Monitor the front door to "close" the back door.

• Author: Clapp, Bruce
• Position: Customer Retention

Most financial institutions are aware of "how many" people leave the bank, yet fewer are aware of "why" they leave. I will share a secret ... for most, the reason these people "leave" is the same for why they "came" in the first place. If they came for a free gift ... they left for a similar cost-based approach from another bank.

Our acquisition methods promote and, many times, increase our retention issues. If they came because of a "value orientation" as opposed to a "cost/price orientation" (that is, because of the convenience of your branches, a personal relationship with a banker and so forth), they immediately have a higher retention score. This does not mean you scrap your successful new account acquisition programs. It does suggest, however, that you pay special attention to three key indicators.

When purchasing, people act based on the knowledge they have at the moment of purchase, and they purchase on emotion and rationalize based upon fact. You have to balance the impact of "price" and "value" in the mind of the customer and on your balance sheet to ensure that you attract the "right" balance of customers.

Three areas to pay extra attention to in connection with acquisition activities:

1. Initial relationship depth. The depth, as measured by the number of services in the initial account-owning contact, is a critical tracking ratio. The depth indicates two key levels of impact: the effectiveness of the front-line staff and the level of commitment from the customer. If a customer plans to utilize the bank as a primary financial institution, the ratio will be north of 3.5 services and the reverse (below 3.5) for a customer seeking to simply use your Dank as a holding place.

2. Time between purchases. The shorter the time period between initial purchase and a secondary purchase indicates the satisfaction index and the loyalty level. Less than 30 days is ideal and indicative of a strengthening...