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Loyalty & Wallet Share

Loyalty. There is almost universal agreement that it is an objective – if not the objective – of customer experience management. It is highly correlated to profitably. It lowers sales and acquisition costs per customer by amortizing these costs across a longer lifetime – leading to extraordinary financial results. In retail banking a 5% increase in loyalty translates to an 85% increase in profits.

Loyalty

Loyalty is Emotion Driven

Banks often see themselves as transaction driven; delivery channels are evaluated on their cost per transaction. As a result, there is a lot of attention given to and investment in automated channels which reduce transaction costs and at the same time offer more convenience to customers. Win-win, right? The bank drives costs out of the transaction and customers get the convenience of performing a variety of transactions untethered by time or space. However, while transaction costs and convenience are important, loyalty is often driven by an emotional connection with the institution. An emotional connection fostered by interaction with actual employees at moments of need for the customers –moments with a high level of emotional importance to the customer – moments of truth.

Moments of truth are atypical events, where customers experience a high emotional energy in the outcome (such a lost credit card, loan application, or investment advice). In one study published in McKinsey Quarterly, positive experiences during moments of truth led to more than 85% of customers increasing wallet share by purchasing more products or investing more of their assets (Beaujean et al 06)

Impersonal alternative channels lack the ability to bind the customer to the institution. It’s the people. Effective handling of moments of truth requires frontline staff with the emotional tools or intelligence to recognize the emotional needs of the customer and bind them to the institution.

 

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The Human Element: Sales and Service, Bank’s Last Link in the Marketing Chain

What if I told you that after all your efforts with marketing (product, positioning and price), there is a one-in-ten chance the branch representatives will undermine the sale?

Now more than ever, it is critical for banks to establish themselves as the primary provider of financial services, not only for deposit accounts but across a variety of financial products and services.  Increasing the average products per customer will require a strategic approach to both product design and marketing.  However, at the end of this strategic marketing process, there is the human element, where prospective customers must interact with bank employees to complete the sales process.

Bank teller waiting on customer

As part of our services to our clients, Kinesis tracks purchase intent as a result of in-branch sales presentations.  According to our research, 10% of in-branch sales presentations observed by mystery shoppers, result in negative purchase intent.

What do these 10% failed sales presentations look like?

Here are some quotes describing the experience:

“There was no personal attention.  The banker did not seem to care if I was there or not.  At the teller line, there was only one teller that seemed to care that there were several people waiting.  No one moved with a sense of urgency.  There was no communication materials provided.”

Here’s another example…

“It was painfully obvious that the banker was lacking basic knowledge of the accounts.”

Yet another…

“Brian did not give the impression that he wanted my business.  He did not stand up and shake my hand when I went over to his desk.  He very rarely made eye contact.  I felt like he was just going through the motions. He did not ask for my name or address me by my name. He told me about checking account products but failed to inquire about my situation or determine what needs I have or might have in the future. He did not wrap up the recommendation by going over everything nor did he ask for my business. He did not thank me for coming in.”

In contrast, here is what the shops with positive intent look like:

“The appearance of the bank was comfortable and very busy in a good way. The customers were getting tended to and the associates had the customers’ best interests in mind. The response time was amazing and I felt as if the associate was sincere about wanting me as a customer, but he was not pushy or demanding about it.”

Now…after all the effort and expense of a strategic cross-sell strategy, which of the above experiences do you want your customers to encounter?

Would it be acceptable to you as a marketer to at the end of a strategic marketing campaign, have 10% of the sales presentations undermine its success?

These are rhetorical questions.

