Retail banks' loyalty declines further
For a fourth consecutive year, customer loyalty and perceptions of brand image among retail banking customers continue to decline, while satisfaction has leveled off, according to the J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study.
The study found that overall satisfaction of retail banking customers averages 748 on 1,000-point scale in 2010 - a slight decrease from 749 in 2009. The brand image of banks has also continued to decline, with customers perceiving banks as being more profit-driven than customer-driven, compared with 2009.
In addition, the percentage of customers who say they "definitely will not" switch banks during the next 12 months has decreased significantly during the past three years to 34% in 2010, compared with 46% three years ago in the 2007 study.
The gap in loyalty intent between customers of larger and smaller banks is considerable, with 41% of customers at smaller banks who say they "definitely will not" switch, compared with 32% at larger banks.
Higher customer satisfaction with in-person service and attention is an important contributor to increased loyalty at smaller banks. Acquisition rates are also improving at smaller banks, with new customers accounting for 8% of the customer base, compared with an industry average of 6%.
Poor customer service - the most common reason given for switching banks - was cited by 37% of customers who changed their primary bank in 2010. Performing simple service acts - such as such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business - may increase overall satisfaction by nearly 50 index points, despite the fact that less than 60% of customers report experiencing them.
"As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right," said Michael Beird, director of banking for J.D. Power and Associates. "Banks that get back to the basics - such as maintaining a clean branch and greeting customers upon entering - may help to alleviate some of the distress customers are experiencing and increase their overall satisfaction."
Fees continue to have a major impact on customer loyalty, as 29% of customers who switched banks in 2010 cite high fees for products or services as their reason for switching.
According to Beird, "Customers tend to be considerably less dissatisfied when they have different overdraft options, such as the ability to transfer funds from a savings account or receive a balance alert. Proactive communication may also help to lessen the negative impact of fees, as satisfaction is more than 100 points higher among customers who are aware of changes in fees ahead of time, compared with customers who are taken by surprise."
The study also found that customers may be highly satisfied even when they are charged bank fees, provided that they perceive they are receiving sufficient value in exchange. When satisfaction with fees is above average, customer's ratings for branch access and appearance, promptness of being served, and the bank's website navigation and range of services are also higher than average.
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