One of the really cool things about working at Maritz (if you happen to be a financial services geek) is that we have a huge research organization, with more experience in customer satisfaction than any other firm that I know of. One of the studies that they’ve done is an analysis of customer attrition and the impact that employees have on customer attrition. Graphically, here’s what they found;
In words, 43% of customers leave an organization because of a negative service experience, and of those, 77% attribute that experience to employee attitude or behavior.
Wow.
While this is important information, the data can be even more valuable because it will allow you to do a “back of the envelope” analysis of the cost of employee driven customer attrition, and that’s a really big deal. Here’s a simple formula to determine the cost for your organization. For the purposes of this exercise, I’ve used data from the FDIC and other sources to define “an average bank”. Plug in your own numbers to get see what the impact would be for you;
- Multiply your total number of customers by your average annual attrition rate to get total attriting customers per year
Average bank = 291,000 accounts X average annual attrition of 9% = 26,190
- Multiply attriting customers by 43% for those who leave because of a bad customer experience
26,190 attriting customers X 43%= 11,261
3. Multiply customers leaving because of a bad customer experience by 77% for those who attribute an employee attitude or behavior
11,261 X 77% = 8,671
4. Multiply customers who left because of an experience attributed to employees by average annual profitability per customer
8,671 X $725 = $6,284,945
For this average bank, the bottom line annual profit loss due to employee driven attrition is over $6 Million.
Double wow.
There’s a large leak in the profit bucket of almost every financial institution, and the only way to fix it is to develop ongoing strategic programs to minimize employee driven attrition. It would be worthwhile to think about stopping that leak.
2 comments:
These numbers seem familiar - but remember, he who constrains the clustering algorithm controls the conversation. Is it "employee related defection" when the teller or banker refuses to refund overdraft fees (according to bank policy)? Or is it the policy that's in the wrong? According to the Center for Responsible Lending, banks make over $17 billion (with a B) in overdraft fees each year -- much of it by manipulating posting routines to increase the number and severity of OD/NSF occasions.
In the typical large bank, 20% of the banker's day is spent dealing with problems arising from these specific policies. (By the way, that's nearly two hours spent NOT selling). When that much of anyone's day is spent dealing with irate customers who's innate sense of fairness has been violated, what makes us think that we can keep employees engaged?
Much of service failure in banking is not a function of poor process design or training, but of unimaginative management practices designed to extract value from customers -- not create it for them!
In the end, everyone -- employees, customers and shareholders -- are frustrated.
Thanks for your thoughtful comment, and it's absolutely true that bank policy has a big role in the customer's perception of the bank, and on the difficulties that employees face when dealing with customers.
The only way to get at the issue is to take a holistic approach, combining strategy, policy, tactics and frontline activities into a consciously designed program to improve the customer experience.
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