Winning back your customers Retail banking study 2010/media/Corporate/Pdf... · 2 Winning back your...

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Winning back your customers Retail banking study 2010

Transcript of Winning back your customers Retail banking study 2010/media/Corporate/Pdf... · 2 Winning back your...

Page 1: Winning back your customers Retail banking study 2010/media/Corporate/Pdf... · 2 Winning back your customers Retail banking study 2010 3 Foreword There is no doubt the Belgian banking

Winning back your customersRetail banking study 2010

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2 Winning back your customers Retail banking study 2010 3

Foreword

There is no doubt the Belgian banking industry is under fire. The recent spate of government bailouts, takeovers and closures has made consumers anxious. At the same time, consumers continue to voice their dissatisfaction and distrust.

This report is the 2010 edition of an annual study on the retail banking industry in Belgium carried out by Deloitte and the Vlerick Leuven Gent Management School. While the 2009 study focused on distribution strategies and more specifically on the future of over 4000 branches, the 2010 study analyses customer loyalty, satisfaction and trust towards the retail banking industry. It is based on responses from 2,000 retail customers regarding their experiences with their primary and secondary banking providers.

What makes this study relevant and unique is that we have information from retail customers on different types of banks and on two different dimensions of loyalty: trust and satisfaction. This specific information allows us to point out the following:•Thepercentageofcustomerswhoarenotcertaintheywillcontinueusingtheir

current bank services has doubled over the past year (from 11% in 2009 to almost 25% in 2010).

•Loyaltyremainslowandthereisacleargapbetweenallbanksandpeertopeeractors.

•Financialinstitutionssufferfromalackoftrustandsatisfaction,especiallyBelgium’sBigFourbanks.

•Highlycommittedcustomersusemoreproducts,givemorereferencesandaremuchless likely to speak badly of their banks to other customers, but they only represent 16% of the market.

Given the future economic outlook, our study recommends that it is even more important for banks to:•Reconfirmasingularmarketpositioningandalignthecustomervalueproposition.•MovefromtraditionalCRMtoinnovativesalesmodelsandenhancedservicequality,

hence speeding up the transformation to financial advisor.•Adaptyoursalesapproachtocustomergenerations,especiallytoGenerationY.

Patrick CallewaertPartnerDeloitteBelgium,HeadofCRMConsultingPracticeforEMEA

Prof. Dr. Kurt. VerweirePartner, Associate Professor in Strategic Management, Vlerick Leuven Gent ManagementSchool,CompetenceCentreEntrepreneurship,GovernanceandStrategy

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About the research Introduction

This report is based on the results of a quantitative survey of 2,000 Belgian retail banking customers conducted in December 2009. The aim of this research is to measure customer trust, satisfaction and loyalty in the retail banking industry in Belgium and to better understand what customers expect from their banks.

The banks have been classified into three different groups: •Big Four banks: the four major retail banks in the Belgian market•Community banks: banks focusing on a specific customer segment or group •Direct and Discount banks: banks that offer financial services through direct

channels mainly; and banks that focuses on price (f.i. interest rate)

This study does not address neither business or private banking customers nor the impact of this perception on the real behavior of customers.

The study analyses how trust, satisfaction, and loyalty differ between different customer segments: •Generations:

- Silent Generation (age 65-75) - Baby-boomers (age 45-64) - Generation X (age 32-44) - GenerationY(age15-31)

•Socialgroups(wedistinguishedfourgroupsusingCIMclassificationbasedonprofession and education of the head of household):- Low - Middle low- Middle high- High

The survey was conducted for Deloitte by TNS Dimarso.

The financial services industry has witnessed one of the most serious crises in its history. Many financial institutions have lost billions of euros over the last two years and the industry outlook is profoundly changing. Much has been written about the nature and origin of this financial crisis. In essence, its root causes seem to lay in macro instabilities – excessive liquidity and cheap money – and micro regulatory failure, such as inappropriate risk management. Subprime mortgage lending practices played a significant role. But many authors point to other causes as well: a lack of adequate corporate governance within financial institutions, too much financial innovation, inappropriate regulation, and remuneration systems for managers and traders oriented too much towards the short term.

