Improving Bank Customer Retention

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%.


More Likely To Purchase: Quantipulation In Action

How many times this week have you heard about some research study that found that one consumer segment is XX% more likely to purchase your products than another segment?

These studies and claims come out every day. And every one of them is a shining example of Quantipulation: The art and act of using unverifiable math and statistics to convince people of what you believe to be true.

The problem with these “more likely to purchase” claims is that they’re leading you to make bad marketing decisions.

For example, it’s popular these days to claim that Facebook fans are an important segment of your customer base because they’re “more likely to purchase” than other customers are. DDB (a very reputable advertising and marketing services firm) conducted a study last year and found that:

“Facebook users who like a brand’s page on the site are thirty-three percent more likely to buy a product, and 92 percent more likely to recommend a product to others. “Fan status is indicative of high purchase intent, especially when compared to any traditional form of advertising, and is an even greater predictor of advocacy with over 90% noting that being a fan has a positive impact on recommending a brand to friends,” said Catherine Lautier, Director of Business Intelligence at DDB.”

The implication of this is that: 1) If marketers can drive up their brands’ Facebook fan count, then more customers will become more likely to buy, and 2) Marketers should focus their marketing efforts on Facebook fans because of higher purchase likelihood.

But there are a few problems here:

1. What does “more likely to purchase” mean? If in a survey Customer A (Facebook fan) says he’s “very likely to purchase” and Customer B (non-Facebook fan) says he’s “somewhat likely to purchase”, what does this really tell you? How much more likely is “very likely” than “somewhat likely”? Isn’t timeframe important? Is that very likely to buy in the next 2 weeks or very likely to buy at some point in the future? Even if Customer B says “not likely”, does that mean we should give up on marketing to him? Really? People don’t change their opinions? After all, he’s already a customer — and isn’t the cost of acquisition 5x higher than the cost of retention?

2. The absolute numbers might not be compelling. In the DDB study, only 36% of Facebook fans said that they were very likely to purchase. Which means that 27% of non-Facebook fans were very likely to purchase (you do the math). Assume that your company has 10 million customers, of which 1 million are Facebook fans. That means you’ve got 360,00 Facebook fans who are very likely to purchase, and 2, 430,000 non-Facebook fans that are very likely to purchase. Which group do you want to market to?

3. Causation versus correlation. Do Facebook fans become “more likely to purchase” after becoming Facebook fans, or did the fact that they were already “more likely to purchase” lead them to become Facebook fans? Granted, their act of becoming a Facebook fan helps marketers better identify them out of the pack. But if — as the numbers above indicate — the differences in likelihood to purchase aren’t that compelling, then it’s simply not a very helpful segmentation tool.

Bottom line: Don’t be quantipulated into believing these “more likely to purchase” claims.

Online Banking Satisfaction 2011

ForeSee Results released its 2011 Online Banking Satisfaction study recently. According to the firm, “satisfaction with online banking overall regains two points to 83 on a 100-point scale one year after dropping by the same amount.”

ForeSee breaks the results down by bank size, comparing the top 5, next 5, large banks, community banks, and credit unions. The comparison — by score component — is shown below: 

Component                  Top 5    Next 5    Large  Comm.   CUs

Products/services        82          81            85            83         84

Look and feel                 83          82           86            84         84

Navigation                     82          82           85            86         85

Website value               86           85           89            86         89

Privacy                           82           83           87           87         88

Site performance         83          85            88            86         87

Transactions                 84          84            89            88         88

I come to two conclusions based on this data: 1)  Different banks’ customers have different expectations of their bank’s websites, and 2) Satisfaction is influenced — heavily influenced — by subjective, and not just objective factors.

How did I arrive at this? From an admittedly subjective perspective:

There ain’t no way in tarnation that community banks’ and credit unions’ websites have better look and feel, navigation, privacy protection, site performance, or overall website value than the top 10 largest banks’ websites.

