How does Customer Experience and Loyalty Impact the Bottom Line?

An interesting read was in my newsfeed recently. An article published in The Financial Brand titled, “Banking Loyalty is Falling. Here’s How to Reverse the Trend.” I have written before about customer loyalty, and it’s a topic that I think should be discussed more in senior leadership meetings.?It would be beneficial for leadership to ask questions like, “How would we define loyalty? How important is having loyal customers to our institution? And even asking, “Is there a correlation between loyalty and customer profitability?”

My take on loyalty generally is this: Many of the customers we claim as “loyal” customers are in fact “repeat” customers. They bank with us and have for some time but only due to inertia.?Absent some strategic reason to move their accounts, they never even give a thought to banking elsewhere.?But when an event happens, I don’t know, say a global pandemic and a business is looking for PPP loans to avoid closing or a Neobank offering 200 basis points more on deposits, these become truer tests of loyalty.

The?Financial Brand article ?points out that Forrester research shows that customer retention dropped from 78% to 76%. The study further indicates that there is a direct correlation between Customer Experience and Loyalty.?Consider the following graphic from the article:

The Customer Experience (CX) components of Effectiveness, Ease, and Emotion shown on the left-hand side correlate with the Loyalty elements of Retention, Enrichment, and Advocacy on the right-hand side.?Thus, the more positive customer experiences that a customer receives, the higher the level of loyalty. This is exhibited as:

• Positive CX engenders a feeling that a customer has selected the “right” institution and are more likely to remain loyal.
• Today’s customers are more likely to act based on an emotional connection to a brand. Positive CX goes beyond transactional accuracy and makes customers feel heard, valued, and appreciated.?A customer that has an emotional connection will advocate for the brand.
• Satisfied customers are more likely to post positive comments about the brand on social media or provide other non-electronic word-of-mouth recommendations.
• The higher the CX rating for an individual customer, the less likely they would be enticed by an offer from another brand, in many cases regardless of the details of the offer.
• Customers who feel valued are more likely to share feedback, both positive and negative.
• The related metadata for long-term customer relationships are infinitely more valuable to a financial institution.

The Forrester report goes on to note that the financial institutions that have historically had the highest CX rankings are still at the top of the latest rankings; however, the actual scores are flat or have decreased.?Their detailed research broke down the CX components into 30 distinct measurable elements in 6 broad categories:

• Respects me as a customer
• Customer service
• Prices and fees
• Communication
• Website and mobile app
• Banking services

It would not be that hard for you to perform your own CX assessment in these 6 categories. You could create a survey and deliver that to a cross-section of your customer base. You can use different survey collectors that are aligned to the customer demographics, thereby allowing you to look only at Gen Z response versus baby boomers.?Your questions should be structured to ascertain the level of customer satisfaction, taking into account the importance of the emotional connection, not just the technology.?Let me give you an example: say your mobile banking app takes a user to a specific landing page after successful login that has been selected by the user.?How does the user “feel” about the freedom to select this landing page??Their feelings in this example are more important than the feature of selecting the landing page.?Your survey has to be structured to elicit these key points of emotional contact.

The best news of all is that the Forrester research shows that FIs that provide a hybrid mix of digital services with physical banking options consistently score higher in CX.?This means that what you do as a community financial institution is directly in line with achieving a high customer experience score.?But you have to strive for the Goldilocks principle, getting the digital/physical mix “just right”.?Commit to learn what your CX rating is and then work on how to increase it.?You can’t pay this lip service; you will need to allocate people and budget to see that higher CX ratings are the result.

Just remember that chasing higher CX ratings is not just a pat on the back exercise.?Higher CX ratings translate into referrals, fewer account defections, and increased wallet share, which directly and positively affects the bottom line.?Higher CX leads to higher $$. Bank on it.