KEY POINTS:
Want to be treated by your bank like you've got a million dollars in your account, even though you have just got a large mortgage, one investment product and a car loan?
Well, things could be changing. Although customer service and satisfaction are at all-time highs, banks are
being told they still have to do more to attract customer loyalty.
According to a survey of New Zealand customers commissioned by information services company Unisys, very good customer satisfaction is not leading to customer loyalty and, with that, customer advocacy.
The research showed that while banks were achieving 71 per cent customer satisfaction, only 21 per cent of customers were loyal.
Banks are not being "customer-centric" enough, says Graham Alston, a partner with global financial services at Unisys NZ.
So why are loyal customers the holy grail as far as banks are concerned? Because when services are being so commoditised, being more valued by customers will lead to a more stable and valuable business.
According to the Unisys research, loyal customers will on average have a far greater range of products and they will have a higher balance for each of these products than non-loyal types.
"People have said they would be willing to put more of their financial services business with the provider, if they felt there was a better level of service," says Alston.
"Loyal customers are ones that will recommend you - they are worth a lot more than general advertising."
Interest rate levels can be less important to these contented types. They are willing to sacrifice chasing the best deal if they are loyal. They are giving these things up to remain with that provider, says Alston.
Generally, service is good. What we are talking about is making them feel they are being tailored to specifically.
In the survey, bank customers were broken down into four areas:
* Relationship enthusiasts - 26 per cent - who trust their banks and think they are doing a good job, as long as they are keeping up with electronic trends.
* Contenteds - 15 per cent - who trust their bank for all financial needs and are not driven by loyalty programmes.
* Uninterested sceptics - 27 per cent - who are not as interested in service or rewards and believe the bank's service is average.
* Relationship seekers - 32 per cent - who don't believe their bank offers good service and want to be rewarded for size and length of business.
What banks should be doing, says Unisys, is tailoring packages individually to customers so they feel they are getting special attention, which is is what a bank in the UK has done with success, says Alston.
"This bank found that tens of thousands of new product sales happened over the period, more than they would have expected. They were able to measure the impact and prove they were increasing the average number of services that individual people had."
To give them credit in the increasingly competitive retail banking market, NZ banks are making increased efforts to retain customers.
Banks are becoming more pro-active about recognising and supporting when their customers are under stress or undergoing some life change.
Karl Hurst, head of customer markets and strategy for Westpac, says personalising things are the key drivers to customer loyalty.
"Life changes... When they are making significant financial demands, that's when the rubber hits the road," he says. "We've had examples where the marriage has broken up and the wife came and talked to us, and said I will always be with Westpac because you were there when it mattered."
Westpac is trying to establish connections through relevant products, such as flatting insurance and the newly launched Debit Plus card.
"We are making sure we have a good product shelf and are being proactive," says Hurst.
Banks such as BNZ have put a lot of effort into loyalty reward schemes, such as Global Plus and FlyBuys.
Blair Vernon, general manager of strategy and marketing at BNZ, says: "People have more opportunities presented to them to switch [banks]. We have gone from an environment where, 10 years ago, there were four or five brands and very few on the next tier. Now there are 12 banks, finance companies in the investment market, and some aggressive competitors in consumer finance."
BNZ's latest product launch has sought to break new ground. The TotalMoney initiative, which enables families to pool their accounts together in one package and benefit from the economies of scale to earn a higher interest rate, has attracted tens of thousands of applications since it launched 13 weeks ago, says Vernon.
"These 'aha' moments create a sense of value and advocacy," he says.
Auckland University business school associate professor Richard Brookes has done research in customer satisfaction and loyalty in banks and the car industry, and says loyalty is all about the context. From time to time, people's loyalty will be tested and often it is not strong enough because of the swathe of attractive offers and incentives, he says.
"For long periods of time, people won't switch because of the effort and inertia but at some stage they will leave or 'unbundle' their package of products and without a backwards glance. Banks can't take it for granted that customers will stay inert."
Given the highly competitive environment, are banks ever truly going to win loyal customers? Is it a hopeless task in an era when people are disloyal about a number of services from mobile phone providers to power companies?
With so many ways people can deal with their bank - call centres, in branch, online - it is hard to make the experience consistent.
Brookes says a student telephoned a call centre three times in quick succession and spoke to three different members of staff. It was only the third one who understood his question, and not everyone would be that patient.
David Tripe, director of the centre for banking studies at Massey University, thinks good service across the board is a hard ask.
"It's possibly an ideal that is hard to achieve," he says. "There is room for improvement. It's difficult in a large organisation to achieve effective processes across all of this."
Ian Park, head of retail banking at ASB, doesn't agree a bad experience will turn customers off if handled right. He says when mistakes are made this is a chance to develop a relationship with a customer and prove the bank has the right motives.
He handled a complaint recently, and the customer came back and said she was happy to recommend ASB. "You commit yourself even further to loyalty," says Park.
So what's the message to consumers? Test your bank's dedication to you and demand more?
Craig Sims, managing director of National Bank Retail, says customers are pretty demanding of their banks right now and the banks are listening.
Sims, who started 20 years ago as a mail boy in the bank's Masterton branch, says the relationship between banks and customers has changed markedly. "The relationship with the bank was where the power rested. Now customers are demanding of us a realm of services and bundles."
