CU$TOMER $ATI$FACTION $TILL COUNT$ - [884 words]
U.S. banks with the worst customer satisfaction ratings are running into the most profit troubles.
For the past decade U.S. banks have dedicated themselves to merging, closing branches, firing workers, and charging higher fees — fees that have doubled to $21.5 billion. The toll on employees and customers has been great. However, shareholders were supposed to benefit from increased profits and higher stock prices.
WRONG! According to Vernon Silver of Bloomberg News, the banks that boosted fees and cut service are losing deposits and depositors as their customers flee to credit unions and less costly banks. When deposits drop, banks are forced to more expensive money markets to get cash for loans, thus reducing profit margins.
In a booming economy:
First Union [ranked worst in Consumer Reports June customer satisfaction survey] experienced an 11 percent profit drop in 1999 and analysts expect an additional drop of 15 percent this year. The bank’s stock has lost more than half of its value since the beginning of 1999.
U.S. Bancorp [ranked third worst of 20 major banks] says earnings growth will slow this year because it cut customer service too much.
Bank One Corp. [ranked seventh worst of 20 major banks] earned $530 million less than expected in 1999 as it lost customers. Profits may fall 26 percent this year.
Satisfied customers are the key to drawing and maintaining deposits, according to a study conducted for Bloomberg News by First Manhattan Consulting Group. Their study found that banks with the highest customer ratings had a 2 to 3 percent growth in deposits for 1995 through 1999. Banks with the worst ratings had a 2 to 3 percent deposit decline. Seventy percent of the growth [or shrinkage] of bank deposits was related to customer treatment, fees, and how much interest they paid. Deposits represent a cheap source of cash for profit making loans.
How does this apply to your non-banking organization.
To make customer satisfaction count, you’ve got to count customer satisfaction
What do your customers want, expect, like, and dislike about your service? How do you monitor this on an ongoing basis? How do you quantify your customers’ servicing needs? What is the value of your service in terms of customer reorders, retention, and loyalty?
If you don’t have answers to these questions your organization is vulnerable to the next proposal to increase profits by cutting service and staff, and replacing them with "cost effective" technology. Your opponent in the argument will be armed with a PowerPoint presentation of slides, graphs, and spread sheets justifying the benefits of cuts. You’ll find yourself incapable of presenting a financial argument for the value of customer service and satisfaction.
Rarely is there a business that can not increase short term profits by laying off employees and replacing them with technology — voice mail, automated email, CRM software, IVR [Interactive Voice Response], web site development. All of these technology tools can be used to enhance your customer service effort.
The problem occurs when they are used to replace, rather then enhance, customer service. Three examples come to mind:
AT&T lost Growth Associates as a 15 year customer when the Customer Care number was answered repetitively by a machine that offered no options for contacting a service person.
Hunter Fan provides no customer service telephone number in their literature or on their web page. I emailed a request for assistance with a defective Hunter Fan. Their July 31st email response was:
Thank you for filling out our guestbook. Requests for company literature and catalogs will be forwarded to our fulfillment service. You should receive your materials in 2 - 4 weeks.
If you have forwarded questions, comments, suggestions or customer service issues to us, this information will be forwarded to our customer service department. Your request is important and we will respond as soon as possible.
This has been their only response. Buy another Hunter Fan? No. Recently, while at Home Depot, I noticed that they are stocking about 20 percent Hunter Fans. Two years ago it seemed more like 80 percent.
Finally, U.S. Bank "fee’d" our business out the door and into a credit union whose philosophy is: "We only charge for abuse, not use." Three U.S. Bank managers had to approve our final withdrawal. None thought to ask why.
Conclusion
In an ideal world we’d provide every service our customers requested. However, in our extremely competitive business environment we are often forced to reduce our ideal level of customer service.
Consequently, it is vital that you know your customers. This knowledge enables you to:
Identify the most critical services they want.
Justify the cost of these services in customer reorders, retention, and loyalty.
Identify potential services that are not producing appropriate value added customer benefits.
The Bloomberg study cites one bank that has done this. Commerce Bancorp boasted profit by 34 percent last year with a Burger King "have it your way" approach. Their branches are open on holidays and Sundays, some as late as 8 p.m. on Thursdays and Fridays.
Meanwhile, Delta Airlines spends money advertising shorter lines because of auto ticketing. If they listened to their customers they might find that arriving on time, providing friendly attentive flight attendants, serving edible food, and providing a comfortable seat rank a bit higher then auto ticketing.