A New Normal: Implications for Bank Customer Experience Measurement Post Pandemic – Stabilizing Relationships
Part 3: Onboarding Research: Research Techniques to Track Effectiveness of Stabilizing New Customer Relationships
As we explored in an earlier post, Three Types of Customer Experiences CX Managers Must Understand, there are three types of customer interactions: Planned, Stabilizing, and Critical.
Stabilizing interactions are service encounters which promote customer retention, particularly in the early stages of the relationship. It is incumbent on an integrated digital-first banking model to stabilize new customers, without relying on the local branch to build the relationship. It is important, therefore, to get the onboarding process right in a systematic way.
New customers are at the highest risk of defection, as they have had less opportunity to confirm the provider meets their expectations. Turnover by new customers is particularly damaging to profits because many defections occur prior to recouping acquisition costs, resulting in a net loss on the customer relationship. As a result, customer experience managers should stabilize the customer relationship early to ensure a return on acquisition costs.
Systematic education drives customer expectations beyond simply informing customers about additional products and services; it also informs new customers how to use services more effectively and efficiently – this is going to be critical in a digital first integrated strategy. Customers need to know how to navigate these channels effectively.
The first step in designing a research plan for the onboarding process is to define the process itself. Ask yourself, what type of stabilizing customer experiences do we expect at both the initial account opening and at discrete time periods thereafter (be it 30 days, 90 days, 1-year)? Understanding the expectations of the onboarding process will define your research objectives, allowing an informed judgment of what to measure and how to measure it.
Kinesis recommends measuring the onboarding process by auditing the performance of the process and its influence on the customer relationship from the bank and customer perspective.
Bank Perspective: Performance Audits
Performance audits are a type of mystery shop, and an effective tool to audit the performance of the onboarding process.
First, mystery shop the initial account opening (across a channels: digital, contact center and branch) to evaluate its efficacy and effectiveness. Be sure to link these observations to a dependent variable, such as purchase intent, to determine which service attributes drive purchase intent. This will inform decisions with respect to training and incentives to reinforce the sales activities which drive purchase intent.
Beyond auditing the initial account opening experience, a performance audit of the onboarding process should test the presence and timing of specific onboarding events expected at discrete time periods. As an example, you may expect the following onboarding process after a new account is opened:
|At Opening||Internet Banking Presentation
Mobile Banking Presentation
Contact Center Presentation
|1-10 Days||Welcome Letter
Internet Banking Password
Overdraft Protection Brochure
Mobile Banking E-Mail
|30-45 Days||First Statement
Credit Card Offer
Auto Loan Brochure
Mortgage/Home Equity Loan Brochure
In this example, the bank’s customer experience managers have designed a process to increase awareness of digital channels, introduce the integrated layered service concept, and introduce additional services offered. An integrated research plan would recruit mystery shoppers for a long-term evaluation of the presence, timing, and effectiveness of each event in the onboarding process.
In parallel to auditing the presence and timing of onboarding events, research should be conducted to evaluate the effectiveness of the process in stabilizing the customer relationship by surveying new customers at distinct intervals after customer acquisition. We recommend testing the effectiveness of the onboarding process by benchmarking three loyalty attitudes:
- Would Recommend: The likelihood of the customer recommending the brand to a friend, relative or colleague.
- Customer Advocacy: The extent to which the customer agrees with the statement, “You care about me, not just the bottom line?”
- Primary Provider: Does the customer consider you their primary provider for financial services?
These three measures, tracked together throughout the onboarding process, will give managers a measure of the effectiveness of stabilizing the relationship.
Again, new customers are at an elevated risk of defection. Therefore, it is important to stabilize the customer relationship early on to ensure ROI on acquisition costs. A well-designed research process will give managers an important audit of both the presence and timing of onboarding events, as well as track customer engagement and loyalty early in their tenure.
In the next post, we will explore the third type of experience – experiences with a significant amount of influence on the customer relationship – critical experiences.
