defection?
According to a recent study conducted for the ICBA, mobile banking tops the list of technologies banks plan to implement in the next 24 months, while another three are related to online banking services. Before jumping into new technology for technology sake (or to keep up with the big guys), it is important for banks to evaluate the effectiveness of current systems.
Sixteen percent of consumers nationally have considered switching to another bank, but have not done so. When asked why they decided to stay, the “hassle of switching” was the most commonly cited reason. The simple fact of having multiple connections to a single bank, in the form of internet banking, automatic deposit and bill pay setup, is bound to make moving accounts more difficult.
This is certainly no surprise to retail banks that have placed a strong focus on cross-selling over the past couple of years. But will adding new technologies to create yet another connection be enough to encourage long-term loyalty? Probably not.
While multiple connections to a bank will delay defection for a period of time, there will come a point when frustration with multiple facets actually encourages leaving. Inconvenience is trumped by wide-ranging dissatisfaction.
Take the following facts, from The MSR Group’s National Consumer Banking Survey, into account:
- When compared to other financial institutions, slightly more than half (only 56%) of consumers rate service at their bank as ‘excellent.’
- Only half of all customers rate the convenience of branch hours as ‘excellent.’
- Nearly two in every ten customers say they waited 5 minutes or longer during their last branch visit; a wait most of these customers consider ‘unreasonable.’
- While use of online banking continues to increase, ratings of online support services is on a downward trend.
- Consumer ratings of ATMs have declined an average of 3.5 index points since first quarter 2007.
- Two in five consumers reporting to be ‘very’ or ‘somewhat’ likely to switch banks would do so simply for lower fees and/or more favorable interest rates.
The way a bank resolves a problem also impacts the future relationship between it and the customer. The more quickly a bank initiates action and seeks a resolution that, to the extent possible, is acceptable to the customer, the more likely the organization is to restore, or even enhance, its relationship with that customer.
The best means of encouraging long-term loyalty is to have a complete picture of opportunities for improvement at each potential touch point—and then to ACT on those opportunities. Every interaction point should be measured using the same instrument and methodology to ensure all areas are evaluated equally.
Banks with a serious interest in establishing long-term relationships with their customers will implement a customer loyalty measurement system that provides:
- Feedback from customers within 72 hours of a customer interaction,
- Organization-wide service level reports, and
- A means of immediate notification of customer concerns.
The MSR Group’s APECS® program is a comprehensive customer satisfaction monitoring system. To learn more about this proven method of increasing customer loyalty, please contact us today at 800-737-0755 or view the demo at www.themsrgroup.com.
Support for the Net Advocacy Rating over the Net Promoter Score
Advocacy and loyalty are complex concepts that involve multiple behaviors. That is why The MSR Group has always used two questions to identify Advocates. Our Net Advocacy Rating reflects a customer’s response to two key questions on the survey: “Would you recommend your (primary) bank to others?” and “Assuming that you need additional banking services, what is the likelihood that you would get them from your (primary) bank?”
A recent article in the MIT Sloan Management Review1 supports our position. In attempting to replicate the Reichheld study leading to the NPS, the authors found, as we have, models that include multi-item measures of loyalty and advocacy outperform the Reichheld model and that recommend intention is not the single best predictor of loyalty.
Further, according to the article, the best predictor of actual retention is repurchase intention and the best predictor of word of mouth behavior is intent to recommend. The MSR Group’s National Consumer Banking Survey goes one step further, validating that Advocates do engage in word of mouth behavior. In our program 68% of Advocates have said something positive or nice about their bank to others within the past year; the percentage is even higher when we eliminate the one year time horizon.
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