It’s not even a valid and fair comparison. A large percentage of community banks and credit unions use third party vendors for their online banking platform. So “look and feel”, “navigation,” and, to a certain extent, “site performance” aren’t even in the control of those institutions. 

It’s pretty clear what’s going on here. On one hand: Negative halo effect. “I hate my bank, therefore I hate it’s website.”

On another hand, there’s likely some demographics at play here. Credit unions are always crying that the average age of their members is high, so it’s very possible that credit union members that were surveyed by ForeSee are, on average, older than the customers of the top 10 banks that participated in the survey. Is it valid to compare the satisfaction rates of two (potentially) very different customer segments? I don’t think so.

If you work at a community bank or credit union and want to capitalize on the ForeSee findings, go for it. It makes for great marketing fodder. 

But please: Don’t delude yourself into thinking your website is better than the largest banks’ sites. 

The One Question You Shouldn't Ask Your Customers

Capgemini, UniCredit and Efma recently published their annual World Retail Banking Report. Lots of interesting data in the report, definitely recommend that you give it a look.

There are some surprising findings in the report, as well. You might not have guessed that customer satisfaction with primary banks was highest in the United States (especially if you’re a credit union executive here). Personally, I’m not surprised. I like the way they asked the question: Satisfaction with primary bank. Everybody hates banks — just not their own.

But there is one finding that bank (and credit union) executives should take with caution. Bank Systems & Technology summed it up in this headline: Customers Say Branch, Online Channels More Important Than Mobile. Per BS&T:

“Mobile was considered the least important channel in all regions, but was valued more highly by Latin Americans than customers elsewhere.”

This finding leads us to the one question you should never ask your customers: Which channel is most important? (or alternatively, Which is your preferred channel?)

There are probably a thousand reasons why this is a bad question. In the interest of time, I’ll share three of them:

1. It’s too generic. Which channel is most important or preferred for what? You don’t really believe that when a customer says the branch is most important or preferred that she means for all transactions and interactions, do you?

2. It’s unactionable. What are you going to do with this finding? Pull money out of the mobile and call center budgets because they’re “not as important” as the branch and online channels? You might very take money away from a channel, but only if the interaction volume in that channel significantly declines, or if the mix of interactions changes. You’re not going to mess with the budgets simply because some survey shows one channel is preferred over another.

3. It ignores the Blepfard Effect. The blepfard effect states:  “It is impossible to ask people to imagine a situation, a state of mind, or something that they can’t possibly imagine when they have no basis of experience to do so.”

The mobile channel is a blepfard. It doesn’t exist for the vast majority of customers. Asking them “how important is the mobile channel?” is a ridiculous question. They haven’t experienced the channel, and what it can and can’t do — and more importantly, what it might be able to do. In fact, for most financial institutions, the mobile channel doesn’t really exist in a mature state, either. What most FIs have done to date is simply port existing functionality from other channels to the mobile device — they’ve hardly scratched the surface of what the mobile channel will be able to do.

There are a lot of good questions you should be asking your customers in the surveys you do. Channel preferences isn’t one of them.

Interpreting The JD Power US Retail Bank Study

I’m intrigued by the findings of JD Power’s 2011 U.S. Retail Bank New Account Study released recently. According to the press release:

“The study is based on multiple evaluations from 4,791 customers who shopped for a new banking account or new primary financial institution during the past 12 months. The study was fielded in November and December 2010, and includes Bank of America; Bank of the West; BBVA Compass; BB&T; Capital One; Chase; Citibank; Comerica Bank; Fifth Third Bank; Harris National Bank; HSBC; Huntington National Bank; KeyBank; M&I Bank; M&T Bank; PNC Bank; RBS Citizens; Regions Bank; Sovereign Bank; SunTrust Bank; TD Bank; U.S. Bank; Union Bank; and Wells Fargo.”

