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Financial services

By Paul Linnell

In 2005 when CTMA conducted its first national customer experience baseline study amongst customers of New Zealand retail banks, the study provided strong evidence that many banks operate with a significantly compromised customer retention strategy.

Many banks appear to operate with a significantly compromised customer retention strategy

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Impact of poor service on customer retention

Banks invest heavily on campaigns to attract new customers, but keeping existing customers depends more than ever on service quality, customer satisfaction and loyalty.   Often, the hard work attracting and developing new customer relationships can be destroyed if that customer experiences a problem or concern that isn’t quickly resolved.  This business risk often remains unseen because a traditional approach to measuring customer satisfaction often fails to show the impact of poor service on the bank’s profitability.

CTMA’s national study estimated that the problems customers experience when banking, and the way many banks currently handle customer complaints, may be placing between 8% and 12% of their annual profits at risk.

The study presented participating banks with valuable insights into their relative strengths, and identified specific opportunities for improvement.

In subsequent annual updates, two disturbing paradoxes have been observed:

• Although customers of some banks report fewer problems, overall satisfaction and advocacy appears to have dropped.
• When problems do occur, there appears to be an increase in the percentage of customers contacting their bank for help, but a drop in satisfaction with the action taken by banks in response.

It appears that although most banks are attending to service quality improvements, customer expectations are increasing. And, when customers go to their banks for help, the problems are often not resolved to the customer's satisfaction.

© CTMA New Zealand Ltd.

© CTMA New Zealand Ltd.