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Convenience Guarantees Customers, Not Loyalty
By Anne McLain
April 24, 2006
Convenience has different meanings in the banking world, depending on who you're talking to. Traditionally, banks felt that the number of ATMs or proximity of branches determined how convenient their customers thought they were. But is that what customers think?
Our recent Vox Instant Poll asked "what defines 'convenience' when you are banking"? 38% of respondents say online banking characterizes convenience to them. Ample ATMs were important to 28% of those polled. Traditional brick and mortar amenities such as extended hours, no waiting and branch proximity were much lower on the convenience scale (see graph below).
Self-service outlets such as online banking and ATMs make banking easier but banks can't rely on them to be self-running entities. Although these services provide additional means to getting business done, they cannot be substituted for mainstream services. According to the J.D. Power and Associates 2006 Retail Banking Satisfaction StudySM, transactions have the greatest impact on a customer's overall satisfaction with their bank. Although the average online transaction takes just 2.8 minutes to complete compared to 7.7 minutes of combined wait and transaction time with a branch teller, in-person transactions rate higher in satisfaction1. This is followed by ATM and online transactions. Why? The human connection. Great frontline interactions drive loyalty and profitability.
Despite the lower cost per transaction, research shows that the migration to online banking does not increase profitability, at least in the short term. Although customers who bank online tend to hold more products than other customers, they are not typically high yield products.2 To generate that type of profitability, banks must provide the means to generate loyalty from their customers. This can be tricky in an impersonal environment such as a website or ATM. How can you mirror the feel you get from a personal experience in the branch?
For the online channel, banks must provide a rich, community-oriented environment that is also user-centric. Online technology isn't fail proof. Performance and reliability are critical factors to maintain. If a customer has trouble with a transaction and can't resolve it easily, this may be more detrimental than the original problem. Also, banks must know who their customers are, segment them, and determine how each of them distinctly interacts online. A "community" feel provides a wealth of information that covers all aspects of their financial needs - and beyond. Online bill pay is the first step but other options may be offering lending, investing, and insurance assistance; neighborhood news; extensive customer service options; and more. Truly, any service industry that has a substantial online channel benefits from focusing on the importance of human interaction.
It's the path to long-term profitability. As customers see their needs are constantly addressed and met, this generates more than satisfaction. It creates loyalty. Retention numbers go up and profitability increases.
Although customers feel self-service outlets such as online and ATMs are convenient, these outlets are only part of the customer service mix. Banks must treat them as robust, integral tools to enhance an ongoing, superior customer experience. This translates to other industries as well - insurance, financial services, and other transactional services. The investment in the experience - especially online - will determine how they can grow their customers' loyalty.
Anne McLain is Marketing Manager at Vox, Inc., a customer experience consulting firm. Contact her through the feedback form on our Contact Us page. Copyright 2006 Vox, Inc. All rights reserved.
1 Source: J.D. Power and Associates 2006 Retail Banking Satisfaction StudySM
2 Source: Campbell, Dennis. The Cost Structure and Customer Profitability Implications of Electronic Distribution Channels - Evidence from Online Banking. Diss. Harvard Business School, 2003.
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