A lack of trustRather than address the causes of this crisis, in this study we want to concentrate on the remedies, and focus on one particular aspect of this debate. It is clear that many people all over the world have lost faith and trust in banks and in the financial services industry in general. Many banks have recorded massive losses, unseen in decades of corporate history. But the lack of trust is not only due to bad performance. Unfortunately for bank managers, there is more to restore than the financial performance of their organisations. Although improved performance is critical to image management, it cannot be the only recourse for re-establishing the credibility of theindustry(HayesJames,2009).

Overall, there is a deeper distrust between the public and the financial services industry. The public has experienced an imbalance, where the industry holds the lion’sshareofpowerandisabletomakedecisionsandtake risks in ways that have a tremendous impact on its stakeholders. More profound attempts are needed to rebuild the image of the financial industry. These efforts should be focused on rebuilding real trust.

What is trust?Trust is an increasingly popular concept in the business world. In 2000, Maister, Green and Galford wrote a very influential book for service companies, The Trusted Advisor. A couple of years later, Stephen M.R.

CoveywroteThe Speed of Trust. Both business books attracted a lot of attention, indicating that trust is an important issue in business, even in periods when there is no crisis. Both books acknowledge that trust is a multidimensional construct. Mishra (1995) has identified four common dimensions of trust:•Competence:trustcanonlybecreatedifonepartyhas

confidence in the knowledge, skills and abilities of the other party.

•Openness:stakeholdersmusttrustindustryleadersto be open and honest about strategy, intent and purpose.

•Concern:thedemonstrationofinterestandcareinthewell-being of others.

•Reliability:consistencyofwordsandactions;itisabout“walking the talk”.

“Trust in the banking industry” versus “trust in my personal bank”So far we have spoken about customer trust in the banking industry. We assume that the financial crisis has caused customers to develop a general level of distrust towards the banking industry and that this has affected all banks equally. But is our assumption correct? Probably not! Not all banks have been affected equally by the negative consequences of the financial crisis. That is why we asked 2,000 customers how much they trusted their banks.

In our study, we used five dimensions to measure trust, mainlybasedonMaister,Green,andGalford’swork(2000). The key components of a trusting relationship can be combined into a “trust equation” containing five components:

T = C+R+I+O S

Where:- T = Trustworthiness- C = Credibility(Ibelievewhatmybankistellingme)- R = Reliability (my bank is conforming to facts)- I = Intimacy (my bank is close to my needs and

concerns)- O = Openness (my bank has a simple and transparent

communication)- S = Self-interest (my bank acts to my best interest)

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1. Customer Loyalty Trust and satisfaction are correlated and lead to more loyal customers with potential business growth.

Loyalty = f(Trust; Satisfaction)

The significant impact of trust and satisfaction on the continuity of the banking relationships has been confirmed by different studies. Marketing authors agree that trustworthy relations create deep loyalty, as trust is the glue that holds a business relationship through good and bad times.

The results of our survey confirm that there is a strong correlation between trust and satisfaction and that they bothhaveamajorimpactoncustomerloyalty(seeFigure1). Satisfied customers who trust their banks are much morelikelytocontinueusingtheirbanks’servicesthanare those who are less satisfied and mistrust their banks.

Low customer loyalty leads to high risk of customer diversification and churn.Our study reveals that 25% of Belgian bank customers will probably or fairly likely not continue to use their bankservices(seeFigure2)comparedto11%lastyear(2009 Deloitte Retail Banking Study). The most impacted bankcategoriesaretheBigFourandcommunitybanks.Nevertheless, the variance between banks within a same group is very high.

Less loyal customers diversify their banking services acrossmultiplebanksmoreoften.AsdepictedinFigure3, 31% of customers who use services from three or more banks are not certain they will continue to use them. Among customers using services from only one bank this uncertainty falls to nearly half (16%). Our results show that loyal customers are less likely to switch banks and diversify financial services.

