Today, banks are facing low interest rate spreads and increased regulations. At the same time, they’re also struggling to offer a value proposition that resonates with customers.
A Gallup Retail Banking Industry Survey said that banks need to do a better job of helping their customers see the value in what they provide. But that’s a challenge, especially when important customers are vulnerable to the competitive pull when better value is offered elsewhere.
Customers who don’t believe their bank offers added value perceive no differential advantage for their bank over the bank across the street. That means higher attrition rates and lost revenue.
However, research indicates that customers who strongly agree their bank provides excellent value are much more active than less engaged customers.
Gallup data show that customers who are fully engaged bring 37 percent more annual revenue to their primary bank than do actively disengaged customers. These customers also have more products with their bank, from checking and savings accounts to mortgages and auto loans. Plus, they have higher deposit balances in their accounts than less engaged customers with the same products.
Exceptional customer service
One key to make your bank defection-proof is this: Prove to your customers that your products and service provide tremendous value in ways that can’t be found anywhere else.
Gallup research also shows that one of the most effective ways to add value is through exceptional customer service — the strongest driver of engagement. Customer engagement, which Gallup describes as a customer’s emotional or psychological attachment to a brand, product or company, is the definitive predictor of business growth.
Today, customers diligently research and consider their options before making decisions. It doesn’t matter if they’re purchasing a $40 pair of jeans, a $30,000 automobile or opening a savings account.
When all else is perceived to be equal (price, product, etc.), how a customer is treated and made to feel before, during and after the transaction is the deciding factor in whether they return. Simply put, customers stick with businesses they feel good about and are emotionally connected to.
The emotions elicited from an interaction between a customer and your bank or brand can take many forms. Positive emotions can result if your bank exceeds the customer’s expectations. For example, adding value leaves the customer feeling they got more than they paid for or even expected. When customers feel they have received exceptional value, they’ll reward your bank with loyalty.
On the other hand, negative emotions can result when your bank fails to meet the expectations the customer brings to the interaction.
Consider how many relationships have ended because a customer can’t wait any longer and gives up in frustration and disgust — two emotions bank customers too frequently indicate in survey responses. How much business is lost because of interactive voice response telephone systems or when a customer has to wait in the drive-thru for service?
When customers disengage, they’ll continue to shop around in search of the bank that does add value. And until that bank emerges, the marketplace will be characterized by high rates of customer turnover.
In the end, the banks that can actively engage their customers in the competition for strategic competitive advantage (market share) are the ones that win.