Are banks tracking the right growth indicators?

A survey of banking executives and customers suggests that measuring return on experience (ROX) is a common attribute of growing institutions.

Financial Institutions witnessed significant change during the past three years. How banks track these changes as part of their growth strategy formed the premise of SLD’s “Measure what matters” study, which in February asked more than 600 executives and 1,600 banking customers in North America a series of questions to identify differences between banks that experienced growth in customer loyalty, retention, sales and depth of relationship and those that saw declines.

The study discovered a range of diverging factors between the 67% of institutions growing in business activity versus 20% of financial institutions who maintained static and 13% that declined. We all know which category banks aspire to be part of, but what is needed to reach the desired state?

To help answer this question, we share defining factors for the growers versus the hold-steady and decliners over the past three years.

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Banks with significant growth in business activity

Larger institutions with higher branch visitation: The growth segment predominantly reflected larger financial institutions, those with 500 to 5,000 employees. Larger regional banks reflected the highest growth at 20% or higher. Institutions with more than 20% growth over the past three years had a significantly higher rate of transactions occurring through physical locations, along with some online transactions. Banks with renovated branches tended to report 20 times more visitations and purchases of additional services, indicating that attention to the customer journey through modern design matters to consumers.

Strong use of ROX metrics: A substantial number (62%) indicated their bank tracks return on experience (ROX) metrics to evaluate their overall company performance. The main reasons given for tracking ROX: allowing for better planning, greater performance accuracy and impact on profitability. In addition, they rated the importance of measuring company culture, customer loyalty, social and environmental impact, and employee engagement at 80% or higher.

Measure more metrics with more tools: From a list of over 17 different ROX metrics, the growth group leveraged more than 10 factors significantly more often than their status quo/decline counterparts, such as customer satisfaction, average time resolution, social mentions, customer sentiment, customer acquisition and retention, and employee satisfaction. In addition, they use a broader range of tools to measure ROX, such as primary consumer quantitative research, third-party industry reports, social media mentions and comments, customer complaints and employee input and analysis.

ROX is tracked across the entire customer journey: The study also explored where banks measured ROX as part of the customer journey across the attract pre-purchase, transact purchase and retain post-purchase stages. The growth banking segment are more likely to track the entire customer purchase journey and are also more likely to include the pre-purchase stage, which tends to be neglected in the banking sector.

More sophisticated emotional metrics: The growth banking segment also ranked employee engagement/retention and customer sentiment and emotional scores as factors they would like to add to their ROX metrics.

Banks with no growth or decline

Smaller banks experience lower overall growth: Financial institutions with stagnant growth represented the 21% of respondents, followed by an equal rate for banks with 5%, 10% and 20% rates of decline. Smaller financial institutions – with fewer than 500 or between 50 and 100 employees – represented the largest group with significant declines.

Lower ROX tracking and fewer branch visits: Those institutions with a growth decline of 5% or greater over the past three years had a significantly higher percentage of their transactions through online channels, with fewer through physical locations. In addition, only 38% indicated their company tracks ROX metrics. More than 30% do not track ROX metrics, and an additional 32% are not sure.

Too many metrics and lack of support: The primary reason for not tracking ROX metrics is the challenge of having too many metrics to measure, followed by a lack of support. This group focused more on operational efficiencies and customer loyalty.

Do not track pre-purchase metrics: This group tracks the fewest number of pre-purchase stage metrics. They also have the most customer purchase journey metrics in the planning stages, indicating they are only just getting started.

Key indicators focused on implementation: Similar to the growth segment, lower growth institutions track customer loyalty as the leading indicator guiding the organization’s performance. The company share price is how this group notes lagging signals and on-time/on-budget delivery as the critical progress gauge. Lagging progress indicators suggest lower growth banks are playing catch-up in driving customer loyalty and overall experience.

The study supports the premise that tracking ROX across the entire customer journey impacts growth. It is critical for banks with lower or declining growth to find a senior leader champion who can help support new customer experience tracking metrics. As the market continues to consolidate and disrupt, leveraging a differentiated customer experience is key to remaining relevant and growing in the future.

Jean-Pierre Lacroix is president of SLD Inc.