Overall, financial institutions are falling through the 'delivery gap' with only 50% of their customers feeling they get positive value from their current financial service providers, according to the first annual 'Financial Services Loyalty Benchmarking Report' from South African analyst firm Markinor.
The study, which was conducted by telephone with a random sample of 1,332 customers of financial services companies, was created to provide information reports and analysis in four areas of the financial services sector:
· Retail banking;
· Short-term insurance;
· Long-term insurance;
· Healthcare insurance.
According to Heidi Brauer, marketing director for Markinor, an environment of consolidation, acquisitions and mergers means it is critical for businesses delivering financial services to consumers to understand the changing and increasing expectations of their customers.
While the report identified the companies that - in Markinor's opinion - are the stars of their sector, it also uncovered some unexpected loyalty variations. "When assessing customer loyalty profiles, we found that one in three customers (33%) will continue using their providers reluctantly and have negative perceptions of and attitudes toward their providers," explained Brauer. "And as many as one in five (20%) already have one foot out of the door. Trapped and at-risk customers don't want to use the services of their provider and, if the exit barriers were to be reduced, a large number would be at risk of defection, creating significant churn in the industry."
According to Markinor, the most significant factors leading to both positive sentiment and business-enhancing customer behaviour include: the ease of doing business with the provider, the quality of products and services, and the brand. In a market where consumers complain of commoditisation, the differentiators for financial services providers are increasingly service and identity related. Moreover, the value for money offered by short-term and long-term insurers, and by medical aid firms, is an additional driver of loyalty in these sectors.
Of the four sectors included in the survey, retail banks were found to have the highest level of truly loyal customers, even though only 50% of banking customers actually want to continue doing business with their current provider. "Loyalty in this sector tends to decrease as personal income increases, even though the barriers to exit are less daunting for the higher income earners," noted Brauer.
Long-term insurance providers are in a similar position, being able to count on the loyalty of approximately half of their customers, although the higher income earners said they were still looking around for better deals or providers.
Medical aids and short-term insurers faired less well: They can count on only 40% being truly loyal customers, and the phenomenon of potential churn is particularly pronounced in these sectors. This is indicative of the "grudge purchase" nature of buying behaviour among consumers. Relationships that these two sectors have with consumers are especially vulnerable to attrition as 20% of customers said they do not want to - and do not intend to - continue their relationship with their current provider.
Brand loyalty's role
Another area that impacts customers' loyalty across the board is brand, particularly in the retail banking and long-term insurance sectors. An additional challenge for banks is to combine product innovation with highly ethical behaviour. The message is clear, the report says: as custodians of customers' financial well-being, banks must never place profits ahead of ethics.
For long-term insurers the challenge is to couple innovation with strong leadership. According to the report, reliability is a broad driver of loyalty among medical aid customers, whereas an important branding ingredient for short-terms insurers is being perceived as being financially sound. The survey also found that, despite financial service customers expecting high-tech solutions, they still want "high touch" service based on a return to relationship-driven business practices.
People and products
The face of a retail bank is its front-line staff. Teller staff, along with products, were found to have a significant effect on customer loyalty in this sector. However, customers' expectations are clearly not being met completely as only 57% rated their bank's teller staff as excellent or very good.
For medical aid firms, the claims and payment procedure is the strongest driver of loyalty, followed by call centres, billing, and statements. This was the only sector where products were not found to have any significant effect on loyalty.
For long-term insurance companies, interfaces between consultants and call centres influence customer loyalty the most. However, products do play a key role because of a very strong demand for innovation. But, while two thirds (66%) of customers rated their consultants as excellent or very good, just less than half thought the products of these companies are adequate, and only half believe the call centres are as good as they expect.
The one sector where the product drive plays a dominant role is short-term insurance. This is a sector in which a host of cost-cutting variants of established structures are marketed aggressively. Even so, companies in this sector got a positive vote from only 50% of their customers, and less than half said they would vouch for the value they get for their money.
The full details of the survey, which examined the opinions of 492 retail bank customers, 795 medical aid customers, 768 short-term insurance customers, and 570 long-term insurance customers, can be obtained directly from Markinor.
The full results are available in the form of four separate reports on retail banking, short-term insurance, long-term insurance and healthcare insurance. In each of these reports Markinor provides in-depth information and insights on the leading companies in each sector, including:
· consumer attitudes toward each sector;
· loyalty measurements;
· consumer attitudes by brand, quality, price, and value for money;
· image perceptions; and
· touch points with consumers.