RETAIL DELIVERY SPECIAL REPORT Part
II
Give The Customers What They Want (and in most cases, it's not a
relationship)
BY PAUL MCADAM
BAI's The Frontline Experience consumer research calls for a
rethinking of the one-size-fits-all approach to relationship-building; some customer segments will be receptive, others
won't. And all involved — consumers, management and employees — say the frontline needs
help.
CONTENTS
Research Overview/Introduction
Meet the Relationship Segments
Bankers’ Relationship Expectations Out of Synch With Consumers’
1 Out of 4 Frontline Employees Say They’re Not Prepared
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SYNOPSIS | BAI's The Frontline Experience research reveals that 70% of
consumers are not receptive to the notion of having a relationship with their primary banking institution. The
fundamental strategic question exposed: How can a retail bank simultaneously align its resources to adequately
serve customers who want a relationship versus the more utilitarian set of customers who simply want convenience,
products and service? Five distinct customer segments are identified.
“Relationship banking” is the bedrock of most financial institutions’
retail strategy these days. The proposition that banks should strengthen their relationships with customers by
selling them more products and services, thereby increasing the loyalty and profitability of those customers,
seems obvious. Why wouldn’t an institution want to do that? What else would or should be done?
Consider, though, that only 31% of retail banking consumers say they are highly receptive to
the idea of developing a relationship with their bank. This is a key finding of BAI ’s The Frontline
Experience research project, which is based on a national consumer survey AboutThe Frontline
Experience. The study further found that perceptions of inefficient, unfriendly and poorly trained
branch staff are key drivers of dissatisfaction and even mistrust, in some cases, among the 69% of consumers that
are either indifferent or highly skeptical of the notion of developing a relationship with a bank.
This research builds on the findings of BAI’ s 2004 research survey of 520 senior
retail banking executives, which revealed that 90% of U.S. retail banking institutions emphasize relationship
banking or service quality as their primary value proposition. The 2004 The Frontline Factor identified
a gap between the expectations of senior management and the ability of their front-line employees to effectively
deliver.
In representing the views of 3,748 consumers, our 2005 work provides added insight on the
difficulty banks have had in implementing relationship banking strategies. The Frontline Experience reveals
yet another gap between strategy and execution. The majority of the general public does not have a positive view of the
customer frontline experience at banking institutions.
For their part, frontline employees also are frustrated. Our analysis of employee attitude surveys Frontline Employees Say They’re Not Prepared revealed that over 25% of
frontline branch staff are dissatisfied with key components of their employers’ sales process, training,
goal-setting, staffing and compensation programs — key programs that are intended to equip them to enhance
customer relationships. When this finding is combined
with the other facets of The Frontline Experience research project, the ramifications are troubling.
While this research doesn’t demonstrate that relationship banking itself is a flawed
strategy, it does suggest that success will require the overcoming of execution deficiencies, which have to do with bank
staff. From the perspectives of customers, the primary deficiencies with banks’ relationship-based approaches are
not due to product- or convenience oriented factors, but rather to the quality of interactions with frontline staff.
Customers raise issues about whether that staff is knowledgeable and well trained and whether it executes transactions
and service requests quickly.
The one-size-fits-all approach to developing relationships will not work, the research makes clear.
We recommend that industry executives approach relationship-
building initiatives from a customer segment perspective. Alignment of resources being deployed into frontline products, staffing and training with the
needs and preferences of at least five distinct customer segments is likely to yield more effective relationship-building results.
How do Customers Define Relationship?
Traditionally, the underpinnings of competition in retail banking have been convenience, product
pricing, service quality and the overarching theme of establishing trusted relationships. But as banks have developed
national or regional distribution networks, achieving sustained competitive advantage through pricing or convenience has
become increasingly difficult.
Attaining long-term differentiation through a value proposition based on sustained price leadership
is generally feasible only for banks that possess either massive scale advantages or superior operating efficiency. And
given the omnipresent availability of banking services in most major markets, few institutions can rely on convenience
as a competitive advantage.
