Reading the Customer

By Johanna Knapschaefer

To improve customer satisfaction, bank marketers are experimenting with new techniques to capture valuable feedback.

Consumer surveys continually highlight customer service as a weak spot for financial institutions. For the last decade at least, many banks have been so absorbed in their own internal issues, particularly merger-driven cost-cutting and reengineering, that customer service often received short shrift. The industry's propensity to raise fees to boost noninterest income hasn't helped either.

The result: banks needlessly lose some of their best customers every year to other providers, particularly nonbank brokerage and mutual fund companies. A survey by NewGround Resources Inc. last year found nearly half of customers agreeing "it wouldn't take a lot" for them to move their money to another bank if the other institution "really treated me well." "Disenchanted customers are voting with their feet," says Charlene Stern, senior vice president at the Chicago-based strategic marketing firm.

To help stem those defections, banks need to improve their customer feedback mechanisms. Besides annoying customers, traditional direct mail and telephone surveys are removed in time from the customers' actual experiences at the bank. "Banks have realized they are not effective at gathering information about their customers and are trying to figure out how to change that," says Kimberly Collins, an analyst at Gartner Group in Stamford, Conn.

The quest for more accurate data has bankers turning to a wide variety of information-gathering techniques, such as complaint data analysis; call center exit surveys; employee feedback groups; customer focus groups; and online surveys. Such tactics are supplemented with traditional strategic research methods such as market surveys and benchmarking studies. Through these methods, institutions hope to gain improved insight into what their customers are really thinking and then use that insight to devise strategies for retaining their loyalty.

The intent of most of the newer techniques is to get closer to the emotions driving consumer behavior and to gauge that sentiment closer to the time of the transaction. No one technique is 100% accurate, however, and some can actually backfire on the institution. Online surveys provide immediate feedback, for example, but might annoy customers if they bear too much resemblance to the much-despised Internet spam.

That's why experts advise a comprehensive and balanced approach, with specific survey techniques carefully matched to specific customer groups. "Successful approaches vary with the objective of the research," says Robert Hedges, managing director of retail distribution at FleetBoston Financial Corp.

Telephone surveys, Hedges says, can be useful for spotting and tracking broad trends, while customer focus groups then help the institution drill down and identify specific service problems. And the telephone surveys themselves have been revamped to provide fresher, more immediate information. Instead of calling customers at dinnertime, FleetBoston conducts a five-minute survey of a random selection of customers who connect to the bank's call center on a toll-free line.

The key, in most cases, is to weave queries into ordinary interactions between customers and the institution, so that feedback can be obtained with a minimum of distraction. "Customers don't want to be bothered, so we have to be better at leveraging the contacts we already have with them," says Michelle Convey, quality leader at J.P. Morgan Chase & Co. in New York City.

Exit Surveys

Before the 1980s, when geographic restrictions were liberalized, banks had an easier time understanding their customers. In the days when banks focused on their local markets and tellers knew many customers by name, bank marketers needed only to conduct simple telephone or branch surveys to gauge customer sentiment.

The advent of regional and now national banking has changed all that. When institutions sprawl across multiple regions, what suits customers in one area may not appeal to those in another. The increasing use of electronic channels, such as automated teller machines, telephone call centers and PC banking, also puts more distance between customers
and the institution. The local branch may no longer be the best place to sample opinion.

Meanwhile, getting an accurate read on customers is becoming more important as evidence accumulates of a growing disconnect between banks and their customers. NewGround last year surveyed 160 bank customers in three cities as to what advice they would give their own banks if those institutions wanted to keep their business. Sixty percent cited a need for improved service, up from 38% in 1997. The strongest demand was for more "humanized" personal service rather than more services or reduced teller lines.

Bank attempts to improve feedback loops are hindered by the fact that traditional data-gathering tools, such as direct mail and telephone surveys, don't work so well anymore. Customers trash the survey letters without reading them and use voice-mail to screen out unwanted telephone surveys.

This leaves institutions searching for alternative feedback mechanisms. Cost is one consideration. Randall Grossman, marketing director of Bank One Corp.'s retail unit in Columbus, Ohio, estimates a telephone survey of 500 people costs between $20 and $30 per person, not including overhead or the cost of designing the survey — compared with as little as $5 using e-mail. The cost of hosting a traditional customer focus group can reach $5,000 per group, he says.

Immediacy is also important. Traditional surveys reach customers some time after their service contact at the bank. Some of the newer techniques are designed to capture feedback when the customer's response is fresher. FleetBoston, for example, has been using telephone "exit surveys," in which customers who contact the call center via a toll-free line are randomly selected for a five-minute survey on the quality of service they received.

FleetBoston's Hedges says this kind of survey provides the company with "immediate feedback" on its products and services. Customer responses are tabulated and scored and then sent to call center managers the very next day, allowing FleetBoston to adjust its procedures quickly. "If we change the way our reps answer the phone, the surveys will let us know whether that change was something positive or negative for the customer," Hedges says.

Detroit-based Comerica Inc. plans to go a step further early this year by installing an automated telephone survey system. Under the proposed plan, customers who complete a teller transaction, deposit or account opening at a branch would receive an invitation, either placed on a receipt or in a follow-up mailing, to call an 800 number to voice their opinions about the service received. After listening to a greeting by the chairman of the bank, the system would launch into an automated, five-minute interview, which would be recorded digitally.

