Large retail banks allow chances to garner loyalty to erode; the purely service-call model misses sales opportunities.
Posted Apr 7, 2005
Banks face challenges they must overcome if they want to gain and retain customer loyalty, according to a Datamonitor study released this week. The world's largest 300 retail banks are failing to take advantage of sales opportunities.
The study was sponsored by Siebel Systems and IBM. Stefano Lindt, director of Siebel Financial Services, says, "We had two main motives in sponsoring the report: First, there's almost no global front-office research out there for retail banking. Second, we're always getting questions from our customers about how their customer service performance rates versus competitors."
Detailed institutional results are not generally available, because Datamonitor and the sponsors share granular details only with each bank. However, the 51-page report breaks out the institutions by region and country, compared against a performance average. The banks' worst mistakes, according to the report, stem from falling back on a purely service-call model and failing to treat interactions with potential customers as such. In particular, customer-facing agents aren't cross-selling effectively, if at all. Also, overall response is inconsistent, damaging the customer experience and eroding chances to garner loyalty and intimacy.
"This really shows a poor ability to capture opportunity," Lindt says, "especially in the U.S. Banks seem to be relying on sheer volume of contacts, rather than providing a high level of customer care." But overall, according to Lindt, U.S. banks fared better than their counterparts in Europe and the Asia Pacific region.
One of the reasons European banks are doing as well as they are appears to be a matter of culture. According to Lindt, the customer attrition rate for North American retail banks is about 12 percent, while in Europe the figure is in the mid-single digits. "Customers in the U.S. and Canada are much more focused on value," he says. "If they can get a slightly lower fee on a checking account, Americans will just switch banks. Europeans are more likely to know their bankers socially, so they won't abandon what they know." According to Lindt, the paradigm for bank interaction in many countries is mostly with tellers and managers, while in North America it has shifted to the Web and call centers.
The study used a secret shopper methodology: The surveyed banks were contacted by both email and telephone, and in each case a generic potential customer inquired about whether a credit card or term deposit account would best suit a given list of needs. The banks' responses were rated on a number of factors, as was the quality of any follow-up contact. The specifics differed for email and phone contacts, but both were evaluated on how well the banks profiled the customer and analyzed the stated need; whether they answered the specific questions and provided sound advice; and whether the agent attempted to cross-sell and/or up-sell the customer--for example, offering to set up a checking account to pay the credit card bills.
Despite generally poor performance on five broad failure points (anonymous interaction, poor customer experience, poor conversion rates, missed opportunities, and unintegrated channels), the results of the study point the way to better future performance. "Retail banks are still profiting," Lindt says, "but to make any improvement they must realize that customer satisfaction happens on the front end, with expenditures in training, as well as in supporting technology."
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