Highlights of the study include:

  • 9% of respondents switched their primary banking institution during the past year to a new provider. That percentage is up a point from the prior year. The study found that “customers in 2011 considered 1.9 banks while shopping—up from an average of 1.6 banks in 2010.”
  • 43% of customers who purchased an additional banking product made that purchase at their primary bank. According to JD Power, “for customers who turn to another institution for an additional product, promotional offers such as gift cards carry the most weight in influencing the purchase decision.”
  • The most common reason for switching banks is a change in life circumstances. The VP of JD Power’s financial services practices is quoted as saying that the most important factor driving consumers’ decisions is advertising, and that “pricing—fees and interest rates—carries relatively little weight in influencing customer purchase decisions.”

Here’s why I’m so intrigued:

How many people actually switched? According to the press release, “the study is based on multiple evaluations from customers who shopped for a new banking account or new primary FI during the past 12 months.” If I read that correctly, people who didn’t shop for a new banking account or new primary FI weren’t included in the study. So if 9% of those who actually shopped around switched, what percentage of the overall population shopped around? The percentage that actually switched might be far lower than 9%.

How many FIs were actually considered? In the age of the Internet, doesn’t it strike you as odd that consumers that shopped around only considered, on average, barely 2 banks? In other words, they considered the bank they chose and one other. Really? Or is it the case that the study found that the average was 1.9 because it only asked about the banks listed in the survey? In other words, if respondents were unable to include community banks and credit unions in the list of banks (oops, FIs) they considered, then those FIs were excluded from the count, and the number of FIs shopped at might actually be higher than 1.9.

Is 43% good or bad? That’s the percentage of respondents who said they purchased an additional product at their primary FI. The press release positions this statistic as “less than half” which implies to me that JDP sees that number as surprisingly low. It’s been a while since my own research has tracked this, but as of a couple of years ago, the percentage of consumers who said that they would consider their primary FI for additional products was in the 20% range. Of course, intention is one thing, and actual behavior another.  So on one hand, 43% might be a great number for banks. On the other hand, if “only” 43% of the customers who purchased another product did so at their primary FI, that could be bad. All this begs the question: What does “primary bank” really mean? If it doesn’t mean “the place I turn to for all my retail banking needs,” then what good is being designated a customer’s primary bank to a bank?

How does JDP really know that advertising was the major influence? Because consumers said so? I’ve never seen a study where consumers admitted that advertising was a major influence AND that so-called rational factors — i.e., rates and fees — weren’t major factors influencing their decision. The odd thing is that for years I’ve believed that consumers overplayed the role rates and fees had on their decision and underplayed the role of advertising, and now that there’s a study out that reinforces my view, I find myself not believing that either.

What do you think?

Don't Listen To Your Customers

At a financial technology conference this week, in response to a question about the state of mobile banking in his firm, the CIO of a community bank said:

“Maybe we’ll be doing something later this year. We surveyed our customers and only 20% wanted mobile banking.”

This comment has so much wrong with it, it’s hard to know where to begin, but I’ll try:

1. It was bad market research. I’m assuming here that the survey simply asked customers if they wanted mobile banking (or how interested they were in it).  If that assumption is true, then the bank violated the number one rule of consumer research: Don’t ask people a question that they can’t answer.

Think back, for a moment, to when blepfards were introduced. Remember what they felt like in your hands? Remember what they felt like next to your skin? Of course you don’t. Blepfards don’t exist. And because they don’t exist, trying to imagine what it’s like to hold it and feel it is a fruitless effort.

This is what I call the blepfard effect:

Asking people to imagine a situation, a state of mind, or something that they can’t possibly imagine because they have no basis of experience to do so.

For people who interact with their bank online, or prefer to avoid the online channel, and continue to use branches and the call center, visualizing or identifying the potential benefits or added convenience of mobile banking is an impossible task. For people who aren’t interacting with other firms using their mobile device — and despite what you might have heard, that’s still the majority — anticipating the benefits of mobile banking is difficult.