Time and time again, in study after study, we consistently observe that purchase intent is driven by two dimensions of the customer experience: reliability and empathy.  Customers want bankers who care about them and their needs and have the ability to satisfy those needs. Specifically, our research suggests the following behaviors are strongly related to purchase intent:

  • Friendly/Smile/Courteous
  • Greeting/Stand to Greet/Acknowledge Wait
  • Interest in Helping/Offer Assistance
  • Discuss Benefits/Solutions
  • Promised Services Get Done
  • Accuracy
  • Professionalism
  • Express Appreciation/Gracious
  • Personalized Comment (such as, How are you?)
  • Listen Attentively/Undivided Attention

As part of any strategic marketing campaign to both bring in new customers as well as increase wallet share of existing customers, it is incumbent on the institution to install appropriate customer experience training, sales and service monitoring, linked with incentives and rewards structures to motivate sales and service behaviors which drive purchase intent.




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The Customer Loyalty Illusion

There is no such thing as customer loyalty.  Loyalty…true loyalty… loyalty through thick and thin – requires an irrational customer, one who will stay with the bank regardless of the bank’s performance.

Every time a customer interacts with their bank, they may learn something as a result of the experience, and adjust their behavior as a result of what they learn. What we perceive as loyalty is an illusion, rather it is actually the product of an ongoing calculation each customer makes conscious or subconsciously to either initiate or maintain a relationship with a bank.  This is the customer value equation.

Customer Value = (Results + Process Quality + Intangible Benefits) - (Price + Other Acquisition Costs + Intangible Costs)

The customer value equation is simply the sum of the benefits of banking with a given institution minus the sum of the costs of choosing another provider.  If this sum is positive, the customer will act as if they are loyal.  If this sum is negative, the customer will behave as if they are disloyal.

The first term in this equation contains all the possible benefits associated with the bank.  These include the obvious, such as convenience of location or hours, rates and fees, breadth of delivery channels, and customer service.  However, they also include less obvious intangible benefits, such as doing business with a local community bank, or the prestige of one financial service provider over the other.

The second term contains the sum of all the costs associated with the banking relationship.  Again, the obvious are rates and fees.  However, there may be other acquisition costs, such as, the effort of switching providers, as well as intangible costs such as potential risk of switching financial providers. These intangible costs are significant, and play a significant role in what we perceive as customer loyalty, where customers remain with a financial institution more out of inertia, than other reasons.

A common objection to the customer value equation as a model of customer decision making is that it assumes that all customer decisions are completely rational, something that flies in the face of modern research using fMRI machines to probe the biological underpinning of decision makings.  This research strongly suggests that many decisions are neither conscious nor rational.  However, the customer value equation model allows for this equation to be subconscious and the intangible terms on both the cost and benefit side of the equation allow for irrational benefits and costs to be inserted into the customer’s decision making.

The proposition that customers are not loyal, and that behaviors we use to describe loyalty are really the result of an ongoing calculation of benefits and costs at first may seem daunting, but embracing the proposition that customers adjust their behavior based on what they perceive about a provider, gives managers a valuable model to think about customer loyalty in ways that mirror customer decision making. Understanding the customer value equation gives bank managers a rational framework to make investments in product, positioning, price and place to best match their offering with their customers’ value equations.

How might banks use the concept of the customer value equation to manage the customer experience?


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Best Practices in Bank Customer Experience Measurement Design

The question was simple enough…  If you owned customer experience measurement for one of your bank clients, what would you do?

Through the years, I developed a point of view of how to best measure the customer experience, and shared it with a number of clients, however, never put it down to writing.

So here it is…

Best practices in customer experience measurement use multiple inputs in a coordinated fashion to give managers a 360-degree view of the customer experience.  Just like tools in a tool box, different research methodologies have different uses for specific needs.  It is not a best practice to use a hammer to drive a screw, nor the butt end of a screwdriver to pound a nail.  Each tool is designed for a specific purpose, but used in concert can build a house. The same is true for research tools.  Individually they are designed for specific purposes, but used in concert they can help build a more whole and complex structure.

