What now?

Sooner or later, this will all settle down. I’m not sure how, but it will, and when it does, it’s going to be different; fewer, bigger players, constrained lending and underwriting policies, and, most importantly, a focus on the real business of banking, the preservation and growth of individual and business capital.

A few banks, the banks that you don’t see in the headlines, have been focusing on that all along. This idea was brought home to me by a person from one of the banks that’s actually doing just fine right now. One of the key reasons that they’re doing just fine is that they didn’t make high risk mortgages. Why? Not because they thought the risk was too great, not because it wasn’t in their strategy, but BECAUSE IT WASN’T IN THE BEST INTEREST OF THEIR CUSTOMERS TO MAKE THOSE LOANS. Think of it, bankers realizing that putting a customer in an over-leveraged loan was a bad idea for that customer. No doubt a lot of those customers ended up with loans from other institutions, but this bank didn’t make that loan.

The lesson…when you start and finish by thinking of the best interest of the customer, and you manage your business prudently, you rarely go wrong. So, what now?

The customer will re-emerge as the center of the banking universe. Banks will realize that core deposits and basic lending products are the most important assets on their balance sheets, that their customers are the ones who own those products, and there will be a shift to acquiring and retaining customers as a core strategy.

Then, it’s about execution. Some banks will decree a "focus on the customer" and continue to deliver lousy service at a high price. A few will take a hard look at their organization and realize that they need to completely re-align, re-train their customer service teams and aggressively coach their front-line managers. And one or two will continue to do exactly what they were doing before because they never stopped thinking about what was best for the customer.

A.P. Giannini, the founder of Bank of America said, “If an institution becomes great, it is usually by the consent of the people it serves.” At this time, in this place, truer words were never spoken.

Customer Experience in Tough Times, The alligators are in the way

A condensed version of an article that I wrote appeared today in the American Banker. Here's the full version of that article.

Viewpoint: Customer Experience in Tough Times, Alligators Are in the Way
By Thad Peterson, vice president, sector strategy and solutions for Maritz’ financial services sector

Decreased liquidity, layoffs, fee increases…the depressing words we see every day in almost every publication, banking or otherwise. Clearly, the focus of bank management and shareholders right now is on getting through the storm, as it must be. But there’s a group that often indirectly suffers the consequences of cost-cutting decisions made in management committee: the customer. And that’s not a good thing.

Think about the world from your customer’s point of view. Retail customers see headlines about bank failures that can cause worry, regardless of relevance to their own situation. They may be seeing fewer people in their branch, or listening to hold music longer when they call with a problem. Maybe some of their fees have gone up for no particular reason. Small business customers worry about getting through this rough patch, and credit has either gotten more restrictive or has dried up completely. It’s a lousy time to be a bank customer.

This is a classic “alligator-swamp” issue, and in most cases, the customer experience swamp is less important than the alligators surrounding the bank. While it’s understandable, there’s risk to sacrificing customer experience: lost customers, profit, and market share. There isn’t a perfect solution to the problem, but there are a few things that can be done to lessen impact on the customer experience.

Are Your Employees prepared to help?

Regardless of what’s happening with the bank, customer service representatives and tellers are dealing with the same problems, and the same people, that they were dealing with before. Only now they have nervous customers, and probably fewer people to help deal with them. Research shows that bad customer service can have a dramatic impact on customer attrition. A Maritz study done in 2006 shows that in a normal environment, 43% of customers leave a bank because of service-related issues. Of those, 77% attribute the bad service to employee attitude or behavior. That means about 30% of your attrition is due to a customer’s perception of the service that’s being delivered by the front line, making it imperative that your front-line employees are armed with the information, training and support they need to keep customers happy.

A few keys to success:

• Listen and Learn: It’s critical to keep a pulse both on how the front line is feeling and what they’re hearing from customers in order to address possible emerging issues head-on. Listening is key, as is measuring satisfaction on an ongoing and consistent basis to provide a benchmark for assessing whether things are really as bad (or good) as you think.
• Reinforce messaging in multiple ways: The front line needs clear and accurate information in order to answer questions and present the bank’s case to customers. Press releases and other announcements about new developments or strategies should go to every employee, along with a scripted response to likely questions.
• Coaching, and more coaching. Managers must ensure their team is working effectively with customers to resolve issues or concerns. Consistent and visible coaching can help employees feel valued, and better understand their influence and role in the bigger picture. Identify ways to keep them engaged and motivated – a particular challenge when so much negative news is rampant about the banking industry. .

Love your good customers

Unfortunately, no amount of employee coaching will make your worst customers profitable. That’s why it’s so important that your best customers “feel the love,” especially in difficult times. This doesn’t just mean private banking customers. There are profitable checking and savings customers that deliver significant value at a fairly low cost. These efforts don’t have to be elaborate or expensive either. For example, Wachovia started an effort to call over a million customers to simply thank them for their business. They key is to make customers feel appreciated and not to view you as a faceless, uncaring organization.

It’s expected that banks will lose more customers in troubled times – but prioritizing who and what is most valuable is key. Do you know which customers are significant money losers?

How do you keep the good customers?

• Knowledge is power – Branches and call centers need to know their customers in order to help them. A lack of data ensures a generic customer experience.
• Rate exceptions and fee waivers – Banks go back and forth about rate exceptions and discretion in fees all the time, but flexibility at the front line is critical, especially when banks are belt-tightening and angering customers. Without the power to provide an exception, the manager appears powerless, both with customers AND with their own team.
• Active communications – Aggressive outbound communications are vital to maintaining customer relationships. This means more than bank statement messages, and banner ads dropped on the website. Personalized direct mail or email is a powerful tool, but the message needs to be delivered quickly enough to be relevant to the customer.

Survive the alligators and maintain the swamp; and prepare to grow

Delivering excellent customer experience is hard to do even in the best of times. A little flexibility, creativity and extra communication with both front-line employees and customers can go a long way with maintaining your customer franchise in challenging times. And, youll be prepared to grow when things get better.