Value, Not Satisfaction, Drives Customer Relationships

Many banks believe they have a relationship with their customers based on customer satisfaction ratings. They tend to assume that customer satisfaction equates to relationship strength and an indication that clients will stay longer and buy more products and services.

However, a survey by the American Bankers Association revealed that satisfaction is not a guarantee of loyalty. Therefore, while it may seem intuitive that increasing customer satisfaction will increase customer retention and therefore profits, the facts are contrary.

Research by Bain & Company has shown that, in business after business, 60% to 80% of customers who defect to a competitor said they were satisfied or very satisfied on the survey just prior to their defection1.

However, some of the most convincing evidence is found in the time-tested research of Professor Robert Peterson of the University of Texas, who found that in most surveys of customer satisfaction, 85% of an organization’s customers claim to be “satisfied,” but still show willingness to wander away to another provider2.

Mere satisfaction does not create an emotional connection between a bank and its customers. My research indicates a customer’s future intentions are not entirely associated with their level of satisfaction, but are more closely related to the health of the relationship they have with the bank.

At a minimum, a bank must understand what customers value in their banking relationship and how to create, communicate and deliver that value to them. Otherwise, these reportedly satisfied customers will go to a competitor once they are made aware of greater value.

It is important for bank management to understand from the customer’s perspective how well the bank is doing at building stronger customer relationships by creating value for its customers. In essence, value describes the nature of the relationship between the customer and the bank, while satisfaction is a representation of the customer’s reaction to the value received from a particular product offering or service.

Satisfaction is strictly tied to the customer’s perception of product and service performance. For example, customers may be satisfied if there are no errors on their statement, phone calls are returned, the bank Web site is easy to navigate or transactions don’t take too long.

Value, on the other hand, involves the interaction between the product, service and customer. For example, determining value might reveal that customers have concerns about how the product can help their children attend college or how the bank can help them manage the time pressures of their day. These are characteristics more descriptive of the customer—what the customer expects from the relationship.

In short, “value” tells the bank what to do (gives it direction), while “satisfaction” tells the organization how it is doing (gives it a report card). It is vital for banks to know both what they need to do (value) and how they are doing (satisfaction); they need both a direction and a report card.

It’s only by increasing the value customers perceive with your bank that their satisfaction levels will raise. When your bank retains customers because they feel good about the value and service they receive, they are more likely to become loyal customers. This loyalty leads to increased referrals, share of wallet and retention.

Remember, the bank that delivers a superior strategy for building stronger relationships with customers ultimately wins the competitive advantage.

1Reichheld, Frederick, Essay #5 in a series of essays on the relationship between loyalty and profits; The Loyalty Effect, the satisfaction trap (Bain and Company, Inc.).
2Peterson, R.A., and Wilson, W.R. “Measuring Customer Satisfaction: Fact and Artifact.” (Journal of the Academy of Marketing Sciences), Winter 1992, p. 6.