Generally, Kinesis believes in measuring the customer experience with three broad classifications of research methodologies, each providing a unique perspective:

  1. Customer Feedback – Using customer surveys and other less “scientific” feedback tools (such as comment tools and social media monitoring), managers collect valuable input into customer expectations and impressions of the customer experience.
  1. Observation Research – Using performance audits and monitoring tools such as mystery shopping and call monitoring, managers use these tools to gather observations of employee sales and service behaviors.
  1. Employee Feedback – Frontline employees are the single most underutilized asset in terms of understanding the customer experience. Frontline employees spend the majority of their time in the company-customer interface and as a result have a unique perspective on the customer experience.  They have a good idea about what customers want, how the institution compares to competitors, and how policies, procedures and internal service influence the customer experience.

These research methodologies are employed in concert to build a 360-degree view of the customer experience.

360-degree bank customer experience measurement

The key to building a 360-degree view of the customer experience is to understand the bank-customer interface.  At the center of the customer experience are the various channels which form the interface between the customer and institution.  Together these channels define the brand more than any external messaging.  Best in class customer experience research programs monitor this interface from multiple directions across all channels to form a comprehensive view of the customer experience.

Customer and front-line employees are the two stakeholders who interact most commonly with each other in the customer-institution interface.  As a result, a best practice in understanding this interface is to monitor it directly from each direction.

Tools to measure the experience from the customer side of interface include:

Post-Transaction Surveys: Post-transaction surveys provide intelligence from the other side of customer-employee interface.  These surveys are targeted, event-driven, collecting feedback from customers about specific service encounters soon after the interaction occurs.  They provide valuable insight into both customer impressions of the customer experience, and if properly designed, insight into customer expectations.  This creates a learning feedback loop, where customer expectations can be used to inform service standards measured through mystery shopping.  Thus two different research tools can be used to inform each other.  Click here for a broader discussion of post-transaction surveys.

Customer Comments:  Beyond surveying customers who have recently conducted a service interaction, a best practice is to provide an avenue for customers who want to comment on the experience.  Comment tools are not new (in the past they were the good old fashioned comment card), but with modern Internet-based technology they can be used as a valuable feedback tool to identify at risk customers and mitigate the causes of their dissatisfaction.  Additionally, comment tools can be used to inform the post transaction surveys.  If common themes develop in customer comments, they can be added to the post-transaction surveys for a more scientific measurement of the issue.  Click here for a broader discussion of comment tools.

Social Monitoring:  Increasingly social media is “the media”; prospective customers assign far more weight to social media then any external messaging.  A social listening system that analyzes and responds to social indirect feedback is increasingly becoming essential.  As with comment tools, social listening can be used to inform the post transaction surveys.  Click here for a broader discussion of social listening tools.

Directing our attention to the bank side of the interface, tools to measure the experience from the bank side of bank-customer interface include:

Mystery Shopping:  In today’s increasing connected world, one bad experience could be shared hundreds if not thousands of times over.  As in-person delivery models shift to a universal associate model with the branch serving as more of a sales center, monitoring and motivating selling skills is becoming increasingly essential.  Mystery shopping is an excellent tool to align sales and service behaviors to the brand. Unlike the various customer feedback tools designed to inform managers about how customers feel about the bank, mystery shopping focuses on the behavioral side of the equation, answering the question: are our employees exhibiting appropriate sales and service behaviors?  Click here for a broader discussion of mystery shopping tools.

Employee Surveys:  Employee surveys often measure employee satisfaction and engagement.  However, in terms of understanding the customer experience, a best practice is to move employee surveys beyond employee engagement and to understand what is going on at the customer-employee interface by leveraging employees as a valuable and inexpensive resource of customer experience information.  This information comes directly out one side of the customer-employee interface, and provides not only intelligence into the customer experience, but also evaluates the level of support within the organization, solicit recommendations, and compares perceptions by position (frontline vs. management) to identify perceptual gaps which typically exist within organizations.  Click here for a broader discussion of employee surveys.

