The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Loyalty’ Category

The internet and consumer choice | PEW

PEW have a new study that focusses on three purchases – music, cellphones, homes, and offers some conclusions about the role of internet in those purchases.

Pew Internet: The internet and consumer choice

WASHINGTON DC – The internet plays an important role in how people conduct research for purchases, but it is just one among a variety of sources people use and usually not the key factor in final purchasing decisions.

The report predictably concludes that people use many methods to evaluate purchases, and that internet is a cornerstone of research, particularly where product complexity is involved.

One of the conclusions, participation, noted that it is rare for consumers to rate their purchases afterwards. That has consequences for many in terms of how they hoped to design the social web.

Written by Colin Henderson

May 19, 2008 at 11:16

Posted in Loyalty, Social Media

The declining value of loyalty plans

Shar’s experience is a classic example of how the whole loyalty model is broken.  Step by step the Airlines [just to pick on them] are eliminating and discounting benefits associated with loyalty.  Then you have situations like this, that frankly have no cost to fix, except a personality transplant for “Linda” and her ilk at American Airlines and others. 

Forrester’s Marketing Blog: Customer Experience Matters More Than Points In Building Loyalty

I *want* to do business with the firms who treat me like a person. Who try to recognize the things I care about. Frankly, I find my miles with American a constantly accruing currency which I have very little opportunity to redeem and therefore don’t perceive as much of a benefit.

For any airline employee to utter the words, “I don’t care who you are or how much you travel” is beyond belief.  Either the loyalty plan means something, or not.  There is no in-between. 

My own experience with air line points is disappointing at best.  Gaining ‘status’ brings so many conditions, that the value is discounted to a bunch of useless coupons, that seem to be impossible to redeem, unless I am prepared to book 12+ months in advance and use completely inconvenient multiple stop routes. [my example is Air Canada].

So stepping up a level, loyalty points and plans are only of value if the customer feels value.  Fewer are feeling that value nowadays, and those Banks who pay for those plans, should think about that.  I think the loyalty plan model is broken. 

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Written by Colin Henderson

December 28, 2007 at 16:37

Posted in Loyalty

Forrester Research online banking prediction, means Banks have a loyalty problem

 Aggressive forecast from Forrester here.  Hat tip Netbanker.  Go there for their analysis.

Online banking adoption continues its upward trajectory, as evidenced by a 27% growth rate in 2005. Expect this trajectory to continue during the next five years: By 2011, Forrester expects online banking adoption to grow by 55%, to roughly 72 million households.

In 2011, 76% of online households will bank online. The largest adoption growth will come from the Gen Y segment, and in 2011, 85% of Gen Yers will bank online.

Source: Forrester Research: US Online Banking: Five-Year Forecast

I think this is perfectly rational.  By 2011, baby boomers are in the minority, with Gen X/ Y and millenials in the majority.  If you assume most of the latter are using online banking, then only 1/2 of baby boomers have to be online banking to make up 76%.


Relevance to bankwatch:

Aside from the precise percentage – The key for banks lies in the fact that the majority of their customers will not regard branches as their primary Bank contact.  What will they have to do to ensure customer contact/ interaction, and therefore loyalty is maintained?  Online Banking is already a core element defining bank loyalty, and with only 24% of customers NOT using online banking, at what price will Banks focus primarily on branch development?


Written by Colin Henderson

March 23, 2007 at 19:20

My Community Connection |

 Give with us, is a unique web application developed by Trabian, in conjunction with Filene.

Trey, Brent and the team at Trabian continue evolution of web 2.0 thinking, that aligns perfectly with the Credit Union business model, and pulls the CU’s even further ahead of Banks.

To celebrate this year’s 21st anniversary of Martin Luther King Jr. Day, Oakridge will be putting on a park clean-up day at Horton All-Sports Park. The focus for this year’s MLK Day project is to provide a safe place for kids to play.  This event will provide community members and organizations a day to come together and serve their community for a greater good. Tools and projects will be provided. Lunch will be provided for this event, as well as t-shirts and beverages. Bring working gloves and smiles.

Source: My Community Connection

‘Give with us’ is described on the blog this way.

The concept is pretty simple in that each Give With Us partner receives a branded website where volunteer opportunities in their community are posted. Take a look at for a prototype used by a Filene i3 project team.

Each Give With Us site can be fully controlled, moderated, and edited by non-technical staff at each participating credit union or non-profit. If you’ve got a volunteer coordinator or public relations manager, they’d probably make a good Give With Us administrator. (The tools are web-based and very simple, and we’ll be posting demos here soon.)

Jim at Netbanker does a review here.  (note Netbanker is having CSS issues, so that link might change).