Previously we discussed the concept of “moments of truth” where some experiences in the customer journey have far greater importance than others. These moments of truth represent increased risk and opportunity to leave a lasting emotional impression on the customer; a lasting impression with significant long-term implications for both customer loyalty and wallet share. The purchase and sales experience is one such moment of truth. One study published in McKinsey Quarterly has determined that the purchase experience of financial services motivated 85% bank customers to purchase more financial products or invest more assets with the institution. (Beaujean et al 06)
We also introduced the concept of defining emotions using two dimensions of mood: valence (positive or negative) and arousal. Again, as we previously observed, modern research into brain activity during the decision process suggests that decisions are made within the brain before we are consciously of them. Emotions provide a short cut to acting on decisions, and rational thought appears to justify decisions after they are made on the subconscious level.
So…given that emotions play a key role in financial decisions, what are the emotions bankers encounter as part of the sales experience?
The emotions financial service customers experience vary by customer, financial need, circumstance and product/service sought, however the emotions a prospective customer may experience include:
• At Ease/Satisfied
So…what do we do with this enlightenment?
First, knowing that people are motivated to maintain positive emotional states and change/mitigate negative emotional states, it is important for the banker to recognize the prospective customer’s emotional motivation and offer solutions which will achieve either of these ends.
Kinesis has conducted research into purchase intent as the result of financial service sales presentation which may be instructive. Click here for this research.
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:
Interest in Helping
Discuss Benefits & Solutions
Promised Services Get Done
Friendly & Courteous
Both empathy and reliability require employees with Emotional Intelligence. These are employees with a positive outlook and a, strong sense of self-empowerment; self regulation; awareness of feelings (both their own and customers); master of fear and anxiety and the ability to tap into selfless motives.
Sales presentations are moments of truth with the potential to leave a lasting impression on the customer with significant long-term implications for both customer loyalty and wallet share – with obvious financial benefits for the institution. We’ve found that branches with above average frequencies of behaviors associated with reliability and empathy experienced a 26% stronger three-year branch deposit growth rate than branches with low frequencies of these behaviors.
Next, we’ll take a look at moments of truth in the context of problem resolution.
There is continued discussion about the branch’s role in the future of banking. The current consensus is it will continue to evolve from a transactional center to a sales center. Banking is a professional service. To avoid commoditization and selling on features other than rates and fees, a professional and effective sales process is required.
Our research into the efficacy of the branch sales process has identified several service and sales attributes that drive purchase intent. (See the insert below for a description of the methodology).
This article focuses specifically on closing behaviors, attempting to identify best practices in terms of driving purchase intent.
In short, for closing behaviors to be effective, the banker must first demonstrate competence and sincere concern for the customer’s best interests and needs. Closing behaviors without this predicate can be very dangerous to the sale.
What are the most common closing behaviors?
In our observational research of 100 retail banking presentations, key closing and presentation behaviors were observed in approximately two thirds of the sales presentation.
|Express interest in your business or make feel valued as a customer||
|Ask for the business or some commitment to action||
|Discuss products in terms of benefits designed to meet needs||
|Make comment expressing value of banking with the bank||
Asking for the business and making the shopper feel valued as a customer were the most common, followed closely by discussing products in terms of benefits designed to meet needs, and finally by expressing the value of banking with the bank.
Which behaviors are most effective?
To answer which of these four behaviors are most effective, let’s look at their relationship to the mystery shoppers purchase intent as a result of the sales presentation.
Of these four behaviors, expressing interest or making the customer feel valued as a customer has the strongest relationship to purchase intent. This behavior was present 3.6 times more frequent in shops with positive purchase intent relative to those with negative purchase intent.
What drives feeling valued as a customer?
Now, let’s take a look at the most significant behavior. What drives feeling valued as a customer? What caused shoppers to feel valued? To gain insight into this, Kinesis asked shoppers an open-ended question regarding how the banker expressed interest in their business. An analysis of the responses to this question is instructive.