Low customer loyalty leads to limited business growth.To measure customer loyalty we applied a commonly used customer loyalty metric, the Net Promoter Score (NPS)developedbyFredReichheldandSatmetrix.CompaniesobtaintheirNetPromoterScorebyaskingcustomersasinglequestionratedona0-10scale:“Howlikely is it that you would recommend our company to a friend or colleague?” Based on their responses, customers can be categorised into one of three groups:

Results of the study

Trust and satisfaction are correlated and lead to more loyal customers with potential business growth.

Cust SatMedium/

Low, TrustLow24%

Cust SatHigh,

Trust High41%

Cust SatHigh,

Trust Low1%

Customers’ intention to continue using bank services

Figure 1. The lower the customer trust and satisfaction, the lower the customer loyalty

Cust SatMedium/

Low, TrustHigh34%

0%

20%

40%

60%

80%

100%

Probably not/Definitely not

Fairly Likely

Definitely/Probably

Cust SatMedium/Low

Trust Low

Cust SatMedium/Low

Trust High

Cust SatHigh,

Trust Low

Cust Sat High,

Trust High

97%

3%

92%

3%5%

76%

4%

20%

44%

37%

20%

82%

14%

4%

73%

17%

10%

75%

18%

8%

Figure 2. Customer intentions to continue using bank services by bank type

0%

20%

40%

60%

80%

100%

Probably not/Definitely not

* Based on your experiences would you continue to use the products and services of bank at least to the same extent as you are doing now?

Fairly Likely

Definitely/Probably

Discount &Direct

Communitybanks

Big Four banksAll banks

76%

17%

8%

68%

21%

75%

18%

7% 10%

84%

11%

5%

Figure 3. Customer intentions to continue using bank services by number of customer banks

0%

20%

40%

60%

80%

100%

Probably not/Definitely not

* Based on your experiences would you continue to use the products and services of bank at least to the same extent as you are doing now?

Fairly Likely

Definitely/Probably

Those with3+ banks

Those with2 banks

Those with1 bank

All customers

76%

17%

8%

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Figure 6. Customer trust elements

Percent of bank customer who gave rating “Completely agree”

Trust = C + R + I + O = 5.5 (theoretical min. is 4, max. is 20)S

5.5 5.3 5.4 6.5

Customer trust by bank type

0

2

4

6

8

Discount &Direct

CommunityBig FourAll

Credibility3.88 (min 1 - max 5)

“… do you believe the message of your bank?”

Big Four

17%

Community banks

22%

Discount & Direct

28%

All customers

21%

Reliability3.73 (min 1 - max 5)

“… bank deliver whatit promises?”

Big Four

11%

Community banks

15%

Discount & Direct

23%

All customers

14%

Initimacy3.68 (min 1 - max 5)

“… bank listens to theirclients and knows them?”

Big Four

15%

Community banks

19%

Discount & Direct

24%

All customers

17%

Openness3.6 (min 1 - max 5)

“… communicates in thebest interest of its clients?”

Big Four

11%

Community banks

13%

Discount & Direct

20%

All customers

13%

Self-interest2.68 (min 1 - max 5)

“..bank acts in the best interest of its clients?”

Big Four

6%

Community banks

12%

Discount & Direct

17%

All customers

10%

42%

45%

13%

23%

50%

43%

46%

11%27%

Figure 4. Likelihood to recommend bank to the family or friends

0%

20%

40%

60%

80%

100%

Detractors (6-1)

* How likely you are recommend bank to your family or friends?

Passives (8,7)

Promotors (10,9)

Discount &Direct

CommunityBig FourAll

38%

46%

16%

Figure 5. Net Promoter Score (NPS*)

All

Promoters 16 13 11 27

Detractors 39 42 43 24

NPS* -23 -29 -32 3

Big Four CommunityDirect &Discount

*Net Promoter Score is: Promoters minus Detractors.

Promoters (9-10), Passives (7-8) and Detractors (0-6). The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter Score.

It must be said that the retail banking industry has never been a leader in loyalty scores. The Net Promoter Score for banks is very low: -23%. Our study shows that banks in general have almost twice the Detractors among their customersasPromoters(Figures4and5).

