Looking for new customer-experience breakthroughs.

• Author: Hall, Robert
• Position: MARKETING SOLUTIONS

HERE IS A ONE-QUESTION QUIZ: What company in 2010 created the largest lead over its competition in customer satisfaction? A hint: Its retail stores played a very key role. The answer, which we will get to shortly, is highly relevant to a banking industry facing daunting challenges from three ongoing trends.

First we continue to see our customers less. American Banker reports that in the first six months of 2007 compared to the first six months of 2010, the average per-branch transactions fell from 10,000 per month to 9,000. The number of bank branches fell 1 percent in 2010. Electronic banking, check processing machines, ATMs, kiosks and other technology continue to eliminate face-to-face and even call center interactions. No one wants to get "Netflixed" and become the Blockbuster (the bankrupt movie rental company) of banking. But while these technologies may lower cost, it is hard to build stronger customer relationships and revenues when you have less contact with your customers.

Second our customers are less loyal. According to the J.D. Power 2010 survey on Retail Banking Satisfaction, customers are more willing to switch banks now, notwithstanding the hassles of opening new accounts and setting up new links for payments and deposits. The study found that 66 percent of customers would contemplate switching, up from 54 percent three years ago, and that many believe banks are more profit-driven and less customer-focused. Whatever we are doing in the interactions we have with customers is driving them away rather than building commitment. Increased customer switching behavior adds to the cost of closing out accounts and requires expensive customer-attraction initiatives to replace defecting customers. All this at a time when new legislation has demolished fee income.

Third, for small-business customers, so important at the local market level, projected add-on purchases are down. According to J.D. Powers Small Business Banking Satisfaction Study, these customers exhibit the lowest satisfaction levels. For the second consecutive year satisfaction and residual customer loyalty have declined with only 19 percent of customers (business owners) saying this year they "definitely will" reuse their financial institutions for additional business products, compared with 34 percent in 2008--a huge drop. Small business, a primary source of job creation, is a segment that bank branches should be especially equipped to win.

Technology vs. customer...