ABA Banking Journal - February 2007 - (Page 42)
Warning : session_start : The session id contains invalid characters, valid characters are only a-z, A-Z and 0-9 in /mnt/data/www.nxtbook.com/fx/config_1.3/global.php on line 9 Warning : session_start : Cannot send session cache limiter - headers already sent output started at /mnt/data/www.nxtbook.com/fx/config_1.3/global.php:9 in /mnt/data/www.nxtbook.com/fx/config_1.3/global.php on line 9 Warning : Cannot modify header information - headers already sent by output started at /mnt/data/www.nxtbook.com/fx/config_1.3/global.php:9 in /mnt/data/www.nxtbook.com/fx/config_1.3/global.php on line 10 Loyalty feature 1/24/07 12:18 PM Page 42 BANK MARKETING Customer loyalty: elusive, but critical To create a cadre of customer advocates, focus your efforts on “the three Rs” T he rapid adoption of online banking, electronic bill payment, and remote deposit capture is accelerating the movement away from personal contacts. Customers like the choice and convenience, but what happens to relationships as they increasingly transact via machine? How can a bank build customer loyalty in this environment? In a business context, loyalty equates to a willingness to sacrifice on the part of the customer: a loyal customer may forgo a lower-cost solution from a competitor or give you time to improve capabilities because they value other aspects of doing business with you. Truly loyal customers can become advocates—they will put their reputations on the line to recommend you to friends because they trust you to deliver that value to others. To put some numbers to it, the Council on Financial Competition estimates it costs between five and ten times more to attract a new customer than to keep an existing one. With mortgage and home equity lending on the decline; diminishing margins on commercial loans; reduced fees from NSFs and ancillary services; and increased competition from non-banks in all areas, customer retention and crosssell remain vitally important as sources of revenue. Customers who are loyal believe the bank acts in their best interest on a regular basis and are most likely to remain with the bank, to make additional purchases, and to become advocates. By Nancy Michael, senior consultant, Capital Performance Group, Washington, D.C. nmichael@capitalperform.com Factors driving loyalty in retail and small business banking Retention 1. Convenience 2. Product quality and fit 3. Satisfaction with problem resolution All of the above plus: 4. Ease/simplicity 5. Transparency 6. Trustworthiness All of the above plus: 7. Emotional connection Scores NPS, a measure of the percent of customers that are promoters relative to those that are detractors bears out that customer willingness to recommend a company correlates strongly with company growth across industries. Repurchase Referral How to go beyond “satisfied” Enormous amounts of resources have been spent by banks in measuring and improving customer satisfaction, but satisfaction alone does not imply loyalty. Analysis referenced by Business Week in October 2006 shows that between 60% and 80% of defecting customers describe themselves as “satisfied” or “very satisfied” just before they leave. The degree to which a customer is loyal can be determined by a hierarchy of behaviors: retention, repurchase, and referral. Any single behavior alone does not mean a customer is loyal—repurchase, for example, may be a sign of inertia or indifference, particularly when products are viewed as commodities. The key to realizing the value of loyalty is in developing customers who are so committed to you that they not only look to you first when they need something but also are also willing to encourage others to do business with you. New research from Harvard University on measuring and tracking Net Promoter Retention Celent estimates that over 60% of total financial, account maintenance, and servicing transactions now take place over the internet. This prevalence of electronic, self-directed transactions creates a greater need to provide high-quality, responsive service when things go wrong for the customer—and they will go wrong, whether because of an internally generated error or an external event, such as a fraudulent transaction. Financial issues are among the most sensitive and anxiety-producing in peoples’ minds, so nothing will make a customer more frustrated than getting caught in the “VRU vortex” when they have a problem. The value of responding effectively at pivotal moments is paramount. 42 FEBRUARY 2007 /ABA BANKING JOURNAL www.ababj.com/subscribe.html Warning : Unknown : The session id contains invalid characters, valid characters are only a-z, A-Z and 0-9 in Unknown on line 0 Warning : Unknown : Failed to write session data files . Please verify that the current setting of session.save_path is correct /var/lib/php/session in Unknown on line 0
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