2. The CIO should be reprimanded for dereliction of duty. Guess what, Mr. IT Dude: Sometimes YOU have to take the reins and tell customers what THEY need based on your vision of what technology can do for them. My favorite response to an executive who tells me “well, my customers aren’t asking for XYZ” is “yeah, well Apple’s customers didn’t ask Steve Jobs for the iPod.”

Here’s another thing I’ve done at conferences when this subject comes up: I ask audience members to raise their hand if they drive car. Pretty much everybody raises their hand. Then I ask “how many of you pump your own gas?” Pretty much everybody raises their hand. I follow that with “and how many of you wrote letters to Exxon, Mobil, etc. and told them you’d prefer to pump your own gas? And, of course, nobody raises their hand. You CAN get consumers to change their channel behavior. You can use the carrot or the stick, different tactics will work in different situations.

If it’s better for you — as mobile banking promises to be for banks (not to mention consumers) — then sometimes you have to WORK AT DRIVING ADOPTION. Novel concept, eh?

3. 20% — in and of itself — is not an adequate decision point. I have no idea if the 80/20 rule holds true for bank customer profitability. If it does — and if the 20% that wants mobile banking is the 20% driving 80% of your profits, then are you really sure you want to dismiss an initiative because “only 20%” of the customers you surveyed want it?

And what about the customers you want to acquire but don’t already have? Did you think to ask THEM what they wanted? If 80% of Gen Yers consider mobile banking a major criteria for selecting a bank — and if Gen Yers are a segment of consumers you want because they represent a disproportionate percentage of demand (compared to the percentage of the overall population they represent) — don’t you think you should offer mobile banking?

I’ll tell you a little story: Back in 2002 (maybe it was 2003), I wrote something for the analyst firm I was working for at the time that argued that banks should not be investing in mobile banking at that time. My argument was that there were higher priorities to focus on.

A colleague of mine wrote something with the exact opposite opinion.

The CIO of a large bank flew us both down to his office, and in front of his management team, had us each present our case. I won (I guess), since the bank discontinued their mobile banking investment, and a year later, I got an email from him thanking me for convincing them to stop investing in mobile banking because it saved them millions of dollars, with absolutely no negative impact on customer satisfaction or retention.

Fast forward to 2011 and the situation is very different. The rapid adoption of smartphones will drive demand for mobile interactions and transactions (not just in banking but across a range of industries), and — perhaps more importantly — will create opportunities for banks to develop apps to add value in ways they can’t do in other channels (I like to call these “purely mobile” apps).

Taking a pass on mobile banking because “only 20% of your customers” want mobile banking is short-sighted, and, I might add, a bad management decision. For g*d’s sake, don’t listen to these customers.

Oh — and please don’t try and tell me how your customers don’t want PFM.

Lies Consumers Tell

I really like Read it every day. Love the content. But I really hate misleading headlines and questionable conclusions on market research. And may be guilty on both counts.

The site recently ran the headline: 90% of Consumers Would Pay for Mobile Payment Options.

Nothing gets my BS-alert-o-meter buzzing like a vuvuzela at the World Cup like a “90% of consumers” statement.

Reading a little further, here’s what I found: 57% of consumers are interested in having mobile payments on their phone; 90% would pay for the service; 64% would switch carriers in order to have access to mobile payments services; 58% would switch banks in order to have access to mobile payments services.

I’m guessing here that it’s really 90% OF THE 57% that said that they’d pay for the service. Which, if I’m correct in my guess, would make it “51% of consumers would pay for mobile payment options.”

That’s a little more reasonable.  But still not realistic.

I am loathe to criticize or critique any other firm’s market research, and I hope that’s not what I appear to be doing. But the “57% of consumers are interested in mobile payments” is a far cry from what Forrester Research found in April 2010. According to Forrester, “18% of US online adults express interest in mobile payments.”