What stands out is the variance between the NPS scores from one bank to another (highest +13%, lowest -44%) and between bank types. Discount and direct banks have significantly more loyal customers than the Big Fourorcommunitybanks.

To better understand what affects trust and satisfaction have on customer loyalty and its inherent behaviour, we analysed the different components of trust and satisfaction.

2. Trust Customers have a low level of trust towards the banking industry and their bank; Big Four and community banks are at highest risk.The industry is suffering from a lack of customer trust, 1 out of every 3 customers does not trust banks in general, and only 12% of customers confirm that they definitely trust the banking industry.

Wemeasuredallfivetrustdimensions(seeFigure6).Customerswereaskedtowhatextenttheyagreewithvarious statements that correspond to different trust dimensions. A 5-point scale has been used on this questionnaire for ratings from 1 to 5 (1 = completely disagree, 2 = rather disagree, 3 = neither agree/nor disagree, 4 = rather agree, 5 = completely agree).

Trust level varies significantly among different bank types.OurstudyshowsthattheBigFourscorethelowest across all trust dimensions. They are followed by community banks, which score slightly better. Without a doubt discount and direct banks stand out from the competition.

There is no greater source of distrust than selfishness. For banks this means low commitment, little intimacy and poor client service.As described above, we quantified customer trust using theCRIOSequation,wheretrustisthesumofcredibility,reliability, intimacy and openness divided by self-interest. It shows how different trust elements interrelate and how one can create and earn trust. Increasing the value of the factors in the numerator increases the value of trust. Increasing the value of the denominator – that is, self-interest – decreases the value of trust.

The trust score for all banks is 5.5, whereas perfection would most probably be a score of around 10-15 (theoreticalmaximum–20).Yetagain,discountanddirect banks have a significantly higher trust score: 6.5 (seeFigure6).

Looking at the trust equation, an important dimension of distrust is the level of bank self-interest. The lower that level is, the higher the level of trust will be. Banks need to reduce their level of self-interest if they want to increase trust again. We believe it is important that banks–especiallytheBigFourandcommunitybanks–reinforce this aspect in their client relationships.

Of all the trust dimensions, self-interest has the largest impact. Paradoxically, banks earn the worst scores on it: only 44% of customers agree their bank is acting in the interest of its customers. Once again, discount and direct banks show better results: 57% of customers agreetheirbankisactinginitscustomers’interest.

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There is not trust difference between generations, but by social groups. Many people talk about enormous differences in values and perceptions between older and younger generations. Our study indicates that these differences do not apply to general views of the banking industry (seeFigure7).Theleveloftrustisnotsignificantlydifferent between generations.

There are, however, significant differences in the trust perceptions between different social groups (see Figure8).Weseeastrongcorrelationbetweensocialgroups and customer trust in banks: the higher the social group, the lower the trust.

Eventhoughthetrustratingsarealmostthesameacrossgenerations, the behaviours that go along with these ratings may be very different.

3. Customer satisfaction Customers are not satisfied with their banks.Evolvingtechnologiesandarapidlychangingenvironment have raised customer expectations. Serving customers well and achieving high customer satisfaction scores in this environment is becoming increasingly difficult.

According to our study only 42% of customers are very satisfied with the overall performance of their bank (see Figure9).Thismeansthatmorethanhalfofbankingcustomersmaybe“atrisk”,mainlyattheBigFourandcommunity banks. Discount and direct banks perform better here: the number of customers who are very satisfiedisabout20%higherthanfortheBigFourandcommunity banks.

When asked which attributes customers consider most important, we found widespread agreement on two items: convenient access to information on accounts and products and knowledgeable branch staff (see Figure10).Whatisstriking,though,isthedifferencein scores on competitive prices, fees and interest rates. While 60% of the discount and direct bank customers gave the highest satisfaction score for this attribute, only20%oftheBigFourcustomersratedtheirbankas“excellent”or“verygood”(seeFigure10).