For more posts in this series, click on the following links:


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Best Practices in Bank Customer Experience Measurement Design: Customer Surveys

Post Transaction Surveys

Many banks conduct periodic customer satisfaction research to assess the opinions and experiences of their customer base. While this information can be useful, it tends to be very broad in scope, offering little practical information to the front-line.  A best practice is a more targeted, event-driven approach collecting feedback from customers about specific service encounters soon after the interaction occurs.

These surveys can be performed using a variety of data collection methodologies, including e-mail, phone, point-of-sale invite, web intercept, in-person intercept and even US mail.  Fielding surveys using e-mail methodology with its immediacy and relatively low cost, offers the most potential for return on investment.   Historically, there have been legitimate concerns about the representativeness of sample selection using email.  However, as the incidence of email collection of banks increases, there is less concern about sample selection bias.

The process for fielding such surveys is fairly simple.  On a daily basis, a data file (in research parlance “sample”) is generated containing the customers who have completed a service interaction across any channel.  This data file should be deduped, cleaned against a do not contact list, and cleaned against customers who have been surveyed recently (typically three months depending on the channel).  At this point, if you were to send the survey invitations, the bank would quickly exhaust the sample, potentially running out of eligible customers for future surveys.   To avoid this, a target of the required number of completed surveys should be set per business unit, and a random selection process employed to select just enough customers to reach this target without surveying every customer. [1]

So what are some of the purposes banks use these surveys for?   Generally, they fall into a number of broad categories:

Post-Transaction: Teller & Contact Center: Post-transaction surveys are event-driven, where a transaction or service interaction determines if the customer is selected for a survey, targeting specific customers shortly after a service interaction.  As the name implies, the purpose of this type of survey is to measure satisfaction with a specific transaction.

New Account & On-Boarding:  New account surveys measure satisfaction with the account opening process, as well as determine the reasons behind new customers’ selection of the bank for a new deposit account or loan – providing valuable insight into new customer identification and acquisition.

Closed Account Surveys:  Closed account surveys identify sources of run-off or churn to provide insight into improving customer retention.

Call to Action

Research without a call to action may be informative, but not very useful.  Call to action elements should be built into research design, which provide a road map for clients to maximize the ROI on customer experience measurement.

Finally, post-transaction surveys support other behavioral research tools.  Properly designed surveys yield insight into customer expectations, which provide an opportunity for a learning feedback loop to support observational research, such as mystery shopping, where customer expectations are used to inform service standards which are in turn measured through mystery shopping.

For more posts in this series, click on the following links:

 

[1] Kinesis uses an algorithm which factors in the targeted quota, response rate, remaining days in the month and number of surveys completed to select just enough customers to reach the quota without exhausting the sample.


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Best Practices in Bank Customer Experience Measurement Design: Mystery Shopping

Bank Mystery Shopping

“You can expect what you inspect.”

This management philosophy is as true today as it was 50 years ago when W. Edwards Deming used it.  Mystery shopping is more than a pure measurement technique conducted properly; it is an excellent motivational tool to motivate appropriate sales and service behaviors across all bank delivery channels.

Unlike the various customer feedback tools designed to inform managers about how customers feel about the bank, mystery shopping focuses on the behavioral side of the equation, answering the question: are our employees exhibiting appropriate sales and service behaviors?

It is the employees who animate the brand, and it is imperative that employee sales and service behaviors be aligned with the brand promise.  Actions speak louder than words.  Brands spend millions of dollars on external messaging to define an emotional connection with the customer.  However, when a customer perceives a disconnect between an employee representing the brand and external messaging, they almost certainly will experience brand ambiguity.  The result severely undermines these investments, not only for the customer in question, but their entire social network.  In today’s increasingly connected world, one bad experience could be shared hundreds if not thousands of times over.  Mystery shopping is an excellent tool to align sales and service behaviors to the brand.

So…what behaviors, channels and employees should be shopped?

