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THE CHALLENGE

In 2001, Commercial Federal Bank had just finished the integration of several large acquisitions that effectively doubled the number of branches and assets under management. Commercial Federal was faced with a problem that many financial institutions experience in today’s competitive environment: how to differentiate itself in a meaningful way to positively impact the perception of the bank and its financial performance. The bank embarked on a multi-faceted branding strategy using outstanding customer service as its point of differentiation.

Commercial Federal senior management realized that to provide outstanding customer service they needed a program that would accurately measure the voice of its customers on the service they were receiving. Equally important, the program needed to focus employees on improving service quality to increase customer loyalty while simultaneously boosting sales and enhancing profitability.

THE OBJECTIVES

The bank came to The MSR Group with the challenge of creating a customer satisfaction and loyalty measurement program that met the below key criteria:

Actionable information that allowed the bank to increase its customer loyalty and advocacy metrics
Statistically valid sampling methodology
Bank wide service level reports that could be integrated into management reporting
Information that was near-real time, ongoing, and available to bank leadership on a 24/7 basis
A relevant performance comparison to the bank’s top competitors in its markets
A program that could be linked to creating a positive impact on the bank’s financial outlook

THE SOLUTION

The MSR Group created APECS® – Achieving Peak Expectations in Customer Satisfaction - to address the stated objectives. APECS® is a unique, dynamic program that monitors, measures, and reports ongoing service delivery processes by measuring customer advocacy at the branch level. One critical component that differentiates APECS® is the actionable information that the bank was able to utilize to enhance customer satisfaction and advocacy, drive new account openings, boost loan volumes, and increase referrals – all with a positive impact on revenue and earnings.

THE APECS® ADVANTAGE

The APECS® process begins with an actual customer branch visit, and within 48 hours of that interaction, customer feedback is gathered through telephone interviews, entered, indexed, and loaded on to The MSR Group’s Performance Monitor®…an interactive, secured website that is available to bank leadership on a 24/7 basis. APECS® provides index scores that allow bank management to:

Compare branch-to-branch service performance;
Compare branch performance to aggregate corporate scores;
Compare branch and aggregate bank performance to the bank’s top competitors in the markets it serves, rather than against a “national norm,” and;
Create a “peer management” tool for sharing “best practices” among all branch management.

The MSR Group has the capability to conduct thousands of phone interviews on a daily basis, gather the results, index the scores, and post them on Performance Monitor®. Branch management can access and utilize Performance Monitor daily, which has created a competitive, yet friendly culture throughout the organization – and the immediacy of the results is critical to all management personnel. APECS® has been uniquely instrumental in helping Commercial Federal successfully implement corporate initiatives at the branch, regional and corporate level.

The bank has used the results to create initiatives that link to human resources management, and campaigns that ultimately improve the bank’s image in its marketplaces. The initiatives include such efforts as developing compensation and rewards system for branch management, and integrating the components of the research instrument into job descriptions and performance appraisals. Subsequently the bank has created incentives for branch management to excel and ultimately contribute to the bank’s overall financial success.

Not only did Commercial Federal Bank understand that Executive and Senior management commitment is necessary for a successful program, they also understood that they needed to implement five key principles:

Service quality needs to be accurately measured at the branch or team level and be representative of the entire customer base (to date telephone survey sampling remains the most statistically representative methodology)
The program must measure key factors that affect service quality and customer loyalty in the eyes of the consumer (regression analysis was utilized to identify the primary drivers behind customer satisfaction)
Incentive programs must be attached to management and employee compensation programs
Program communication and service training must be an ongoing, dynamic process (therefore service measurement cannot be a “snap shot in time.” It must reflect customer opinions on a day in, day out basis.)
Coaching of employees must take place as close to the time of interaction with the customer as possible (results are available within 48 hours after the customer visit)

Other key components of the APECS® program is the “Action Alert”…an overnight information process that communicates highly dissatisfied customer comments to bank management personnel for immediate follow up and “damage control.” Action Alerts address individual customer issues immediately, ultimately avoiding customer churn. Conversely, “Magical Moments” positively reinforce exemplary performance. “Magical Moments” reporting differentiates top performing branches whose customers perceive perfect quality of service not only at Commercial Federal, but relative to their other service providers…inside and outside the financial industry.

THE RESULTS

Integration of the APECSTM process into the bank’s everyday way of life has been extremely positive. Putting a focus on customer satisfaction and loyalty has turned the bank’s customers into advocates as evidenced by the record number of new checking account openings and loan portfolio growth. “New checking account openings are up 48% over 2001, and the consumer loan portfolio is up 29% over 2001,” said Roger Lewis, Senior Vice President and Director of Corporate Marketing.

The bank’s growth is further substantiated by a 29% increase in the likelihood for current customers to open new accounts and an 11% increase in their likelihood to recommend their bank to friends or relatives. “The likelihood of a customer opening additional accounts rose to 85.5% in 2005 (up from 66% in 2002) and the likelihood to recommend Commercial Federal Bank to a friend or relative rose to 89.5% in 2005 (up from 83.3% in 2002),” Lewis added.

APECS® builds customer advocacy…a vital element in any customer satisfaction program. Scores generated by APECS® are true index ratings that have been created through a proprietary correlation analysis model that identifies the most influential components affecting customer satisfaction and advocacy.

The MSR Group Advocacy Chain Model

Critical
Customers who fall into the “Advocate” segment, score the bank’s performance no lower than 100 rating points on questions proven to most highly influence customer satisfaction and loyalty. Customers who fall into the “Loyal” segment score the bank between 88.8 and 99.9, etc., etc. Research indicates that a direct correlation exists between advocacy and profit. An “At Risk” customer is 4% more profitable than a “Critical” customer, a “Loyal” customer is 2% more profitable than an “At Risk” customer, and an “Advocate” is 8% more profitable than a “Loyal” customer. Since 2002, Commercial Federal has experienced a 21% increase in their “Advocate” customer segment while decreasing the number of “Loyal,” “At Risk,” and “Critical” customers. Overall, this movement up the “Advocacy Chain,” represents more than a $1.5 million dollar increase in annual revenue through enhancement of existing customer profitability.

Commercial Federal Bank’s Customer Advocacy Growth
2002 2004

CONCLUSION

The bank needed a quality service metrics program that supported its new philosophy, enabling the bank to build a customer loyalty program that provided immediate, actionable information that also positively impacted revenue, and decreased the expense associated with account churn. The bank turned to The MSR Group for help, and in response APECS® was instituted.