Managing customer relationships in financial services is not just about the experience, it’s about the holistic proposition

Financial Services Team Blog

Phil Brooks

Having talked to numerous clients over the years about improving customer relationships it is interesting how some clients simply focus on making process/service improvements.

▪ How can we reduce the amount of time on hold?
▪ How can we improve staff knowledge?
▪ How can we improve complaint resolution?

To be fair you can understand why.  A number of organisations have deeply ingrained a culture of six sigma, lean or have a customer satisfaction tracker or an NPS study which can focus the analysis solely on the rational measures.

Whilst satisfying target customers on rational dimensions is important, organisations that perform also look to achieve some sort of emotional connection alongside leaving them with a desire to come back for more. Customer relationships are far more complex than any single measure can provide.

Successful customer relationships are driven by brand as well as differentiated products and services.  This is perhaps even more the case for financial services than say for FMCG.  We have fewer direct/personal interactions with our customers and therefore have fewer opportunities to engage with or to impress on a one to one basis compared to most other sectors.  This is especially the case with insurance.

Many have claimed that the financial services industry lacks truly differentiated brands, and to some extent I have to agree. However, that does not mean that differentiation is not attainable.  In fact, it cannot be a coincidence that those organisations that have managed to create a differentiated brand have the strongest customer relationships.

Look at some of the metrics below from the banking sector, admittedly some of the base sizes are small.  The Co-operative has created a brand around their ethical and sustainable behaviour, developing a culture that is embedded into their DNA. First Direct has created a proposition around their service. It is clear that both strategies are working for them, particularly for the Co-operative given their recent growth in current accounts.

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Having looked at data of this type for a number of years now, these brands are probably benefiting from a positive brand halo effect which of course is not easily quantifiable. If a mystery calling / shopping study was conducted measuring actual service levels across the market there may be less of a difference.  Remember, consumer perceptions are not necessarily reality.

That said, it is perceptions of both service and product which is important, strangely not the actual standard of service/product itself.  It is consumer perceptions that drive initial trail and then re-purchase/loyalty.

A company could be offering the best service in the land and be achieving its cross selling and retention targets. Attracting new customers will be much more difficult, unless they let the wider population know about the service they offer and how they are different.

Conversely, providing a poor service will leave you at the mercy of social media and negative word of mouth which could have a detrimental effect.  Positive word of mouth does happen, but not to the same extent and is particularly less likely within some types of financial services.

So how can we improve the relationships we have with customers. Clearly we need to ensure products and services meet customer needs and expectations, but nor should we underestimate the role of brand and communications – we should at the very least be communicating our successes.

This is clearly a strategy NatWest has adopted both with their ‘Helpful Banking’ campaign alongside their customer charter (whatever you think of it).  Again it seems to be working for them as they start to pull away from the other major players on a number of key measures.

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From a research perspective, we need to ensure that any driver analysis is conducted on the relationship holistically and not just on the rational measures such as satisfaction or likelihood to recommend. The analysis should also include touch points such as communications, reputation and ongoing relationships and not just service delivery and products.

For those within the industry who think we are all hated, you’re wrong.  It can be a loving relationship if you create an overall proposition that people can buy into. Simply looking to improve products and services (such as mobile payments) will never be enough.

True, those first to market with a mobile payments solution may instigate some churn amongst the early adopters.  Though, overtime as competitors catch up and mobile payments become the norm this short term benefit will erode away, unless product and service innovation becomes engrained into the organisation culture and becomes part of the brands reputation. That’s when real tangible benefits will start to happen and can be maintained for the long-term.

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The next edition of viewpoint will be on Customer Relationship Management and will be available from late March/early April. More information on our approach can be found here.

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