Banks must monitor engagement to keep customers

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By: Wise Marketer Staff |

Posted on October 20, 2008

An Allegiance 'Pulse of America' survey reveals that Washington Mutual and Wachovia experienced steep declines in customer engagement prior to the recent buy-outs.

In its ongoing national survey of consumer attitudes toward banks, Allegiance noted that Washington Mutual and Wachovia Bank saw sharp declines in customer engagement starting in the second quarter of 2008 until the present. Washington Mutual fell from 31% to 21%, while Wachovia dropped from 36% to 26%. Allegiance recommends that financial institutions pay special attention to customer loyalty and engagement to avoid losing depositors.

Each quarter, Allegiance gathers data from a census-balanced sample of about 1000 consumers who use a cheque account. Respondents are asked questions that are designed to reveal key drivers that affect customer emotions. The data is used to understand how to engage banking customers, and can be filtered by gender, age, income, race, length/depth of relationship and more.

Analysing a full year of surveys, Allegiance found that an average of 36% of consumers were engaged with their primary financial institution. In Q2 of 2008, Washington Mutual and Wachovia had average or slightly lower than average customer engagement, with 36% for Wachovia and 31% for Washington Mutual. However, the engaged group moved to the swing category in large numbers in the following months. A full 10% of WaMu and Wachovia customers, representing millions of customers, downgraded out of the engaged group. According to Allegiance, this could indicate that these banks were cutting back on efforts to engage customers.

Not surprisingly, in California and Florida, where sub-prime mortgages were highly concentrated, banks had a significant downtrend in engagement scores. In fact, disengaged customers tripled in California from Q1 to Q3. Another interesting factor uncovered was that nationally, upper middle class customers in the US$75K to US$150K income level had an 11% drop in engagement from Q2 to Q3, the highest when compared to other income groups.

According to Kyle LaMalfa, Allegiance best practices manager and loyalty expert, "The most critical opportunity for improving customer engagement in the banking industry is to reduce customers' stress and worry about the future. Banks should use product and communication strategies that connect with consumers' need to feel protected. They should also constantly monitor engagement to keep their business strategies aligned with consumers' concerns. This will help banks regain trust and retain customers."

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