First vice president Albrecht Grabenstein says Comerica's proposed system is similar to one used by Applebee's Neighborhood Grill & Bar restaurants. Applebee's gives its customers a $3 meal discount for providing service feedback, and Comerica plans a similar type of incentive. "The cost of such a system is much cheaper than the cost of conducting live telephone interviews," Grabenstein says.

Complaint Watch

Some of a bank's most valuable feedback comes from customer complaints generated spontaneously. Morgan Chase, for example, monitors complaints emerging from multiple channels, including market surveys, focus groups and call monitoring by service reps. When these complaints reveal a pattern that can be corrected, the bank takes action.

In August, for example, Morgan Chase noticed an unusually heavy volume of checkbook orders. Since customers were complaining of errors on their checks, these had to be processed with "rush" status, which costs the company extra. An investigation revealed that one in every 10 checkbook orders contained an error.

In response, the bank eliminated some of the steps involved in processing the orders. Service reps now take the customer information on the phone and then transmit that information directly to the vendor. "Our research has proven that problem resolution helps build loyalty," Convey says.

Customer loyalty is a particular concern at First Union Corp. (now part of Wachovia Corp.). Following its disastrous integration of CoreStates Financial Corp. in 1998 and 1999, service lapses provoked massive customer defections. One technique favored by the former First Union's cash management, consumer credit and global cash management operations is a survey of exiting customers to pinpoint any dissatisfaction they may have.

"If we see a spike in closed accounts beyond normal attrition, we investigate," says Kathy Ridge, an executive vice president with predecessor First Union in Charlotte. She says it's beneficial to know what specifically made the bank non-competitive in terms of service levels and fees. By the time banks hear about competitor activities through ads and trade journals, it is often too late, she adds.

Recently, for example, the company noticed a large number of customer defections in Florida. In response, the bank hired a national market research firm to probe into the situation. "Sometimes customers don't want to complain to their teller," Ridge says.

Turning to cash management operations, managers obtain valuable feedback from customer advisory boards, which have been instrumental in helping the bank develop product and service strategies for the past decade. Representatives of commercial clients are invited to attend two-day focus group events in Charlotte, at the institution's expense. "We fly them in, put them up in hotels and wine and dine them," Ridge says.

On questionnaires sent out ahead of time, the customers are asked to rate products and services, including the sales force, backroom service, PC-based products for cash management, systems enhancements and imaging capability of new products. The advisory groups then discuss the results of these surveys and refer them to the appropriate managers.

Bank One Corp. also makes extensive use of customer focus groups. The Chicago-based bank organizes what it calls "ideation focus groups," consisting of between 10 and 20 customers, to help brainstorm for new ideas. A few years ago, a retail customer in one of these groups expressed the desire to transmit funds via e-mail. This comment led to the development of Bank One's eMoneyMail service, according to Grossman.

Since the arrival of its new chief executive, Jamie Dimon, Bank One has also been gathering customer feedback indirectly, through its own employees. Late last year, the company initiated an Internet suggestion box and convened internal focus groups. The goal is to encourage employees to voice their observations on day-to-day bank operations and make suggestions about how to improve customer service and efficiency.

The suggestion box has already generated some useful ideas. For example, Ryan Ballard, a senior financial service advisor with the bank's First USA card unit in Frederick, Md., suggested simplifying the number of menu options on First Assist, the system used by service advisors to answer cardholder inquiries. "This change will allow advisors to access the appropriate screen faster, which reduces the amount of time a customer is on hold, speeds up service and reduces stress for advisors," Ballard says.

Another employee made a suggestion, still awaiting implementation, for speeding up the consumer loan process. Brook Erickson, a technical trainer in the consumer lending unit in Phoenix, Ariz., noticed that documents for consumer loans at Bank One are date-specific and have to be rewritten if customers need to reschedule their appointments. He recommended putting a seven-day range into the documents. "That way, the company would save money, eliminate an inefficient practice and improve customer service," Erickson says.

Electronic Feedback

As more customers try out Internet banking, the online survey is emerging as a tool for immediate customer feedback.

Customers who visit First Union's Web site are offered the opportunity to make service-related comments, on the homepage or mortgage applications, for example. Select customers further receive "push surveys" designed for a targeted audience, such as those who use the bill-pay service. "We can get feedback within days," says Gayle Wellborn, senior vice president in First Union's e-channel division.

The bank then analyzes this feedback, often incorporating it into new product offerings. "We've incorporated a lot more of the customer's voice in the design and creation of products and services up front," Wellborn says.

Despite the ease of online surveys, First Union uses them with caution since there's the possibility of a negative reaction. "We're very careful that we don't spam customers everywhere they go," Wellborn says.

Some banks offer customers incentives to respond to online surveys. Last August, Comerica customers who answered questions about their Web banking usage patterns and satisfaction levels were entered into a drawing for an assortment of prizes, including tickets to a Detroit Tigers baseball game at Comerica Park.

Despite its ease of use and ability to elicit quick responses, experts say the online survey is not a panacea. Although between 15% and 25% of American households have at least dabbled in online banking, according to researchers, a much lower percentage uses it on a regular basis. Gartner's Collins warns that banks relying too heavily on online surveys will end up with a skewed result that doesn't reflect the opinions of their larger customer base.

Regardless of how banks choose to obtain customer info, the key is finding a strategy that builds trust and long-term relationships. That not only means listening carefully to what customers have to say, but also following through with an improved organizational approach.

Ms. Knapschaefer is a freelance writer based in Pittsburgh.

Copyright © 2003 by Banking Strategies, published by BAI.

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