Relevance to Bankwatch:

A clear theme has developed here.  Credit Unions, supported by efforts of people like Trabian, are leading the Financial Services charge to Web 2.0 (I know we hate that expression now) type services, with small, iterative and creative moves that align nicely with the Credit Union business model.  This will cement and further enhance their customer loyalty. 

Side note:  the opportunity is there for small regional US Banks to do the same.


Written by Colin Henderson

February 3, 2007 at 16:06

Customer loyalty, and linkages to market share

I blogged about Net Promoter score, the loyalty measurement de jour back in November.  Today a colleague, Len pointed out Filene research who are doing some interesting research.  I find their premise interesting … the part about the minimal share of consumer finance.  Is that true?  Does it apply equally to consumer deposits?

Why do credit unions consistently score higher than banks on customer satisfaction surveys, yet, at the same time have a fairly minimal share of the consumer finance marketplace? Could it be that satisfaction is a good, but ultimately insufficient measurement of loyalty and propensity to grow?

Source: Home : Filene Research Institute

Looking forward to hearing more about the results on this.  The conventional wisdom says that all else being equal that NPS will result in greater market share.


Written by Colin Henderson

December 11, 2006 at 22:54

Posted in Loyalty

Lloyds TSB online banking ‘revolutionised’ – Money News

The press release title is a bit of a stretch to suggest ‘revolutionised’ but the feature sounds like it has potential. 

Lloyds TSB has revolutionised its online banking facilities by adding a new bill manager feature, allowing customers to view, pay and store their household bills online.

Source: Lloyds TSB online banking ‘revolutionised’ – Money News

But what a let down when I visited to check this out.  No mention on their site, and I gave up with the demo when it tried to install the Microsoft Virtual Java machine.  So I will have to speculate – this is a brilliant example of how simple co-ordination could have made this a big win for Lloyds, but the result is quite the opposite.

Relevance to Bankwatch:

One of the next evolutions for online banking is what I would characterise as budget management.  Lloyds example of bill management (I give them the benefit of the doubt) and Wells Fargo’s spending report (they provide analysis reports of your debit and credit spending) are pro-active free tools that take online banking beyond simple transactions.  These kinds of tools are sticky, and if done well, will offer ways to develop customer loyalty.


Finextra provide a bit more information on the Lloyds thing.  They have hooked up with Voca and CheckFree.  This is the first time I have been aware of CheckFree outside the US.  This is clear introduction of the model we are more used to in North America, and is a big deal.  Key is the sign up of billers to the CheckFree system. 

The new service enables Web banking customers to pay, view and store paperless bills online and is designed to remove the need for customers to deal separately with individual companies or log on to providers’ Web sites.

Lloyds TSB says fourteen companies, including utility and telecoms firms, have so far agreed to allow their customers to view and pay bills through the new site

Question;  the CheckFree model is to sell the service to multiple Banks – will Barclays be close behind?


Written by Colin Henderson

November 29, 2006 at 23:17

NetBanker 2.0: Bank-account switching tools from Intuit and uSwitch take center stage

This quote from Gary Hamel at BAI is brilliant in its simplicity and unfortunately truth. (Courtesy of Jim at NetBanker)

The biggest profit center at banks is customer ignorance, which banks have mistaken for customer loyalty.” — Gary Hamel, speaking to 1000+ bankers at BAI’s Retail Delivery Conference, Nov. 15, 2006

Source: NetBanker 2.0: Bank-account switching tools from Intuit and uSwitch take center stage

His focus was internet based switching tools. 

The importance of switching tools

Hamel believes financial services loyalty will disappear once customers find out how easy it is to move their accounts to pick up a 100 basis points on their savings rate or avoid $35 overdraft fees.

I recall back at the beginning online in the late 90’s we all pontificated about the elimination of switching costs that internet wrought.  Well the product guys won round 1, and that prediction has not come true … yet.

The difference now is that there are enough customers using online and relying on it .. in fact insisting on it.  So along with the comfort level with online self service comes the willingness to use for new and innovative purposes, including switching.  uSwitch is especially interesting because Banks are just a subset of what they deal with.  This is a great model, and more reflective of how customers think .. banking at some levels is just another annoyance, along with electricity and phone service.

Gary rightly points to three examples:

  2. (my coverage here from Sept)
  3. Intuit
  4. I would add Davis & Henderson in Canada with their eswitch product

Relevance to Bankwatch:

The issue for Banks here is not whether any of these services work well or not.  One way or another they will work and there will be more of them.  Its a pain to have to change all your direct debits, salary deposit etc, and if you get annoyed at your Bank and can switch with one call, this eliminates switching effort, costs (which will be picked up by your new Bank) and effectively reduce Banks to have to focus on the one thing that matters – service and loyalty.

