Banking satisfaction is not loyalty, says study

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By: Wise Marketer Staff |

Posted on March 1, 2004

When banks conduct customer satisfaction surveys to estimate levels of customer loyalty, they may be missing vital clues, according to a study by Phoenix Marketing. Even high levels of satisfaction may be masking future retention problems, forming a 'loyalty gap' between customers and bank advisors.

According to Phoenix, if banks continue to determine how loyal their customers are based on satisfaction surveys, they risk missing problems that are buried deeper in the relationship. In short, customer satisfaction and customer loyalty are not measures of the same thing.

New data from Phoenix Marketing's ongoing programme to measure the investment and lifestyle behaviours and attitudes of affluent and high net worth households puts the satisfaction versus loyalty issue to the test. Phoenix developed a proprietary measurement of loyalty called the Phoenix Affluent Loyalty Barometer, which is based on the premise that the foundation of customer loyalty is willingness to take action on behalf of the brand - effectively it is an indicator of the depth of commitment and investment in a brand.

Qualities of loyalty
Phoenix believes that being willing to take action on a brand's behalf means that the customer is willing to recommend the brand to someone else, and be a 'brand evangelist'. The Barometer is an additive score from 0 to 100, based on four components:
·  Willingness to recommend the brand if asked;
·  Checking with the brand if a new product is needed;
·  Resistance to switching brands;
·  Finding value in the brand.

Satisfaction or loyalty?
In the study, affluent households gave their bank advisor an average loyalty score of 69 (roughly average compared with advisors from other financial firms, such as investment companies, and mutual fund companies). So how does a loyalty score of 69 compare with satisfaction with this advisor? Using the same scale, the average satisfaction score for bank advisors was 78 - some 9 points higher than the loyalty score.

And there are other examples. The Phoenix study found that independent financial advisors are the loyalty leaders, with an average loyalty score of 75. Yet their satisfaction score, using the same scale, is 80. The satisfaction scores for the leading advisor-oriented companies all had loyalty scores ranging from 7 to 15 points higher as well.

The loyalty gap
But what is the reason for this discrepancy? On the surface, it could be argued that banks and investment providers are doing a relatively good job at satisfying their customers while not doing such a good job building a loyal client base.

But, according to Phoenix, in many cases the high levels of customer satisfaction may be masking future problems with retaining those same customers, creating a hidden gap in the company's perception of their customers' loyalty.

Satisfaction drivers
The study examines the drivers of both satisfaction and loyalty. For bank and financial advisors, the key drivers of satisfaction are relatively 'soft' elements such as service quality, the relationship with the advisor, and ease of doing business.

These may be important elements in the customer relationship but the question is whether or not they are the elements that form the foundation of a sound customer retention strategy (ultimately leading to increased profits and growth). The answer is probably no, says the study.

Loyalty drivers
The top three drivers of the loyalty of affluent customers to their bank advisors turned out to be very different from the satisfaction drivers. The key loyalty drivers are more concrete: the quality and frequency of communication with the customer, the percentage of assets that the customer has with the bank, and whether or not the advisor has completed a financial plan with the customer. Improving communications, increasing assets under management, and implementing a financial plan with the client are all ways that bank advisors can impact affluent customer loyalty.

But if a bank purely measures customer satisfaction, it may never understand the significantly different drivers of loyalty, and never spot the loyalty gap until it is too late.

Phoenix's Affluent Marketing Service tracks trends, behaviours, market size and purchase intentions in the affluent and wealth markets continually. It collects information from over 6,000 affluent households, segmented by investable assets.

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