Market research firm Yoosless Phuqing Research released the results of a study today, revealing important insights into improving bank customer retention.
According to the study, bank customers who turn right into parking spots in a bank’s parking lot have a 7% higher retention rate than left-turning customers. According to the firm’s founder and CEO, Aimso Yoosless:
“Just 18% of right-turning customers switched banks last year. In contrast, 23% of left-turning customers switched. Clearly, a quality parking experience creates greater customer retention than quality online banking or direct deposit services.”
First National Bank of Boar Tush (Alabama) has already acted on these findings by closing off left-side parking spots:
According to the banks’s SVP of Revenue, William Dumass: “By closing off half the parking lot, we expect to increase our overall retention rate by 2.5%, which translates to roughly $500,000 in annual profits. The ROI on this effort is huge.”
If you’re wondering what motivated this blog post, it was an article titled Banks Ignore Customers, Waver on Mobile Engagement that reported the following:
“While only 13% of banking customers currently use mobile engagement, a recent survey of revealed that a quality mobile banking experience creates greater customer retention than quality online banking or direct deposit services. A financial services strategy consulting and research firm conducted a recent study showing that only 5% of [consumers] using mobile banking and payment services switched bands in the previous year. With no true standout bank in the mobile banking arena, the bank that drives innovation in the mobile field stands to gain a large advantage.”
[Note: The above is a cut and paste with some rearranging going on. I’ll assume the author meant “bank” and not “band.”]
It would be easy to chalk this up to a misunderstanding of causation versus correlation. But that doesn’t capture it in every case.
On the contrary, in a number of–if not many–cases, it’s a factor of the author’s desire to make a statement about innovation, technology, or maybe to be seen as a thought leader. The research simply gives the author the opportunity to reiterate something that they already believed.
Ironically, I’m a big believer that the mobile channel will be a strong differentiator. But the business case won’t be justified by some simplistic impact on customer retention.
The retention argument has been used with every online technology that’s been introduced over the past 15 years: online banking, online bill pay, eStatements, PFM, etc.
At this point in the development of online banking technology, banks’ retention rate should be approaching 800%.