When these responses are grouped by theme they generally group into four themes:
Looking at these comments with respect to whether or not the shopper reported positive purchase intent, two of these themes have a positive relationship to purchase intent: personal attention (45% for positive purchase intent compared to 0% for negative) and concern for needs (43% in shops with positive purchase intent compared to 11% for shops with negative purchase intent).
|Comments with POSITIVE relationship to purchase intent.|
|How expressed interest/Made feel valued as customer…||
Positive Purchase Intent
Negative Purchase Intent
|Personal/ Full Attention/ Not Rushed||
|Sincere/ Best interests in mind/ Concern for needs||
The other two behaviors have a negative relationship to purchase intent. One of these is both significant and instructive.
|Comments with NEGATIVE relationship to purchase intent.|
|How expressed interest/made feel valued as customer…||
Positive Purchase Intent
Negative Purchase Intent
|Offer to open account/ Effort to get business||
|Informative/ Answered questions||
A more overt effort to get the business, including opening the account, was present ten times more often in shops with negative purchase intent (61%) compared to positive purchase intent (6%). An effort to ask for the business without appearing to have the customer’s best interests in mind or giving the customer personal attention will not drive purchase intent. While asking for the business is an important part of any professional sales presentation, when doing so, the ground needs to be prepared by making the customer feel you have their best interests in mind. Otherwise, the banker can seriously undermine the presentation.
As branches continue to evolve from a transactional to a sales center, it is important not to divorce service from sales. Good sales is good service. The sales behavior with the strongest relationship to purchase intent is expressing interest in the customer and making them feel valued. The most effective way to make customers feel valued and interested is to provide them your full attention and sincerely demonstrate concern for the customers needs and best interests.
Visit the next article in this series. Beyond Needs Analysis: Asking Motivation Questions to Drive Purchase Intent – http://bit.ly/11sK9vG
To evaluate the state of the in-branch sales process, Kinesis mystery shopped 100 branches among five banks with significant North American footprints. Among the objectives of the study were to:
1) Define the sales process among different institutions.
2) Evaluate the effectiveness of specific sales behaviors.
Shoppers were asked a mixture of closed-ended questions to evaluate the presence or frequency of specific behaviors, and open-ended questions to gather the qualitative impressions of these behaviors on the shoppers – in short the how and why behind what the shopper felt. Finally, to provide a basis to evaluate the effectiveness of each sales behavior, shoppers were asked to rate their purchase intent as a result of the visit. This purchase intent rating was then used as a means of evaluating what behaviors tend to be present when positive purchase intent is reported as opposed to negative purchase intent.
It seems like only yesterday the branch was history. Do you remember twenty years ago when everyone predicted the death of the branch in favor of alternative delivery channels? How things have changed.
Now, the branch is seen as critical to delivering value to not only customers but shareholders as well. Now it appears branches and, more specifically, same-branch deposit growth is a key driver of shareholder value. First Manhattan Consulting Group has determined that other than return on equity and revenue-per-share growth, same-branch deposit growth is the strongest driver of total shareholder return. Furthermore, they quantify this relationship, concluding that 60% of the variance in shareholder return is explained by organic retail deposit growth. The shares of institutions with higher same-branch deposit growth tend to trade at higher multiples-to-earnings than institutions with lower same-branch deposit growth rates.
With the understanding that same-branch deposit growth is a key driver of shareholder value, Kinesis has endeavored to test and understand the relationship, if any, between the customer experience and same-branch deposit growth. We have determined that both purchase intent and same-branch deposit growth appears to be strongly associated with behaviors associated with reliability, empathy, and assurance.
