November 15, 2006 20:37 ET

Two-Thirds of US Banking Customers Don't Feel Valued by Their Bank: IBM Study

Customer Growth Strategies Called Into Question

ARMONK, NY -- (MARKET WIRE) -- November 15, 2006 -- US consumers want banks to value their business, understand their financial goals and provide financial advice. Yet, despite substantial investment in customer-related improvements, few banks are able to deliver. An IBM (NYSE: IBM) study of over 3,000 US banking customers reveals that two thirds of customers don't feel valued by their bank and are unwilling to commit to deeper relationships with their bank. The study comes at a time when banks are struggling with the impact of industry consolidation, increasing global competition and discerning customers that demand higher quality experiences with their bank.

The study, "Unlocking Customer Advocacy in Retail Banking," reveals 74 percent of US banking customers find bank marketing offers irrelevant and only 36 percent indicate bank employees listen to their needs and follow up with them. It's not surprising that only half of customers in the study would consider their current bank for new products or services, calling into question banks' current organic growth strategies.

While banks have been focused on improving customer service through operational improvements, such as streamlining back-end processes, offering more ways for customers to bank and opening more branches, limited attention has been given to addressing customer attitudes related to their banking experience.

"Banks have been focused on streamlining their operations to make them as efficient as possible, however many of these back-office improvements have little impact on customer perceptions of bank quality," said John Armstrong, banking partner and senior consultant, IBM. "The unfortunate result is that many customers perceive their banks as not acting in their best interests."

A new measure of customer attitude

As part of this study, IBM has developed a new measure of customer loyalty to assist banks in quantifying the impact of their actions on customers. While traditional customer satisfaction measures rate customer's opinion of past performance, the IBM Customer Focused Insight Quotient (CFiq)™ enables a bank to tie opinion to future behavior by quantifying customer attitude. This combined measure captures a customer's likelihood to recommend their bank to others and modifies it by adding a customer's purchase and switching intent to more accurately predict customer future behavior.

Based on CFiq, the study shows only 24 percent of banking customers are advocates (the highest tier of positive attitude) of their bank, requiring banks to seek new strategies for attracting and retaining the very customers they are relying on for organic growth. Smaller banks, such as credit unions and community banks, scored better than national and regional banks. For example, 36 percent of all credit union customers and 30 percent of community bank customers are advocates of their bank, 50 percent higher than customers of regional and national banks (23 and 22 percent, respectively).

"IBM's research makes us ponder a very perplexing conundrum: how could so many banking service providers re-brand, re-engineer, strategize and act in the service of enhancing consumers' relationships, and yet get it so very, very wrong?" said Susan Fournier, Associate Professor of Marketing, Boston University School of Management. "Companies can get greater predictive and diagnostic power from IBM's attitude-plus-behavior metric and the segmentation schemes that derive from it. All of this is guaranteed to improve the relationship strategies and executions that retail banks develop for their brands."

Making an emotional connection could provide opportunity

While customers praise banks for strides they have made in executing on the "rational" measures of the relationship (e.g. provide multiple channels to bank, providing consistent knowledge, and correcting errors), banks fell short on the "emotive" aspects of the relationship. The study shows banks deliver on rational aspects 52 percent of the time, but only deliver on the emotive aspects 26 percent of the time. It is the emotive drivers, such as valuing their business, understanding their goals, and providing meaningful advice that customers attribute importance to in gaining their advocacy.

Notably, while the study did not find demonstrable differences in the demographic profile of consumers who were advocates versus antagonists (i.e., antagonists are just as likely to be high net worth customers as advocates are), it did find significant differences in how each group perceived their bank. Those defined as advocates generally gave their bank credit for doing "everything right," while antagonists found fault in almost everything their bank did.

Take action

In order to understand and effectively manage customer attitude, banks need to identify customer advocacy segments, assess their attitudes toward key banking attributes and align resources and investments to enhance the value associated with high impact interactions. Specifically, banks need to take a new approach to:

--  Metrics: move from customer and employee satisfaction to
    recommendation, purchase and switching as the measures of customer
--  Focus: move from affecting only the rational drivers of customer
    behavior to addressing both the rational and emotive drivers of behavior.
--  Brand: move the brand promise from purely marketing communications to
    a tangible attribute delivered as part of the customer experience.
--  Lifecycle: move from a view of product push and pricing levers to
    recognizing customers' multistage buying lifecycle and the impact it has on
    their attitude and responsiveness in marketing, sales and service
--  Channel: move form broad-based channel integration, where everything
    is integrated with everything else, to specialized channels aligned with
    the end-to-end experience and what matters most to your customers.
--  Enablers: move from technology as the primary enabler of efficiency to
    people as the primary asset at the point of delivery.
--  Information: move from historical data integration and analysis to
    targeting data and new research techniques around customer events to yield
    timely and relevant customer insight.
With the right approach, sustainable organic growth is more attainable. Those banks that understand their CFiq scores and the impact these measures have on the customer base, develop a compelling customer experience, and operationalize the necessary improvements to create a customer-focused enterprise will have a distinct advantage.

To get a copy of this study and for more information on IBM, please visit

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