Making Satisfied Customers Loyal Customers

Ever tried queuing up to any retail bank branch in Hong Kong during lunch hour? I'm sure you can write a short story or watch an episode of CSI before your turn at the counter comes. And when you get to the counter, do you ever feel that the teller wants to just get your transaction done and over with?

Of course not all retail bank markets have queues the likes of a movie premiere. I once queued up at a large retail bank in Makati City (Philippines) for 45 minutes when there were only two people in front of me. The people at the counter appeared to be busy doing things other than entertaining customers lined up at the counter.

Welcome to retail banking in the 21st century. Unisys recently commissioned Australia's ACA Research to survey the state of the retail banking industry across four major markets in the Asia-Pacific. The findings point to clear opportunities for banks to convert customer satisfaction into long-term loyalty, and convert this loyalty into a profitable long-term business relationship with customers.

Retail banking is under constant threat of commoditization. Product differentiation windows no longer exist. Every bank claims to value customer satisfaction. Unlike the credit card market where new customers are cajoled into signing up with enticing welcome gifts and promises of rewards, retail banking customers are built through hard-fought relationship building exercises that span years. Thus in retail banking the degree of customer centricity has become the one area where true differentiation exists.

According to the survey only 10 percent of the 1,602 respondents consider themselves loyal and just 40 percent satisfied with their banks. Every customer is unique. Customers want excellent customer service and are willing to move their business to those willing to give appropriate service levels commensurate to the amount of business customers bring into the table.

Reuben Khoo, Vice President and Managing Director of Global Financial Services, Unisys Asia Pacific, puts it succinctly that customer satisfaction does not necessarily equate to customer loyalty. "The majority of customers like bank staff to ask about their banking needs, and are happy that banks use their personal information to tailor solutions to meet their needs. The research shows that majority of customers feel this is a high area of priority," says Khoo.

Trust and confidence are also critical to maintaining solid customer relationships. News about accidental customer data leaks present significant hurdles to confidence building. Ninety-five percent of respondents are concerned about fraud and identity theft, and feel that banks are not delivering enough protection currently.

"New ways of protecting identity, such as fingerprint biometrics, retina scans and voice recognition, are important to customers. We believe that those banks that offer these types of features first will pull ahead of their competitors in reducing customer churn, and then building customer loyalty," adds Khoo.

My aunt recently tried to withdraw money from her bank and was told she would be charged for withdrawing a portion of her hard-earned money. She questioned the rationale and even threatened to move her entire asset base elsewhere. It didn't help that she queued up 30 minutes only to be told she had to pay the bank to get her money out.

A bank's ability to keep its fees and rates low while delivering customer-centric improvements and new offerings is a priority for customers.

The research confirms that if banks can extend relationships with customers, meet customers' preferences for unique experiences, provide loyalty rewards, and offer excellent service and new, secure technology, then customers' loyalty and advocacy will improve.

Why is loyalty so important? Loyal customers are more likely to consolidate their business with their primary banks, holding a higher proportion of their account bank balances with them.

What is Customer Centricity? What are banks trying to achieve through developing Customer Centric models and offerings? A definition of Customer Centricity from the Wharton School of Business at the University of Pennsylvania provides an insight: Truly customer-centric companies conceive of and manage themselves in a fundamentally new and more effective way:

They perceive themselves not as a group of products, services, territories, or functions, but as a portfolio of customers.

They know how much money they make or lose with each of their customers or customer segments, and they understand why.

They understand the different needs of different customers and group them into operational customer segments and sub-segments based on common needs. They thrill their customers by delivering knockout value propositions that competitors cannot match.

They continually innovate by evolving their customer segments and sub-segments, and improve their value propositions as customer needs change.

They organize their business into customer segment business units to establish clear ownership of the customer experience and accountability for the financial performance of each customer business unit.

They create a competitively unassailable customer innovation advantage based on a customer R&D model grounded in continual experimentation at key customer touch points
They understand in precise analytic terms exactly how their different customer relationships contribute to -- or subtract from -- the total value of the firm.

Because they manage their customer portfolio on this basis, they know what to manage and where to invest in order to create sustainable, profitable growth and drive outstanding share price performance over time.