'Value' drives loyalty more than 'satisfaction'.

• Author: Triplett, Ted
• Position: CUSTOMER RETENTION

MANY BANKS BELIEVE THEY HAVE A RELATIONSHIP WITH THEIR CUSTOMERS based on customer satisfaction ratings. They assume that customer satisfaction equates to relationship strength and means that clients will stay longer and buy more products and services.

However, a survey by the ABA revealed that satisfaction is not a guarantee of loyalty. Therefore, while it may seem intuitive that increasing customer satisfaction will increase customer retention and therefore profits, the facts are contrary.

Research by Bain & Co. has shown that, in business after business, 60 percent to 80 percent of customers who defect to a competitor said they were satisfied or very satisfied on the survey just prior to their defection.

However, some of the most convincing evidence is found in the time-tested research of Professor Robert Peterson of the University of Texas, who found that in most surveys of customer satisfaction, 85 percent of an organization's customers claim to be "satisfied," but still show willingness to wander away to another provider.

Creating and delivering value

Mere satisfaction does not create an emotional connection between a bank and its customers. My research indicates a customer's future intentions are not entirely associated with their level of satisfaction, but are more closely related to the health of the relationship they have with the bank.

At a minimum, a bank must understand what customers value in their banking relationship and how to create, communicate and deliver that value to them. Otherwise, these reportedly satisfied customers will go to a competitor once they are made aware of greater value.

It is important for bank management to understand from the customer's perspective how well the bank is doing at building stronger customer relationships by creating value for its customers. In essence, value describes the nature of the relationship between the customer and the bank, while satisfaction is a representation of the customer's reaction to the value received from a particular product offering or service.

Satisfaction is strictly tied to the customer's perception of product and service performance...