Satisfaction and loyalty scores of high-balance account holders are the lowest of any customer segment and have been for years. But banks should avoid the temptation to rely on rewards programs and other perks to keep their wealthy customers happy. A better strategy is to focus on what many high-net-worth clients say is most important to them: better customer service.
The industry’s failure to please those with the highest profit potential is nothing new. In 2010, Bain & Co. surveyed 89,000 bank customers nationwide. Respondents from households with investable assets of $1 million or more reported significantly lower loyalty scores than those with investable assets between $100,000 and $500,000. Loyalty scores averaged just 2% for affluent households and 16% for more moderate households.
As recently as last year, J.D. Power’s annual banking survey for 2014 showed an overall satisfaction rating of 771 for affluent customers, which was 14 points below the average of 785. The market research company’s 2013 survey showed an even wider gap — 744 for affluent customers versus 767 for nonaffluent customers. (The 2015 survey did not break out statistics on the satisfaction of affluent customers.)
The difference affects banks where it hurts: on the bottom line. Only one-quarter of affluent customers said they would definitely purchase the next financial product from their bank. Compare that result with nearly one-third of nonaffluent customers saying they would, according to the J.D. Power 2013 study.
Affluent customers deserve special attention, but the attention banks are currently providing doesn’t appear to be building relationships or winning new business. A new strategy to woo the wealthy must get built.
Sure, a bank’s first inclination is to offer affluent customers CD rate bonuses, mortgage discounts and other financial perks. A Wall Street Journal article earlier this year lists a few of the programs currently offered to high-value clients. Bank of America promoted higher interest rates on savings accounts and lower rates on auto and home-equity loans. Regions Financial, meanwhile, offered similar bonuses and discounts. Qualified customers must have a Regions checking account and a mortgage with the bank or at least $50,000 in deposits.
But financial discounts and bonuses aren’t working. Deep-pocketed account holders won’t turn down such benefits, but banks are not engendering loyalty or deriving greater profits from this customer segment.
Another benefit that is dangled in front of affluent clients is mobile banking features. As heavy users of online services, affluent customers are thought to appreciate advanced mobile features. However, a focus on technology underscores perceptions that banking relationships are merely transactional. Giving customers no more than a smartly executed deposit or bill payment doesn’t embellish the brand. On the contrary, it affirms that the relationship is all business.
The 2010 Bain & Co. survey pinpointed a solution: Affluent respondents cited service as what they most wanted from their bank. They mentioned the word “service” more than six times as much as “rates and fees” or “branches” as their top reason for recommending a certain bank. The survey concluded that service delivery has the greatest potential to set a bank apart for good or for ill.
Customers wanting good service shouldn’t be news to bank CEOs. It is the advantage that community banks have long claimed differentiates them from rivals. But that so-called advantage isn’t working. We don’t take customer service seriously enough.
Nothing replaces a personal relationship with a customer. Marketing programs can deliver products, campaigns and website traffic. But client relationships must be built the hard way — one interaction at a time.
Banks take shortcuts. They substitute rates and bonuses and mobile wizardry for building relationships. Instead of innovative marketing campaigns, we need to focus on innovative relationship-building. We need to ask: how can we do a better job of solving customer problems? How can we get in front of clients? What can we do to increase our value when electronic banking pushes us to more impersonal transactions?
If we don’t find innovative ways to serve customers, we will be in danger of becoming faceless back-room processors for anonymous clients.