Similarly,customersoftheBigFourandcommunitybanks expressed very low satisfaction with the ease of understanding products and services, which indicates

Figure 7. Customer trust by generation (CRIOS)

0

1

2

3

4

5

6

7

8

5.85.55.45.75.5

All Silentgeneration

Baby-boomers

GenerationX

GenerationY

* CRIOS index = (C+R+I+O)/S

Figure 8. Customer trust by social group (CRIOS)

0

1

2

3

4

5

6

7

8

5.25.76.26.55.5

All Low MiddleLow

MiddleHigh

High

* CRIOS index = (C+R+I+O)/S Excellent

Very good

Figure 9. Customer satisfaction by bank type

All Big Four Community Discount& Direct

0%

10%

20%

30%

40%

50%

60%

34%

31%

33%

43%

15%7%6%8%

There is no greater source of distrust than selfishness. For banks this means low commitment, little intimacy and poor client service.

Big Four Community Discount & direct

Figure 10. Customer satisfaction with bank attributes

0% 20% 40% 60%

Introduces innovativeproducts and services

Wide selection ofproducts and services

Responsive customer service

Ease of access tobank personel

Satisfactory answers tocustomers requests

Competitive prices, feesand interest rates

Ease of understandingproducts, fees & interest rates

Knowledgeable staff

Convenient access toinformation on acc.

and products

* Percent of bank customer who gave rating “Excellent” or “Very good”

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Big Four

Community

Discount & direct

Figure 11. Gap analysis between importance and satisfaction with the banking attributes

* The gap is the mean score for the satisfaction rating subtracted from the mean score forthe importance rating. Attributes are ranked by importance to all customers, where 1 - most important , 9 - least important.

9. Introduces innovativeproducts and services

8. Wide selection ofproducts and services

7. Responsivecustomer service

6. Ease of access tobank personel

5. Satisfactory answers tocustomers requests

4. Competitive prices,fees and interest rates

3. Ease of understandingproducts, fees

& interest rates

2. Knowledgeable staff

1. Convenient access toinformation on acc.

and products

-1.0 -0.5 0.0 0.5 1.0 1.5

Importance to the custom

ers

customers’needforsimplicity.Customersofdiscountand direct banks were least satisfied with customer service responding quickly to telephone calls and e-mail requests and customer service giving satisfactory answers to requests.

Additionally,customersarenotsatisfiedwiththeirbanks’ability to introduce innovative products and services, though this attribute is the least important to clients.

Analysis does not reveal significant differences in customer satisfaction between diverse generations or customer social groups.

Measuring customer satisfaction is only half the story.Measuring customer satisfaction is not enough. It is also necessary to determine customer expectations and the importance attached to different bank attributes, otherwise resources could be spent raising satisfaction levels on things that are not relevant to customers.

Our study reveals that there is often a gap between the service customers expect and the actual service experience(seeFigure11).Findingthisgapwillbethefirst step to improving service.

ThechartinFigure11tellsushowimportantvariousaspects of bank performance are to customers, compared with how satisfied customers actually are with particular attributes. The gap analysis enables identifying priorities for improvement. The gap in this context is the mean score for the satisfaction rating subtracted from the mean score for the importance rating. If the mean score of an attribute is positive, then customers rate the service as very important but are not satisfied with the service they are receiving. In this instance, action is required.

ThetoppriorityoftheBigFourshouldbeimprovingcustomer perception on competitive prices, fees and interest rates, as they show the biggest gap on this attribute. In this instance it is important to note that we are not suggesting that lowering prices is the way to go. Instead, banks should focus on improving the services attached to their product portfolio and thus create the feeling that the customer is getting value for money.

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Ease of understanding products, fees and interest rates should be at the top of bank agendas, as this represents one of the major challenges for all banks. It is clear that banks should focus more on making product benefits and risks easy to understand.

Although the banking attribute knowledgeable staff was rated relatively high (among the top three) by customersoftheBigFourandcommunitybanks,thereis still a remarkable gap to close. This indicates that the expectation bar for this attribute is set very high. On the other hand, customers of discount and direct banks have lower expectations about staff knowledge and therefore the gap is rather small.

It should be highlighted that discount and direct banks have a higher gap in convenient access to info on accounts and productscomparedtotheBigFour.Among other possible reasons, this demonstrates that their customers have very high expectations in terms of better access and convenience.