Sales channels and sales behaviors offer the most ROI relative to other types of shopping.  In terms of prioritizing mystery shopping resources, shops of sales channels and sale behaviors should be the first priority.  With the increasing use of universal associates and transforming tellers into sellers, it is incumbent on managers to measure and motivate these higher level sales skills, in both branches and contact centers.  After sales behaviors have been prioritized, if resources remain for mystery shopping service scenarios can be included in the mix.

As for the specific measurements, the best practice for mystery shop design is to focus on empirically measureable employee behaviors captured with objective questions.  (Was a specific behavior present or not?…Yes or no).  The best methodology for deciding which questions to ask is to start with your brand promise, and determine which sales and service behaviors animate the brand.  Once you have developed a list of expected behaviors, the next step is to map each behavior to a specific question.  Avoid compound questions which ask about two different behaviors, unless you expect both behaviors to be present at the same time, and you are not worried about distinguishing if one is present without the other.

For more information about a process to align behaviors to the brand, click here: “5 Steps to Make Frontline Employees Authentic Representatives of the Brand”

Open-ended questions, either in narrative form or qualitatively asking what shoppers liked or disliked about the experience, add valuable context for understanding the customer experience.  Many clients consider these qualitative observations the heart of the shop.

While the core of the mystery shop is objective measurements of specific behaviors, there is a place for subjective impressions.  Rating scales are used to capture shopper impressions of various dimensions of the customer experience, as well as the overall experience itself.  These subjective ratings provide valuable context for interpreting the customer experience, and specifically the efficacy of the objective behaviors measured.  For example, purchase intent ratings calculate a correlation between the objective behaviors measured and purchase intent, identifying which behaviors may be more important in terms of driving purchase intent, and which investments in training, incentives and rewards have the most potential for ROI.

Finally, given mystery shopping measures employee behaviors against bank service standards, it is a best practice to calibrate and align service standards with customer expectations by constantly feeding information uncovered with the customer surveys back into the service standards and mystery shopping.  Such an informed feedback loop between customer surveys and mystery shopping will ensure the behaviors measured are aligned with customer expectations.

Call to Action

Research without a call to action may be informative, but not very useful.  Call to action elements should be built into research design, which provide a road map for clients to maximize the ROI on customer experience measurement.

For more posts in this series, click on the following links:


Click Here For More Information About Kinesis'; Bank Mystery Shopping


Clink Here for Mystery Shopping Best Practices

Leverage Unrecognized Experts in the Customer Experience: Best Practices in Bank Customer Experience Measurement Design – Employee Surveys

Bank Employee Surveys

Frontline customer facing employees (tellers, platform, and contact center agents) are a vastly underutilized resource in terms of understanding the customer experience.  They spend the majority of their time in the customer-bank interface, and as a result tend to be unrecognized experts in the customer experience.

An excellent tool to both leverage this frontline experience and identify any perceptual gaps between management and the frontline is to survey all levels of the organization to gather impressions of the customer experience.  This survey can be fielded very efficiently with an online survey.

Typically, we start by asking employees to put themselves in the customers’ shoes and to ask how customers would rate their satisfaction with the customer experience, including specific dimensions and attributes of the experience.  A key call-to-action element of these surveys tends to be a question asking employees what they think customers most like or dislike about the service delivery.

Next we focus employees on their own experience, asking the extent to which they believe they have all the tools, training, processes, policies, customer information, coaching, staff levels, empowerment, and support of both their immediate supervisor and senior management to deliver on the company’s service promise.  Call-to-action elements can be designed into this portion of the research by asking what, in their experience, leads to customer frustration or disappointment, and soliciting suggestions for improvement.   Perhaps most interesting, we ask what are some of the strategies the employee uses to make customers happy.   This is an excellent source for identifying best practices and potential coaches.

Finally, comparing results across the organization identifies any perceptual gaps between the frontline and management.  This can be a very illuminating activity.

For more posts in this series, click on the following links:


Click Here For More Information About Kinesis' Employee Engagement Research