The Relationship-Centric Bank

By Michael Ruckman

Learning what your customers really want just might be the key to creating a relationship-centric bank.

According to a Gallup survey in 2009, only about half of customers surveyed could strongly agree that their banks performed the sorts of actions that likely would keep customers coming back, such as “making me proud of where I bank”, or “keeping me informed of new opportunities”, or even “understanding my financial goals.”

The Relationship-Centric BankAnd a desire for repeated contact with a provider is just the beginning of a healthy relationship.  Another survey conducted by Forrester in 2010 asked respondents if they agree with the statement, “my financial services provider does what is best for me not just its own bottom line” . Results showed that a majority of respondents simply don’t trust their banks.

Gallup has done extensive research on customer engagement (how and why customers have a strong emotional tie to products and brands). According to Gallup’s methodology, described in the article “Bankers, Meet Your Customers” (published in 2009), “the baseline requirement for customer engagement is rational satisfaction, which comes from meeting a customer’s needs, such as price, speed and efficiency.”

Companies that fulfill these needs are more likely to have loyal clients who renew and refer business. However, the “real difference in customer behavior and profitability comes from going beyond rational satisfaction to emotionally engaging customers with your products and services” .  I would venture further to say that every customer contact that is positive, fulfilling, and emotionally engaging contributes to the health of the relationship, and, thus, the loyalty that a person feels toward the other party in that relationship.

 

 

The Value of a Healthy Relationship
Why is a healthy, loyal customer relationship valuable for banks? Few would dispute the benefits, and many different studies show that loyal customers are less price sensitive, hold higher deposit balances , use more credit products, and also are better at credit repayment  with the banks that have won their loyalty.

Gallup has proven that customers who are fully engaged in their relationships “delivered a 23% premium over average customers in share of wallet, profitability, revenue, and relationship growth, while actively disengaged customers represented a 13% discount on the same measures.”

Most bankers will rate loyalty and development of customer relationships fairly high on their list of priorities, yet customers seem to be unhappy with the quality of those relationships.  Somewhere there is a serious disconnect, and the seriousness is reflected in a 2009 survey by Deloitte entitled, “Rebuilding the Relationship Bank”. For example, the study concluded that only 36% of the consumers surveyed were very satisfied that their primary bank understood their needs. And, when related to a major life event, such as getting married, having a child, nearing retirement, or moving to a new home, only 18% of the consumers surveyed reported that their primary bank had contacted them to suggest appropriate products.   Shouldn’t understanding customer needs and helping them through major life events be some of the primary activities for a bank?

Relevance – Is there a relevant reason for contact with the bank outside of purchasing and/or using a bank product? If not, then the relationship will simply remain that of user/provider. If banks wish to develop deeper relationships with customers, especially with the hyper-connected, self-serving customers today, then they will need to find relevant reasons for contact outside of sales activities and servicing products that they already sold. Contacts related to planning, budgeting, advice, education, special events, etc. would help to create relevant reasons for contact outside of sales and service.

Trust & Security – Is the bank a trustworthy and reliable source for these types of contacts and can the bank be trusted to be impartial and act in the best interest of the customer? Many banks offer some kind of advice, but it is usually very strongly tied to the sale of a particular product that they are pushing. In fact, most advice that we come across when visiting different banks is designed to highlight a particular product that the bank is selling rather than identify and act on the true needs and goals of the individual. Some advice is given before even asking questions about the individual’s needs and goals. This will surely generate some level of distrust and create a barrier for the customer to pass this stage in the hierarchy.

Belonging – Does the customer feel that they belong in the relationship with the bank? This has a few different implications: 1) understanding different customer groups and personality types so that the bank can interact with them appropriately, 2) ensuring that customers feel welcomed at any point of contact and that the staff is genuinely interested in creating a positive and fulfilling contact for the customer, and 3) creating aspects of a club-like atmosphere where customers can participate in events or activities with people that are in the same customer group or share the same interests.

Status/Esteem – How does the customer feel about the relationship with the bank when they are not interacting with the bank? Are they proud of their relationship? Do they talk about benefits that the relationship brings?  Do they feel increased status when using the bank card or talking about the relationship? Banks will need to focus more on how customers feel about the relationship. If customers are unable to feel good about themselves when thinking about the relationship, then the relationship will always be at risk.

Growth & Transformation – How does the bank relationship help the customer to achieve their dreams, goals, and aspirations? People do not dream of a relationship with their bank, or a mortgage, or a car loan.  They do, however, wish they could have a better day-to-day quality of life, help solving a problem, and help realizing goals and dreams. If a bank can play a role in helping with these items, with the growth and transformation in a person’s life, then the true meaning of Maslow’s self actualization can be achieved. If not, then the relationship will be unfulfilling for the long-term. In other words, the bank customer may be satisfied with the quality of usage of the product that they purchased, but the relationship will not fulfill one of the key components of the hierarchy of needs.

If banks begin to view their relationships with customers with the possibility of helping their customers achieve their dreams, goals, and aspirations, this is a much more appropriate use of Maslow’s Hierarchy of Needs. As it applies to the banking relationship, we could almost view it as a marriage of sorts. And to extend this idea even further, it is possible that customers, happy and fulfilled with the relationship, might choose to consolidate their financial activities in one place – in effect transitioning simple loyalty (which allows a customer to be loyal to more than one provider) to monogamy (loyal to and consolidated into one relationship).

This marriage would be nirvana for bankers – lower operating/infrastructure costs, lower risk, lower cost of acquisition per customer, lower customer attrition, higher profit per customer, higher deposit balances, and higher number of products per customer. What banker would argue with these benefits?

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