Small wonder, then, that many banks are looking to the softer domains of service quality and
relationship-building to differentiate. Once reserved for private banking or high net-worth individuals,
relationship-building approaches have now migrated to the mass market, with the promise of delivering deeper customer
loyalty and a greater share of the consumer wallet.
But what does the concept of having a “relationship” with a bank really mean to a
customer? A dictionary
will typically use the following phrases to define the word “relationship:”
- Connected by common origin, such as marriage or kinship;
- The connections, dealings or associations bringing together persons or groups in
personal or business affairs;
- A particular state of affairs among people related to or dealing with one another.
These definitions imply themes of affinity, family connections and of people working together to
achieve common goals. Do customers and bankers really have mutually consistent definitions of what constitutes a
relationship? Our research suggests not Bankers’ Relationship Expectations Out of Synch With
Consumers’'.
Banking executives interviewed for the project tended to refer to customer relationships in terms
of bank-oriented benefits, such as “having a multi-product relationship with a customer” or “gaining
as much of a customer’s business as possible.” Only a few bankers defined relationship in terms of customer
benefits, such as “relationships are all about what’s in the customers’ best interests.”
The research demonstrates that trust and confidence are the foundational elements of a relationship
from customers’ perspectives. But these are not abstract concepts. Customers view the concepts of trust and
confidence as part of a hierarchy that starts with the bedrock principles of safety, accuracy and professionalism and
builds into more complex principles of fairness and authenticity. Ultimately, customers want to have confidence that the
bank and its staff are acting in their best interests.
Relationships are built on experiences. Unless customers’ perceptions of trust and confidence
are secured in the lower levels of the hierarchy — safety, accuracy and professional interactions during routine
transactions — banks will not be granted permission to evolve the relationship into the advisory stage.
This does not suggest that convenience, product features and pricing are not important. Our
research found that some major customer segments acknowledge the convenience and product performance provided by their
bank. They’re just not interested in forming a relationship with their bank, which is ultimately a process
determined by the customer. Bankers cannot make a customer relationship; they can only generate a consistent set of
experiences that ultimately guide a portion of customers to this desired state.
The Frontline Experience demonstrates that customers’ perceptions of the quality of
the interactions they have with branch staff have a tremendous impact on their overall receptivity to establishing a
relationship with the institution. The importance of in-person interactions with branch staff to relationship-building
is highly apparent, not only in frequent interactions with tellers for routine transactions, but also in the
higher-value interactions that are involved in all of the major stages of a customer’s lifecycle with a bank
— shopping prior to a new product purchase, account opening, new customer on boarding, the purchase of additional
products and the closing of product relationships.
The ability of frontline staff to provide the five Ps of prompt, positive, polite, perceptive and
personal service in routine as well as high-value interactions is essential. But meeting these basic customer
expectations will not be sufficient to differentiate a bank from other providers. These interactions must also cultivate
trust and confidence, and
ultimately involve frontline staff that will take ownership of the customer need or problem.
It’s an enormous task to ask every frontline employee in every branch to not only handle but
also to take ownership in every customer interaction in a manner that builds trust, confidence and relationship
receptiveness. In fact, it’s impossible. Yet banks must necessarily focus on what is possible. There are steps
that can be taken to meaningfully enhance customer service and nurture relationships that will grow.
First, realize that there is a major group of customers that define relationships differently than
bankers. Many don’t want a relationship. Second, understand the building blocks of customers’ relationship
hierarchies. And third, realize that the progression of customers through that hierarchy will vary. This speaks to the
need to understand customer segments Meet the Relationship Segments.
CONTENTS
Research Overview/Introduction
Meet the Relationship Segments
Bankers’ Relationship Expectations Out of Synch With Consumers’
1 Out of 4 Frontline Employees Say They’re Not Prepared
Questions or comments about this article? Post them at the Banking Strategies blog.
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