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Bain and Company Paint a New Picture of Loyalty in Retail Banking

Bain and Company, the home of Fred Reichheld and the repository of a generation’s worth of loyalty information and research, released a study that surveyed the key factors that determine customer loyalty in retail banking.

Customer loyalty in retail banking Americas 2011 was written by Gerard du Toit and Beth Johnson and surveyed nearly 97,000 account holders from banks across the US, Canada, Mexico and Brazil, conducting additional research with more than 5,100 bank customers to “identify which interactions conducted through which channels earn their loyalty and why”. The report may be found here.

The study concluded with some key points, saying that “Loyalty is built interaction by interaction through:

  • Exceptional member service
  • Convenience and accessibility of products and services through the branch network
  • Experiences that strengthen brand reputation and emotional bonds

Bain recommended that banks recognize the importance of three moments of truth in the customer experience interaction chain:

  • Routine transactions such as deposits, withdrawals, and funds transfers
  • Moments of truth such as lost card replacement or mortgage application
  • Wow experiences, defined as routine experiences transformed by technology

According to the survey, customers expect Routine transactions to take place “routinely” and view them as table stakes to the banking game. Not all banks are able to transform the ordinary into a Wow moment through technology, so larger institutions have the edge in the Wow category. The remote deposit capture technology offered by Chase and others would be a good example of how to make a routine transaction easier and more “cool”.

The magic, according to the study, can be found in executing very well in Moments of Truth with customers. Less than 10% of all transactions fall into this category and most are concentrated in live channels where customers are face to face with a banker or speaking by phone. To capitalize on customer’s desire for personal service, banks described as “loyalty leaders” need to excel in these moments.

One interesting point to think about in the report was a statement that “Member loyalty is not another initiative that banks can drive”. Bain states that loyalty can only be earned over time, must be built patiently on a foundation of daily leadership, and that a culture of measurement and continuous improvement will guide the bank to the best outcomes.

Following this path, Bain states that “competitive advantage comes from defining a set of qualities that define Member experiences and builds relationships”.

Clearly Bain is highlighting the importance of customer experience, operational execution, and consistent measurement – all foundational elements of the loyalty designs that Kobie Marketing  recommends for its clients. The report did not address the role of incentives in any way, leaving a hanging question of whether Bain is quietly moving to support another structure for loyalty programs, more in line with its Net Promoter Score metric.

We’ll keep watch on this one. Please drop us comment with your thoughts on the subject.

Author: Bram Hechtkopf

Bram leads the “marketing of Kobie Marketing.” He consults with current and prospective clients on new business opportunities, helping to develop customer retention and loyalty marketing strategies and solutions that drive increased retention and spend. Following in the footsteps of his father, Kobie’s founder, Bram is eager to continue Kobie’s vision of technology and data analytics as enablers of leading-edge marketing executions for world-class customer loyalty initiatives. Bram has consulted with a wide array of leading brands including AMC Entertainment, TGI Friday’s, BJ’s Restaurants, Verizon, Bank of America, RBC, Flagstar Bank, JPMC, Sagicor, Coca-Cola, Cox Enterprises, Ruby Tuesday, Hawaiian Airlines, and Royal Caribbean Cruise Lines. Prior to Kobie, Bram worked with the Human Capital Transaction Advisory Services practice for Ernst & Young, LLP, where he developed and presented analyses and recommendations on executive incentive and equity plan design and due diligence findings to senior management and the Board of Directors of Fortune 1000 clients. Prior to Ernst & Young, Bram worked with Towers Perrin in Manhattan as a consultant specializing in incentive plan design for executives and sales forces. Bram received his Bachelor of Business Administration degree with honors from the Goizueta Business School at Emory University with a concentration in Marketing and Information Technology.

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