I don’t know who’s right. Personally, I tend to agree with whoever has the more conservative numbers. Why? Because consumers lie.

There are probably more reasons than the ones I came up with, but here are four of the most common lies that consumers tell (usually to market researchers) in particular order:

1. I’m going to tell everybody I know how great you are. Net Promoter Syndrome Sufferers should stop reading this post, because they’re not going to like this. On the other hand, it’s been said so many times in the past four or so years, that they’ve probably developed a keen ability to ignore this: The gap between the percentage of people who say that they’re likely to recommend your product or service and the percentage that actually do is huge. Survey someone right after a positive experience with a firm, and you’re just asking for an even bigger gap.

2. I make well-informed, carefully considered decisions. I’ve yet to do a consumer study, or seen one from anybody else for that matter, in which any significant percentage of consumers said “I had no rational or logical basis for why I chose the provider I did” or “I flipped a coin, threw a dart, or rolled the dice” or “The woman I talked had a nice blouse on”. Consumers will always tell you that their decisions are the result of intelligent thinking.

3. I’d switch providers for that one thing you just asked me about. If 57% of consumers are interested in mobile payments, why would a higher percentage be willing to switch carriers for the service? What about the fees they’ll get hit with for breaking their contract? When push comes to shove, consumers lie down and don’t do anything. In the world of financial services, the percentage of people who actually pick up and leave their bank because someone else has a service their current bank doesn’t have is small. Really small.

4. I’m willing to pay a lot of money for that if you build it/develop it. Sure, go ahead and ask me if I’d be willing to pay for some new product or service you’re thinking about. No skin off my back to tell you “yes.” But did you ask my wife if she’s going to let me pay for that product or service when you release it? 🙂 More seriously, though, in hypothetical situations, consumers are always more likely to say they’d pay for a service. But what happens when they’re presented with a real-life choice of five add-on services? They might have said in research they’d be willing to pay for one, but they didn’t say they’d be willing to pay for all five, at the same time.

But hey, don’t let me dissuade you from thinking that 90% of consumers would pay for mobile payment options.

Getting Consumers To Switch Banks

Bank Systems & Technology reported on a study conducted by Harris Interactive on behalf of Xerox which found that:

“Americans said that although they’re not unhappy with their financial institution, many would switch banks given the right incentive. Of those who currently use a bank/FI…22% say they are satisfied but would switch banks with the right offer/incentive and 5% say they are dissatisfied and looking/willing to look for a new bank.”

That begs the question: What is the right offer/incentive to get that 22% to switch?

According to Compete, that might not be the lowest fees or best rates. According to their data, more than half of…whatever population they’re tracking…said “convenient location or ATM” was the reason they chose their primary bank. Less than one in five said “lowest account fees” or “best interest rate.”

But wait, that might not be right. Because JD Power and Associates says that:

“Consumers shopping for a new bank put more importance on a bank’s brand image than on the location of branches, the products and services offered, or the recommendations of others.”

On the other hand, a study from Acton Market Intelligence revealed that:

“Consumers rate People — the financial institution’s frontline staff, client service representatives, and senior level executives — as the most influential factor in their decisions to choose a certain bank or credit union for their primary banking services.”

But a closer look at that study shows that while 71% of people rated People as being “critical/very important”, 68% rated Products/Services as being critical/very important, and 66% rated Image/Community as being critical/very important. So yes, People is most important — but not by much.

Interestingly (to me at least), was that none of the aforementioned sources cited “service” as a particularly important factor. Oh sure, you could say that People in the Acton study referred to service, but I’d argue that service is a lot more than just people. For those of you at FIs competing on the basis of your (often self-perceived) superior service, you might want to take a look at, who concluded that “service, security [are] key issues when picking banks.”

So, if you would be so kind, please explain me something: Who’s right?