When the gap between importance and satisfaction isnegative,itindicatesover-achievement.Customerscould rate an attribute as unimportant, but might be very satisfied with the service. In this case no action is required. It is interesting to note that all types of bank show

negative gaps in two attributes related to banking products: wide selection of products and services and introduction of innovative products and services. Only 27% of customers think a wide selection of products and services is extremely or very important. And just over half this percentage (15%) feels it is extremely or very important that banks regularly introduce innovative new products and services. This is of very low importance compared to other attributes: i.e. 76% of customers rated convenient access to information on accounts and products as extremely or very important.

As a conclusion, all banks have positive gaps that require immediateimprovementactions.YetthelargestgapstoclosearefortheBigFourandcommunitybanks.

Customers do not perceive a bank’s competitive advantage.Our previous study, There is a future for the bank branches, revealed that success comes to banks that are the best at delivering value to customers via one of five specific value dimensions: •Priceleadership•Productleadership•Serviceleadership•Accessandconvenience•Connectivity

Figure 13. Competitive advantage of the bank

No advantage at all

* How would you rate the advantage to you by dealing with your bank rather than with any other bank?

A very big/big advantage

Some/only a slight advantage

Discount &Direct

CommunityBig FourAll banks0%

20%

40%

60%

80%

100%

44%

54%

2%

24%

66%

10%

18%

68%

14%

25%

65%

10%

We believe that successful banks are those that dominate their chosen value dimension, while maintaining adequate standards on the others.

It is rather disappointing that customers do not perceive most Belgian banks as leaders in any of these value dimensions. When looking at customer satisfaction with bank performance, we do not observe a remarkable difference in four out of five differentiating areas. We note that only discount and direct banks dominate the price value dimension, though without excellent performance. This also suggests that discount and direct banksarebetteratmanagingtheircustomers’priceexpectations(seeFigure12).

Thefactthatcustomersdonotseetheirbank’scompetitive advantage is alarming. Only 18% of the Big Fourand24%ofcommunitybankcustomersfeelthereis a very big/big advantage by dealing with their bank rather than another. This contrasts with the perception of 44% of customers of discount and direct banks (see Figure13).Insuchacompetitiveindustrywherebanksoffer similar products, real differentiation becomes a competitive advantage.

By focusing efforts on increasing customer satisfaction and bridging the gap between real service versus expected service, banks will enhance the customer experience. This in turn will help build customer loyalty and trust.

Big Four

Community

Discount & direct

* Percent of customers who gave “excellent” and “very good” ratings to nine questions related tothe five value dimensions.

Figure 12. Customer satisfaction with their banks

Price

Product

ServiceAccess

Connectivity

0%

20%

40%

60%

80%

100%

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Figure 14. Strategic positioning

Bank type Universal bank Community bank Discount bank

Differentiator

Key actions

Focus on services and products Offer best prices and direct access

Direct bank

Universal - future positionCommunity - future position

Community - current positionUniversal - current position

Value proposition

Product

Price

0%

20%

40%

60%

80%

100%

ServiceAccess & Convenience

Connectivity

Discount- future positionDiscount & Direct - current positionDirect- current position

Value proposition

Key actions• Improve service quality• Simplify product and services• Introduce realtionship (loyalty) based services and pricing• Improve communication with the clients and increase connectivity

Key actions• Increase price value proposition• Increase access and convenience; leverage on social media• Simplify product and services and improve communication with the clients

Product

Price

0%

20%

40%

60%

80%

100%

ServiceAccess & Convenience

Connectivity

What should banks do to restore trust and satisfaction and build sustainable loyalty? A total of 57% of unsatisfied and distrustful customers, representing 25% of all customers, intend not to continue using their bank services. We believe that the following actions will help banks restore the customer trust:1. Deploy a singular market positioning and customer

value proposition.2.MovefromtraditionalCRMtoinnovativesalesmodels

and enhanced service quality, hence speeding up the transformation to financial advisor

3. Adapt your sales approach to customer generations.

1. Deploy a singular market positioning and customer value proposition.Industry restructuring is driving a fundamental shift in operating models. In these cost focused times it is very important that customers understand the value delivered by their bank and can identify a competitive differentiator.

