You Should Only Hope For Frequent Contact With Your Customers

As part of a special section on “Building A Better Customer Experience,” American Banker re-published an article (pw req’d) yesterday that reported the extent to which consumers viewed financial firms as acting in the customer’s best interest (in contrast to acting in the interests of its own bottom line). A quote from the managing director of a New York-based consulting firm, explaining why banks scored lower than other types of FIs, caught my eye:

Most people interact with their banks more often than they do with an insurer or a brokerage, so there is more opportunity for error. People have more frequent contact and more types of contact with their bank, so things like hours and fees seem onerous.”

My take: Frequent contact with customers is a blessing, not a curse.

A few years ago, I was speaking at a conference about the impact of online banking on customer loyalty, and I presented the results of a study that Bank of America did that showed that — all else being equal (e.g, demographics, tenure with the bank, starting balances) — over time, online bill pay customers grew balances and number of products owned faster than other customers.

I wondered out loud why that would be — after all, what was it about paying bills online that made someone more loyal to his or her bank?

I found that there are (at least) two possible answers. The first has to do with consumers’ motivations and expectations. For some consumers, the strength of the relationship they have with their bank is predominantly driven by factors relating to convenience. As a result, the convenience that they experience by paying bills online strengthens their emotional connection to their bank.

But the second explanation — the one most relevant to this post — came from someone sitting in on my presentation that day. Neal Burns, a University of Texas at Austin professor of advertising, told me that according to research he’s done, “repeated, positive interactions with a brand strengthen a customer’s connection to that brand.”

Insurers get few chances to create that positive impression — but when they do, they’re usually good opportunities, since insurance claims are typically high emotion interactions. Brokerages — particularly discount brokerages — may get that chance even less frequently, especially if they don’t have an advisory relationship with the customer.

Banks should be thankful for the frequency of contact they have with their customers. That their scores in the survey are lower than other FIs isn’t because of “opportunity for error”. It’s better attributed to:

  • Organizational conflict. The product-centric nature of most banks creates conflicting goals and incentives that make it difficult for those firms to always act in a customer’s best interest. Can we really expect a mortgage specialist to tell a checking account customer that he might get a better deal on a loan by going across the street?
  • A focus on the wrong experiences. I don’t mean to downplay the importance of customer service interactions, but I believe that the scores reported in American Banker reflect the dissatisfaction and missed expectations that consumers have with their sales experiences. It’s in these interactions where they receive product recommendations that they perceive to be best for the bank and not for them, and where their expectations of what it’s like to do business with the bank are established. Expectations that, in some cases, are not lived up to.

Banks that build trust with their customers earn forgiveness when (and if) they do make a mistake. Having the opportunity to build that trust through frequent interactions is a bank’s advantage — not handicap.

Technorati tags: , , , ,


4 thoughts on “You Should Only Hope For Frequent Contact With Your Customers

  1. It’s a causality question, isn’t it? Burns asserts that the frequent interactions in and of themselves produce a good customer, whereas RFM just observes that the more Recently and Frequently a customer has interacted with your brand, the better that customer should be. The flip side of Burns would be to state that a good customer who already loves your brand will therefore interact with you more frequently.

    Either way, it’s encouraging and, what is more important, actionable. At our company, our customer service team should realize and act as if it is either serving our best customers or creating them, as the customers’ contacting us is a good (frequency) indicator either way.

  2. Thanks for your comment, Drew. You raise a great point regarding causality. For me, it doesn’t matter which causes which (good customers interact more frequently, or more frequent interactions lead to good customers). But if you take the flip side of Burns, it does beg the question: How did that good customer get to be a good customer in the first place?

    The consulting guy who I quoted at the beginning, seemed to imply that — for banks, at least — more frequent interactions are just opportunities to screw up, therefore, banks should hope that their customers would interact less.

    That’s crazy thinking.

  3. In addition to the reasons already mentioned here, convenience and habit can not be downplayed. Setting up online bill paying takes an investment of time from the consumer and once it is set up, they will be unlikely to do it again elsewhere. It is one of the best tools for increasing customer “stickiness”. As long as the financial institution functions properly as a bill paying tool, they are maximizing the likelihood of having that customer for life. The money has to go in to pay the bills, so a likely outcome would be increases in balances across debit products because who wants to deal with more than one financial institution?

  4. Thanks for commenting, Maria. Many banks certainly find that online bill payers are “sticky” — in that they don’t close accounts or transfer them elsewhere, especially given the pain of setting up OL bill pay (although Rob Rubin is going to fix this, see But if even after setting up OL bill pay, if a customer hates his bank, while he might not switch banks, there’s got to be other explanations for expanding the relationship. After all, firms like ING Direct make it really for consumers easy to move money in and out of their primary checking accounts.

Comments are closed.