Read My Blog, Get Rich, Become A Genius

A study of subscribers to this blog has found that, compared to the national average, the typical Marketing Tea Party subscriber:

  • Earns 10 times more
  • Has a net worth 15 times greater
  • Has an IQ 35 points higher

Conclusion: Reading this blog makes you rich and smart. (Of course, the fact that you are already reading this means that you already knew that).

“But wait a second Shevlin,” you say, “you’re making a causal connection where they might not be any.”


Sorry to burst your bubble, but it doesn’t take a genius to figure that out. (Translation: People who don’t read this blog should be able to figure that out).

If that’s true, then how do you account for articles and blog posts like the one on NielsenWire that reported:

“The mobile banking consumer carries a higher balance than the average banking consumer and has a greater net worth. While still only representing a small percentage of banking households, that number is increasing. Understanding the unique needs of this lucrative segment could mean winning and retaining valuable customers.”

Guess what happens to the average balance and average net worth of the average mobile banking customer as mobile banking adoption increases. They decline. As more customers adopt the service, the averages of adopters trends toward the overall average.

(You get this, but only because your IQ is 35 points higher than the average).

There’s another problem with the logic in the Nielsen post: Just because an artificially defined segment of consumers has a higher than average level of income and/or net worth does not mean it has “unique” needs. And even if it did, as more and more people adopt mobile banking, those “unique” will become less and less unique.

Well, I told you that if you read my blog, you’d get rich and become a genius. You might not be any better off financially, but c’mon, admit it: You do feel a little bit smarter, don’t you?

The New Frugality Is A Crock

Ever since the economy started heading downhill, pundits have been announcing the advent of an era characterized by the “new frugality.” I’ve seen a couple of books heralding this alleged new mindset, as well as white papers from some very reputable consulting firms.

I haven’t bought into this from the start. I have strongly believed that as soon as the economy turns back, so will spending. Will it be the “conspicuous consumption” of the past? Maybe not, but today’s frugality isn’t going to last. Or so I maintain.

Problem is, I haven’t had any data to back up my opinions.

Technically speaking, I still don’t have any solid data to rely on, but there are some anecdotal pieces of evidence to support my contentionThe Next Great Generation Blog (how humble) asked participants, “ If you unexpectedly received $100 today, what would you spend it on?

Here are some of the responses (compiled by Carol Phillips on her Millenial Marketing site):

“Rent? Food? My heating bill, so I don’t freeze in cold, snowy Buffalo? Sorry, I’m boring. I’d go spend it on a concert ticket (two, if I’m lucky and buy from the box office to avoid Ticketmaster’s stupid fees!).”

“I haven’t bought shoes in at least a year, so a pair of black Johnston & Murphy Ainsworths.”

“I think I’d buy a sparkly dress and take a handful of over-worked, over-tired, over-caffeinated friends out for an epic adventure in the City of Dreams.”

“Probably booze and cigarettes…”

Maybe it’s me, but concert tickets, Johnston & Murphy shoes, sparkly dresses, and booze and cigarettes don’t sound like the spending habits of a “frugal” consumer.

There a couple of things going against the frugality argument:

First off, there are a lot of market researchers — me being one of them — who will tell you that asking consumers what their future behavior is going to be like is highly unreliable. Most recently, I saw this in research I conducted regarding consumers’ bill pay behavior where the percentage of respondents who said they were likely to change the way they pay their bills in the next two to three years was about 10 times greater than the percentage who said they actually changed their behavior in the past two to three years. We, as consumers, are just not very good at predicting the future — even when it comes to our own behavior.

Second, younger consumers’ perspectives are even more reliable (sorry if I offended you). For many Gen Yers, the recent downturn in the economy is the first one they’ve experienced as working, bill-paying, consuming adults. So they think their newfound frugality is something that will persist because it’s become fashionable to be frugal. But when their car turns 10 years old, and their kids become fashion-conscious teenagers, and…so on…if the economy is healthy and they’re earning money, then they will be spending that money.

I’m putting my stake in the ground now: The so-called new frugality is a crock of