The Customer Confidential Podcast
Last year, almost 40% of American customers bought at least one new product from a bank. Despite bankers’ intense focus on cross-selling, only half made that purchase from their primary bank. This pattern, more or less, was repeated in more than 27 countries, according to Bain & Company research on 190,000 consumers.
Bankers all over the world have become increasingly concerned about earning the loyalty of their customers. While they have long had cross-selling, share of wallet and customer satisfaction on the list of topics they discussed, very few banks historically invested in earning the ardent advocacy of customers required to succeed. In the US, the primary source of growth for most banks came from mergers once the regulations changed to allow interstate banking. Many banks relied on an ever-growing list of fees to grow revenue.
Those sources of revenue, however, have largely run their course. Many banks are precluded from acquiring their competitors by regulators worried about antitrust issues. Others are precluded for reasons of regulatory limits on their capital spending. Fee revenue has come under pressure as regulatory agencies have more and more come to the defense of consumers.
Now, bankers who previously didn’t take loyalty seriously care a lot more. They’re competing for a shrinking pool of new customers, with a shrinking variety of available sources of new revenue growth forcing them either to deepen their relationships with their existing customers or poach customers from their rivals.
What can banks do to restore growth? Is it now time to focus on regaining customers’ loyalty? These are questions my next guest on The Net Promoter System podcast has set out to answer. Gerard du Toit, a partner at Bain & Company, leads the firm’s research on customer loyalty in retail banking, and has been digging deeply into the topic of how and why customers choose to do more or less business with their bank.
Gerard’s research shows that earning bank customers’ loyalty requires bankers to improve the banking experience so that the customer benefits as much as the company. That means using digital tools to make simple transactions—such as depositing a check—easy to do at home. This then frees up the branch to be a resource for more complicated interactions, such as applying for loans and getting investment advice.
Many banks have dramatically improved their customer experience, even turning once-punitive overdraft fees into teachable moments that leave customers feeling that their bank is on their side. The lessons retail banks are learning apply to other industries, especially those that rely on people who subscribe to their services. I think you’ll find our discussion enlightening, even if you’re not a banker.
You can listen to our lively discussion on iTunes or through the player above.