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Industry News Two More Words on Client Retention 2011-06-23 For the past couple of months, PNT’s “Industry News” has focused on client retention. We have two more words to add to the mix. Service first. In fact, when it comes to client retention, service first seems to be the mantra of choice among successful financial institutions. The truth of the matter, though, is that some financial institutions give only lip service to customer service, and this can have adverse outcomes on a bank’s bottom line. “Banks have been in very much of a sales-first mode for a long time,” said Jim Eckenrode, a research executive for banking at TowerGroup, in a recent interview with BankTech. [1] But if banks want to retain their existing clients (which is one of the best ways to bolster bottom lines), experts agree that this has to change. “The lack of customer trust—the erosion of the relationship—is really causing banks to focus more on service first (on maintenance of the relationship) and acquisition in sales as a secondary outcome,” said Eckenrode. This bears repeating: acquisition in sales is a secondary outcome. Sure, financial institutions can showcase flashy new products or create incentive programs designed to hook new customers. But if they aren’t focusing on client retention by putting service first, they will have a hard time maximizing profits. Unhappy customers won’t just trickle away—they will tumble away. On the other hand, industry research indicates that financial institutions could raise profitability by up to 100 percent, simply by increasing client retention as little as five percent. This means that financial institutions must work to “do right” by the customer. Instead of trying to drive sales opportunities, Eckenrode said that banks focused on client retention use “service opportunities as a way to drive sales opportunities.” In other words, providing good customer service is the financial institution’s first concern. In turn, they have greater customer loyalty and less attrition. And ABA Banking Journal, citing research by the IBM Institute for Business Value, agreed, suggesting that financial institutions should take “a fresh look at the client.” “The research [by IBM Institute for Business Value] indicates that banks, especially in emerging markets, are poised to move toward needs-based and behavior-based segmentation in the next three years. To do so, banks will have to understand client needs based on client interaction in their channels. The survey indicates banks need to improve their systems and processes and invest in analytical tools as a precursor to gaining client insight.”[2] “Good service” starts at the most basic level: Do the tellers facilitate transactions with positive, solution-oriented attitudes? Putting the customer first also means that the bank’s technical innovations make life easier. Are the ATMs and customer service lines convenient? Is the bank keeping up with technology by developing user-friendly and innovative applications? Remember, though: innovation alone is not enough when it comes to client retention banks must put service first, pushing everything else to the backburner to make sure the customer has a positive banking experience. [1] http://www.banktech.com/video/?videoID=52472593001 [2] http://www.ababj.com/tech-topics/the-new-technology-imperative-center-on-the-customer-1930.html
Customer Acquisition and Client Retention: New Banking Regulations Bring Challenges and Opportunity
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