In a recent interview on Bloomberg TV’s “Taking Stock with Pimm Fox,” APT CEO Anthony Bruce comments on how consumer-facing companies can measure the return on Facebook advertising dollars.
Author Archives: Jatin Atre
The Central Bank only has until April 21st to release final rules about debit card interchange fees. The proposal in the Dodd-Frank Act is that interchange fees would be limited to $0.12, down about 70% from today’s $0.44 average. The Federal Reserve will likely miss the 4/21 deadline, and it is unclear if debit card regulation will be delayed or even if it will happen at all.
While there is still a great deal of uncertainty, there has been a flurry of announcements about new policy changes from the nation’s largest banks. The Washington Post reported that Wells Fargo has decided to join other banks like SunTrust and discontinue its debit reward program. JP Morgan Chase has also decided not to waive checking account fees for customers who actively use their debit card. (more…)
Jim Miller from Prime Performance recently published research showing customer satisfaction scores across different banks and tiers of banks. The premise is that delivering a better customer experience will ultimately drive better financial performance.
We feel this is valuable information and agree that better customer service often results in an increase in key performance metrics such as new account generation and retention. Across many banks, we have measured the performance of branches that improved customer satisfaction against a control group that maintained satisfaction levels. This has shown clear improvements in performance and has held across small banks and large banks.
The question that follows is how best to improve customer satisfaction. There are a number of options available – increasing staffing, training employees, increasing convenience through longer hours, or improving the branch experience by adding coffee stations or flat screen TVs. It is important to test different approaches to scientifically determine which improves customer satisfaction and financial performance most and has the highest ROI.
WASHINGTON, D.C. & NEW YORK – January 24, 2011 – Applied Predictive Technologies (APT) announced today that 2010 saw significant increases in scientific testing aimed at understanding the impact of various strategic and tactical initiatives at leading North American banks. APT’s study reveals that testing at larger banks (those with more than 2000 branches) increased by 23% from 2009 to 2010, while banks with over $20B in assets increased testing by 85% in the past year. These leading banks are testing new ideas in nearly all functional areas, including staffing, pricing, customer retention programs, ATM surcharges, new product introduction and marketing, among others.
Over 38% of tests focused on media and marketing programs. Banks increasingly want to measure the ROI of numerous media channels (TV, radio, online) and a variety of campaigns focusing on different products and messages. Banks have also been increasing testing in other areas, including a 261% increasing in testing of pricing changes and actions related to mergers and acquisitions. Cross-channel servicing, relationship management programs, and branch remodels have also been areas of increased focus. Using sophisticated analytical tools, banks are increasingly able to answer nuanced questions, such as which elements of a remodel program help increase ROI, how changing staffing mix between part-time and full-time tellers impacts customer satisfaction and profits, and the optimal strategy for each branch after an acquisition.
Despite the significant uptick in testing, there still remains an untapped opportunity to increase scientific testing to identify the right strategies to respond to regulatory changes, further optimize deposit and loan pricing, and understand the best ways to improve customer retention and cross sell. While some banks are already doing this, many are leaving money on the table by not making the most of scientific testing to fuel innovation. “The banking environment continues to evolve very rapidly,” said Patrick O’Reilly, APT’s President. “Testing ideas before rolling them out is the most powerful way to de-risk key decisions. Some leading banks have pushed scientific testing to new levels. Their experiences hold important lessons for all banks.”
Like many retail banks, Citi has been investing to transform its branch network to better meet the needs of customers. An American Banker article details how this includes “more technology, longer hours,” and a new “concierge-style desk.” The labor model is also changing, and “employees take on multiple roles throughout the business day depending on customer need.”
So far, however, only a limited number of branches have made these types of changes. Citi’s model for the branch of the future is its new branch in Manhattan’s Union Square. The real question will be how broadly these innovations will be rolled out across the branch network for Citi and other retail banks.
It’s easy to design new branches with their model in mind, but it will be more challenging and more expensive to renovate existing branches. And, as banking transactions move online, it will be increasingly important to make the most of the branch network and set up branches to best handle the more complicated, relationship-based transactions that can’t be done online.
Banks will need to go branch by branch to understand which ones warrant investment and what changes would be most profitable for a given branch. Identifying the best approach for each type of branch requires accurate measurement of the impact of branch renovations and segmentation of response by branch characteristics.
In the end, a tactical approach will maximize return on investment and better meet customer needs.
There has been an explosion in hiring relationship managers over the past few years. An article in US Banker discusses how a big challenge can be actually finding enough relationship managers to hire given the high demand for them.
A central issue that is not as frequently discussed, though, is how to make the best use of these sought after employees. There is a limit to how many customers a relationship manager can effectively target, typically around 300 to 600 customers, and there is a lot of debate about how those customers should be chosen. This debate is also worth a lot of money; we have found that getting book assignment right can increase the profitability of the program by tens of millions of dollars. (more…)
Citi has big plans for branch remodels. US Banker wrote about Citi’s major investment in its branches and how it plans to change the ways customers use the branch: “The company wants to transform its retail outlets to let customers handle much of their banking needs on their own, using self-service processes that have been perfected online.”
This broad effort will include enlarging the lobby, investing in new technology, and merging different channels to make banking more seamless.
Branch remodels are an important part of doing business to maintain the brand, stay competitive, and adapt to new ways of doing business. However, remodels require a huge investment, and banks often don’t understand the return on that investment and how to best target spend. (more…)
Overdraft regulation is a sweeping change that puts a significant part of revenue at risk. It is therefore shocking that a Moebs survey cited in American Banker found that only 1 in 9 of banks have started preparing for this change.
The majority of banks will find themselves unprepared when regulation changes take effect on July 1st. Banks need to act immediately to determine how they will respond to this regulation. (more…)
Citibank recently announced it was planning to begin charging a monthly service fee for about 1 million accounts that previously had free checking. Not so fast, said New York Attorney General Andrew Cuomo. Citigroup now has to delay its plans until 2011 since “Mr. Cuomo’s office didn’t believe Citigroup provided customers with adequate notice about the new fee.”
Citi should thank Mr. Cuomo. What would have happened if he didn’t block their decision? The answer is that nobody really knows. It’s possible that most customers wouldn’t have noticed or wouldn’t react negatively. It’s also possible that attrition would have skyrocketed.
It is clear that retail banks need a new strategy for free checking. A recent article in the New York Times details the rise of free checking in the 90s. It helped bring customers in the door and eventually “became a commodity.” However, the fees that propped this product up and made it profitable are now disappearing.
The challenge is that customers have become used to free checking and now expect this service from their bank. How will they react when it goes away? Banks need to be very smart and targeted in how they approach free checking in the future. (more…)