Banks Must Do More to Foster Customer Relationships

Two thirds of consumers do not feel valued by their bank and are unwilling to foster a deeper relationship with their financial institution, according to the results from an IBM study. This attitude has far-reaching implications for banks' CRM-related IT efforts that were supposed to remedy just this kind of situation, says the firm.

The study, titled "Unlocking Customer Advocacy in Retail Banking," builds upon a larger body of work the firm is performing on customer-focused enterprises (CFE). IBM polled 3,000 U.S. banking consumers and classified them into one of three advocacy segments-advocates, apathetic and antagonistic-based on their answers to three questions: Would you recommend your bank to someone else; would you go to your bank first for a new financial services need; and would you not switch banks if offered a competitive product? Advocates have the highest likelihood to recommend and stick with their financial institution, antagonists are at the complete opposite end of the scale, while apathetics are somewhere in the middle.

"We wanted to see how well banks performed versus customer expectations and the banks' ability to grow organically," explains John Armstrong, banking partner and senior consultant with IBM. "The results showed that only 24 percent were advocates."

Not surprisingly, credit unions and small banks scored highest in satisfaction at 36 percent and 30 percent, respectively, while large, national banks ranked lowest at 22 percent. The fact that the big banks were not at zero indicates that they must be doing something right. The key is finding out what that is and understanding how to broaden those successes, Armstrong notes.

"The national banks are spending much more on CRM technology [such as marketing automation, call center desktop and sales productivity applications] than credit unions," he says. "But these systems are designed to benefit the company in its pursuit of more-efficient operations, increased sales per customer and the ability to find information about customers."

Armstrong says the next challenge for banks is to capitalize on these investments and integrate these solutions in ways that directly benefit customers. For example, banks can use insights about customers' transaction events to drive relevant offers and solutions, not simply "flavor of the day" cross-sell offers.

"A smaller, community bank doesn't have the same problems because they're more engaged with the community and can offer more personalized service." This, he says, is how they are better able to meet consumers' "emotive" needs than larger banks.

Emotive needs consist of the customer's desire to feel like they're valued and that they are being listened to by bank staff. Most banks are falling short here. The report showed, for example, that 74 percent of U.S. banking customers find bank marketing efforts irrelevant, while only 36 percent indicate bank employees listen to their needs.

It's on the operational/rational needs side that they excel, however, Armstrong notes. "Banks have been very successful at meeting customer's rational needs, such as providing consistent information at all touch points and providing multiple channels in which to bank," he says. "Technology has played a substantial role in that evolution, including Customer Data Integration and enhanced service and sales platforms. The technology has enabled large banks to overcome the issue of knowing what customers are doing as they interact with the bank."

As banks begin to realize that customer satisfaction is about more than efficiency, Armstrong says there are implications with regard to where banks need to put their focus-more on people than technology. "Simply delivering on the rational needs of efficiency may be good to attract customers, but it's not good enough to keep them in light of ever-growing competitive offers for safe keeping of their money. Banks have to learn to leverage people as an asset," he explains. "There are not too many technologies that are good at showing empathy. This changes the characteristics of the kinds of people banks hire. Don't put the people piece last."

In the end, the leaders will be defined by those banks that capitalize on their investment in customer-data-gathering solutions, and marketing and sales systems, says Scott Lieberman, CRM business solutions professional, IBM Global Business Services. "To achieve the goal of increasing customer advocacy, banks will need to invest in solutions such as more-robust text and speech analytics to understand how customers are communicating, not just what they are saying. In addition, putting in place technologies that can gauge customer advocacy at the point of interaction with a simple opinion question will provide greater insight into how banks are doing with individual customers in winning their loyalty."