To test the relationship between same-branch deposit growth, Kinesis has conducted thousands of mystery shops of a broad spectrum of institutions ranging in size from community banks with two branches to very large institutions with branch networks in the thousands. To conduct this test, Kinesis used a measurement instrument based on the five-dimensional SERVQUAL model, which defined the customer experience by the following five-dimensions: tangibles, reliability, responsiveness, empathy and competence.
The specific objectives of this analysis were to:
1) Test specific service behaviors/attributes against purchase intent to determine which behaviors, if any, appear to correlate with purchase intent.
2) Evaluate the relationship between the presence of these behaviors and branch deposit growth.
3) Test the efficacy of a mystery shop scoring system and branch deposit growth.
Kinesis first worked to test the relationship between elements of the customer experience and purchase intent, and to determine key drivers of purchase intent in the customer experience. As part of the solution to achieve this end, Kinesis asked each shopper, how the experience would have influenced their intention to purchase had they been an actual customer. Responses to this inquiry were collected on a 5-point scale ranging from “significantly increased” to “significantly decreased” the intention to purchase. Furthermore, immediately following this purchase intent rating, Kinesis asked each shopper to explain why they rated purchase intent as they did.
To help assure the validity of the analysis, two independent analysis plans were applied to the purchase intent data. First, the open-ended comments regarding why the shopper rated their purchase intent as they did were grouped according to common themes and according to the purchase intent rating. Second, the balance of the responses to the mystery shop questionnaire was cross tabulated by the purchase intent rating to determine which specific behaviors correlated most closely with purchase intent.
The results of this first part of the analysis plan revealed the following:
Once a shopper enters the branch, branch personnel clearly drive purchase intent. Over two-thirds (69%) of the reasons given for positive purchase intent are the result of branch personnel, only about one-in-five (18%) were product related, while 8% were due to the branch atmosphere.
The branch personnel driven elements include: generally positive, friendly service (26%), product knowledge/informative/confidence in the personnel (16%), attentive to needs/interest in helping/personalized service (14%), and professional/respectful/not pushy employees (10%). Prospective customers want confidence and trust not just in the bank, but also in the people who are the human face of the institution.
The second part of the analysis plan revealed very strong correlations between the following behaviors and purchase intent:
- Friendly & Courteous
- Interest in Helping
- Discuss Benefits & Solutions
- Promised Services Get Done
- Express Appreciation
- Personalized Comment (i.e., How are you?)
- Listen Attentively
Kinesis then grouped these highly correlated behaviors into the five-dimensional SERVQUAL model and found they group into three of the five-dimensions (reliability, empathy, and assurance) as follows:
- Reliability: Promised Services Get Done; and Accuracy
- Empathy: Interest in Helping; Discuss Benefits & Solutions; Personalized Comment (i.e., How are you?); and Listen Attentively
- Assurance: Friendly & Courteous; Greeting; Professionalism; and Express Appreciation
Intuitively, this result makes sense, beyond the basic requirement of reliability; customers also want to interact with bank personnel who have empathy (care about their best interest) and assurance (the knowledge and courtesy of employees and their ability to convey trust and confidence).
To evaluate the link between the customer experience, and the above behaviors, to the bottom line, Kinesis compared mystery shop results to same-branch deposit growth using publicly available deposit data from the FDIC. This analysis determined that branches with above average frequencies of reliability, empathy and assurance behaviors experienced 26% stronger three-year branch deposit growth rate than branches with low frequencies of these behaviors.
Finally, to evaluate the efficacy of the mystery shop scoring methodology, mystery shop scores were compared to branch deposit growth. This analysis revealed branches with above average mystery shop scores experienced a 78% greater branch deposit growth compared to those with below average mystery shop scores.
Our research and experience leads us to the conclusion that there is a link between the customer experience and such critical financial metrics such as same-branch deposit growth. With an understanding of which attributes drive this relationship, managers can now focus training, incentives and other management techniques on reinforcing empathy and assurance among its personnel, and make a financial case to all stakeholders (management, employees and shareholders) that the customer experience does drive financial performance.