Our study clearly shows that the winners in the crisis are those banks that have a clear market positioning and that manage to deliver a simple and clear customer value proposition.

Basedonbanks’currentpositionsandcustomerexpectations, we suggest that certain bank types should primarily focus on specific value propositions (seeFigure14):•Universal and Community banks: service and

connectivity leadership•Direct and Discount banks: access & convenience and

price leadership

We believe that banks should dominate their chosen value dimension while maintaining satisfactory standardsontheothers.Furthermore,thestrategicpositioning should be translated into an adequate and transformed operational model. Banks need to deliver their value proposition through each customer touch point.

Conclusions

Figure 15. Actions to restore customer trust rated by importance to the customers

0% 10% 20% 30% 40%

Importance to the custom

ers

1. Bank charges honest, lowest prices

2. Banks rewards me for being a loyal customer

3. Bank clearly explains the risk of each product

4. One single contact person at the bank who is in charge of my portfolio

5. Longer opening hours either through branch or phone or chat

Sales andService

improvementsChange in

attitude6. Banks act more in my best interest

7. Bank gives me more & free advice with regards to my products at the bank

8. Bank makes me feel appreciated as a valuable customer

9. Be clear and consistent on what the bank stands for

10. Communicate more frequently with me as a client

11. Bank better understands my needs and recommends appropriate products

12. Less changes in personnel at the branch

13. Bank proposes less and more simple products

14. Staff (in the branch or on the phone) is more friendly

15. Contact me when there are some important changes in my life

16. When I have contact with different persons at the bank, ensure that they know me

17. Bank makes less mistakes, less processess that go wrong

18. Bank contacts me pro-actively with products that can be of interest to me

19. Staff (in the branch or on the phone) is more competent and better trained

20. Faster response to my questions

Investments intraditional

CRM systems

2. Move from traditional CRM to innovative sales models and enhanced service quality, hence speeding up the transformation towards financial advisory. AdecadeagotraditionalCRMprojectsweredrivenbythe possibilities offered by the 360° customer overview concept, spurred by new front office applications, multi-channel technologies, and the proliferation of consumer serviceandvaluerequirements.InasecondphaseCRMwas focused on traditional customer management ideas centred on the belief that customer satisfaction is influenced by speed to market and delivery efficiencies. As the market looked for more cost savings, customers took a back seat.

The new projects need to be driven by customer satisfaction. They should develop an advocacy through efficient contact and sales management. Our survey points out that the most important action for restoring customer trust and increasing customer satisfaction is todeliverbetterclientservice(seeFigure15),hence

speeding up the transformation towards becoming a financialadvisor(seeFigure16).

This new paradigm demands reviewing current priorities. Being able to stay close to customer touch points is probably more important than providing an overview ofallcustomerinformation.Financialinstitutionsthatincrease their ability meet their customers quickly via new media will certainly have a competitive advantage.

However,thecurrentdiversityofnewmediawon’tallow retail banks to ensure consistency of information. Achieving a customer overview would help to reallocate resources towards sales innovation and service quality.

The quality and stability of employees will be critical for delivering bank promises. Agility and time to market couldberealisedviatheuseofCloudapplicationsif the risk perception related to data ownership and compliance is properly evaluated.

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3. Adapt your sales approach to customer generationsBanks have an opportunity to increase revenues by understanding the differences between Generations X, YandBaby-boomers,andbydevelopingspecificactionsto boost loyalty.

OursurveyfocusedonGenerationY(bornroughlybetween 1980 and 1992), Generation X (born between 1960 and 1979) and Baby-boomers (born before 1960) to achieve an accurate depiction of generational preferences and trends in retail financial services.When respondents were asked which actions banks needtotaketorestorecustomertrust,GenerationYcustomers were much more concerned about long opening hours either through branch, phone or chat comparedtoothergenerations.YetfortheSilentGeneration (born between 1925 and 1945) and Baby-boomers it was more important that the bank clearly explains the risk of each product, while this was relativelyunimportantforGenerationXandYcustomers(seeFigure17).

