Many banks have customer loyalty issues. It’s well known that bank fees and other behavior have been catalysts for customers to switch to credit unions in 2011 and 2012 — in big numbers.

Banks also have also had a credibility issue with affluent women.

Another indicator: Banks need new approaches because they are only satisfying 21 percent of their medium-sized business customers, according to marketing research by TNS in 2010.

More recent studies indicate there are a lot of unhappy bank customers. Actually, the challenges faced by banks in trying to grow include principles that are applicable to all business sectors that want opportunities for growth.

The TNS study suggests American banks need new strategies to lay a strong, long-term foundation to attract new business customers. It was sponsored by the Commercial Banking Momentum Monitor (CBMM).

“For 70 percent of the market, multiple failures by the current lead provider on credit, pricing, operational reliability, or service would push the client to consider alternative providers,” according the TNS press statement. “When an opportunity arises, the banks most likely to be considered are those that have already established a base level of familiarity and rapport with the prospect.”

Such criteria were once assumed.

“Failure to meet these tests will immediately eliminate banks from consideration,” the press statement says. “The factors that are currently most likely to influence the final selection of a new banking partner are credit terms, pricing, the product fit, the quality of the web-based solutions, and servicing.”

The study repeatedly makes this point.

“Banks seeking to drive growth through acquisition need to understand the dynamics of the switching process in the current environment,” says TNS Vice President Glenn Staada. “This includes the triggers that lead to consideration, the evaluation process, and the potential barriers to switch. The banks that will be best positioned to attract new relationships will be those that are able to respond to unmet and emerging needs with a differentiated solution.  Bankers must continuously invest in building relationships with the businesses in the community, even among those extremely satisfied with their current relationships. It is these relationships that will eventually drive consideration once an opportunity presents itself.”

The good news for such banks for the 21 percent of loyal customers is that most will stay put.

Here’s why:

  • 67 percent of the loyal business customers are content.
  • 53 percent of them say their banks are fulfilling their credit requirements.
  • 10 percent believe the cost of switching is too high, particularly because of complex business relationships.

“Banks can aid acquisition success by developing strategies to help clients more easily transition away from an existing provider, especially around EFTs (electronic fund transfers),” suggests Mr. Staada.

The study also hints at opportunities for banking growth.  However, about 20 percent of the study’s respondents say their business needs are so unique other banks couldn’t provide the same level of service. Ten percent want their banks to improve but they haven’t found a better bank.

Factors that would persuade a business to change banks:

“Approximately, 90 percent rate pricing as a critical factor in the evaluation of a new provider,“ according to the press release.  “Nearly as important are factors relating to financial stability, trust, ethical operations, high-quality technological solutions, service, and credit.”

Other factors for a business to consider when changing banks:

“Four in 10 would use their knowledge of the banks operating in their area to select the banks they’d evaluate as a potential new provider,” the press release states. “One third say they must have a prior relationship with that bank, and nearly three in 10 rely on word of mouth from business colleagues, family, or friends.”

“In the initial round of evaluation, potential suitors are most often eliminated from consideration due to questions around financial instability, ethical operations, or perceived unwillingness to extend credit,” adds Staada.  “In today’s economy, these are the new minimum requirements for entry in the business and middle market segments.  Bankers should have a strategy to pass the stability, ethics, and credit benchmarks prior to engaging with a new client.  Failure to anticipate these questions will greatly diminish the opportunity to compete beyond these basics to communicate more fully the on the merit of its offer.”

Do you see the parallels between the banks’ challenges for growth and all companies?

My firm’s research: For 18 percent of the world’s population, price or cost is the only consideration in buying products and services.

So, for 82 percent, perceptions about value matter most, including these perceptions about a bank or any other business.

The value perceptions include:

Employees, Spokespersons – 52 percent. The key characteristics are integrity, judgment, friendliness and knowledge.

Remember, about 70 percent of your customers will buy elsewhere because they feel they’re being taken for granted. And customers normally will not tell you why they switched to your competitor.

Image of the organization – 15 percent. They are concerned about the image of your company in the community. Cause-related marketing is a big plus in forging a positive image. So is cleanliness and good organization.

Quality of Product or Service Utility – 13 percent. The customer is asking the question – “What will this do for me?”

Convenience –12 percent. Customers like easy accessibility to do business with you. That includes your Web site, telephoning you, and the convenience of patronizing your business.

Price – 8 percent. Price is important, but it’s the least concern among the five value-motivating perceptions.

Your next challenge is to align your marketing, products and services, and customer service — while being mindful of these motivating perceptions.

From the Coach’s Corner, related reading on big bank issues:

“Banks have a new image. Now you have ‘a friend,’ your friendly banker. If the banks are so friendly, how come they chain down the pens?” 

-Alan King


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.