Last week, Forrester came out with its annual Customer Advocacy rankings, rating nearly 50 financial service institutions in the U.S.
The key statement they ask is, “My financial service provider does what’s best for me, not just for its own bottom line.”
The largest banks in the country scored the lowest, including Bank of America , Chase, Capital One, TD/Commerce, Fifth Third, Citibank, and in last place, HSBC. For HSBC, only 16 percent of respondents agreed with the statement, as compared to 70 percent of credit union members.
Why the poor rankings for the big banks?
“Customer advocacy rankings are a predictor of customer retention and attrition”
“Part of it is that the banks are preoccupied with their bottom line. They are public institutions who are in business to make money for their shareholder and inevitably, that shows to customers,” Mr. Bill Doyle, a Forrester Vice President, said.
A high customer advocacy ranking means that customers tend to believe their bank takes their side in disputes, does what is right even if it’s not required by regulation to do so, gives fair rates or performance comparisons and is clear about charges and fees, Doyle said.
According to Mr. Doyle, customer advocacy rankings are a predictor of customer retention and attrition, and customers who rate their financial service firms high are more likely to consider their firm for additional products. In contrast, customers who give their banks a low ranking are most likely to switch in the next year and are “going to be reluctant to put any more money and open new accounts at those institutions,” Mr. Doyle said.
Now, you can write this off, since banks are always at the bottom of the Advocacy Report (for the 7 years the report has been published).
Maybe banking as a whole is different enough from insurance and credit unions that the comparison is highly unfavorable from the start. In addition, we do not know if customers are are advocates for their banks are in fact their Best Customers. Remember, in banking today, the top 10% of customers represent more than half of revenue and almost all profit. So a bank does not need many customers to agree with the Advocacy statement to maintain or even grow revenue and profit.
Whenever you lose a Best Customer, you need 5-8 average customers to make up the difference
But I think there is a larger issue here. The question does not ask if banks care about their bottom line more than customers — customers know they do, and that banks, as public institutions, have to make their financial targets to continue to service their customers.
No, the question is worded in a way that asks if banks care about customers in addition to making the bottom line numbers. Customers just want to feel like they are present, not the only thing. And even then, the vast majority believe that banks treat them like a means to an end. Forget about relationships, they just want to be noticed!
No amount of customer data analysis and personalized communications will cover for an organization that is willing to trade off customer satisfaction for short-term profits. Ultimately, customers will figure out that the company believes them to be replaceable, and will return the favor by price-shopping brands. The end result will be declining margins and increased commoditization for the company and the industry itself.
Banking, particularly the national banks, are just one case in point. Many companies today persist in trading off customer satisfaction, referenceability and retention for short-term profits. In this way, you can win a battle, but ultimately lose the war, as customers trade off your immediate benefits vs. long-term value with your competitors. And when they leave, they don’t come back. This is true, and especially costly, for Best Customers.
To make matters worse, whenever you lose a Best Customer, you need 5-8 average customers to make up the difference. That is a pretty steep slope, especially when the hill is of your own making.
Mark Price is Managing Partner at M Squared Group. He is a leader, writer, speaker and consultant on how to increase revenue by retaining and growing Best Customers by improving their experience. His particular concentration is “bricks and clicks” — businesses that engage their customers through the web and through a physical contact (retail or saleforces). Before founding M Squared Group, Mark was the practice leader for customer intelligence for Zamba Solutions. Mark also blogs on http://www.cultivatingyourcustomers.com/ and is a father, husband, tennis player, skier and fanatic science fiction/fantasy reader.
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