In most banks the current service delivery model is devoted to the Silent Generation and Baby-boomers, the ones who visit the branches in person. On the other hand, younger customers are much more mobile and rely more heavily on online interactions. Banks, therefore, need to find a way to attract and retain prospective customers who rarely step into a banking office, who on the contrary prefer to conduct banking transactions on the go (internet, mobile, etc.). In order to be attractive to younger generation customers we believe banks need to develop new strategies in three areas:

•Channels(Extent,donotignore).GenerationYcustomers are comfortable with new technologies and value the ability to switch between channels based on their needs. Banks should make their channels easy to navigate and provide an adequate customer experience, even if consistency could be at risk for some emerging channels.

•Marketing(Educate,donottell).GenerationYcustomers live in an information intensive, connected world. As financial freshmen, they need guidance on how to begin their financial lives. Providing practical information can be a winning strategy to build relationships. Socially mindful, they are sceptical of traditional advertising and rely far more on the advice of family and friends when purchasing products or services. Banks will need to reach out to these GenerationYnetworks.Banksshouldrecognisethetrend and begin embracing social media in the same way as the general consumer market.

•Products (Simplify, do not complicate). They prefer simple, practical, and affordable banking services that reflect the fact that they are just beginning their financial lives, and their comfort with technology. GenerationYvaluessimpleandpracticalproductsatcompetitive prices.

ToaddressGenerationXandYneeds,banksmustbuildor acquire personal financial management capabilities to help customers gain control over their finances. This, together with introducing new technology capabilities and developing a financial services online community, will help to build customer intimacy.

Figure 16. Speeding up transformation towards financial advisory

Cus

tom

er in

tim

acy

Sales innovation and Service quality

Social Media and emerging channelsPhysical and direct channels

Com

mer

cial

info

rmat

ion Future state

Bank current state

Suggested future state

Suggested direction

Curr

ent d

irect

ion

Tran

sact

ion

info

rmat

ion

References1.HayesJames,E.(2009)“Inthewakeofthefinancialcrisis:rebuildingtheimageofthefinanceindustrythrough

trust”, The Capco Institute Journal of Financial Transformation, 37-41.

2.Mishra,A.(1995)“Organizationalresponsestocrisis”,inKramer,R.E.andTyler,T.(Eds.)Trust in Organizations, SagePublications,ThousandOaks,CA.

3.Maister,D.H.,Green,C.H.andGalford,R.M.(2000)The Trusted Advisor,TheFreePress,NewYork,NY.

4.Reichheld,F.F.(2003)“Theonenumberyouneedtogrow”,Harvard Business Review, December, 46-54.

Figure 17. Actions to restore customer trust rated by importance to the customers

Silentgeneration

34%

27%

29%

27%

13%

18%

24%

22%

25%

14%

10%

15%

15%

16%

6%

Babyboomers

37%

31%

32%

23%

15%

18%

18%

17%

18%

18%

15%

16%

15%

9%

7%

GenerationX

36%

42%

27%

23%

20%

17%

15%

19%

17%

19%

14%

14%

14%

16%

15%

GenerationY

36%

38%

25%

16%

28%

21%

19%

17%

15%

15%

18%

5%

8%

11%

19%

Importance to the custom

ersImportance to the custom

ers

1. Bank charges honest, lower prices

2. Banks rewards me for being a loyal customers

3. Bank clearly explains the risk of each product

4. One single contact person at the bank

5. Longer opening hours either through branch or phone or chat

6. Bank acts more in my best interest

7. Bank gives me more & free advice with regards to my products

8. Bank makes me feel appreciated as a valuable customer

9. Be clear and consistent on what the bank stands for

10. Communicate more frequently with me as a client

11. Bank better understands my needs and recommends products

12.Less changes in personnel at the branch

13. Bank proposes less and more simple products

14. Staff (in the branch or on the phone) is more friendly

15. Contact me when there are important changes in my life

Percent of customers that chose an action as important.Color reflects the value’s tendency toward the top or bottom of the values in the range:

Top values in the range

Medium values in the range

Bottom values in the range

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