Relevance PS:  Why can’t a Bank provide this service?  In particular it would be interesting for a Bank to disassociate customer relationship from financial products.  Build customer trust, help them find the services they need no matter which institution, and the benefits that will build from that trust would be enormous, and perhaps pave the way for the other 90’s prediction, Open Finance.


Written by Colin Henderson

November 20, 2006 at 20:32

Automatic Waitress and Cashier

I have bought a few breakfasts and lunches this way in Tokyo, but I liked the spin Jeremiah places on it, as he describes the Apple store experience too.

Automatic Waitress and Cashier
On a similar note, when we went to Tokyo, you ordered food at a ‘vending’ machine, you plunk in some coins, punch the picture you want (above) and quantity and a receipt plops out. You sit down at the counter, hand the receipt to the polite cooks who serve you. This saves time as the employees don’t have to deal with money, you don’t need a waitress, management doesn’t have to worry about employee shrink (theft), and there’s no on-hand cast for robbers to steal. Oh, and you still get that friendly human experience from the chefs.

I have had similar experiences in the Apple Toronto store. I had to change a faulty ipod (it happens) and with no receipt, they simply looked up my record based on my email address, confirmed the serial numbers, and 5 minutes later I walked out with a new ipod. I was blown away.

So its interesting to me that Jeremiah takes the Apple store, and the Tokyo restaurant experience and correctly aligns them both with paperless, integrated channel, experiences, that will bring you back. The focus in the stores is on the issue at hand, not the paperwork.

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Written by Colin Henderson

November 17, 2006 at 23:01

Net Promoter Score

I heard of a North American Bank using this method to assess customer loyalty.  I was skimming some GE analyst reports and surprise, they are using it too, and I’ll bet invented it.

The concept as I understand it is intended to be:

  • simple
  • easy to understand
  • give equal weight to both top box scores, and bottom scores

Typical customer loyalty is a horrendous amalgam of:

  • satisfaction
  • will use again
  • willing to recommend

NPS takes the third element as being the one that trumps the others.  You wont get recommendations unless you have the other elements, so its a dependency.  Why not give it primacy.


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Written by Colin Henderson

October 31, 2006 at 22:18

Posted in Loyalty

Forrester Research: CRM Market Size And Forecast, 2006 To 2010

 I will state my preferences up front.  I am not a fan of CRM.  It involves enormous costs that only provide value based on the abilities of the employee.  CRM purists will say that is because it was implemented badly.  Fair enough, but that’s the current state for most.

….  however, the need to extract additional value from past expenditures and a lack of game-changing innovations from vendors will result in moderate market growth. Enterprise buyers should:

1) invest selectively in high-value upgrades;

2) focus on customer-process optimization; and

3) demand support from vendors to optimize existing CRM infrastructures.

Source: Forrester Research: CRM Market Size And Forecast, 2006 To 2010

The value in CRM is predicated on knowing enough about the customer during each customer interaction, that they will be over-whelmed by how smart the firm/ employee is to know them so well, and reward the firm with loyalty. 

Reality is more like this:  “may I place you on hold for one minute”, during which time the poor employee must re-read the notes from previous employee encounters, and determine a course of action.  I am generalising of course, but I have called enough call centres as a customer to know this to be true.  Unfortunately I also know this from viewing CRM implementations first hand internally.  The core of CRM as the big vendors deploy, is what I would characterise as text based customer information, including name, address, telephone, and customer notes.  The key is the customer notes.  This is just a series of text, and its really hard to use that intelligently.  Some are trying to develop text analysers that will produce intelligent customer information and predictive patterns based on key words.  I don’t buy that.  Scientists are working hard on this, but I have sat through enough presentations, to know that generally the solution comes down to requiring internal administration by large numbers of people to learn from what they are reading, and enable set questions based on certain repetitive patterns. 

Bottom line, today the text based notes stored within CRM systems are relatively useless.  The time taken to read them during each interaction nullifies much or all of the benefit, depending on the speed reading capabilities of the agent/CSR.  I am starting to see the next generation of thinking on this, and its going to be controversial, because of the enormous spend on CRM to date. 

I have been listening, reading and thinking about Enterprise Decision Management (James) and Improving New Account Opening (Phil), and there is something there that fills the gap for me. 

I subscribe to the school of thought that says loyalty stems from quality service.  Indifferent or bad service will drive disloyalty.

This study from the CFC in 2003, relates service to customer loyalty.  They conclude that banks make a high return at both ends of the spectrum, really bad or really good service.  There is some logic to that, because most Banks are in the middle band, and that’s the worst place to be, because your customers are neutral.  Neutral means they can move between Banks with ease.


If Banks want to exceed at loyalty and the revenue that drives they have to get out of the neutral service zone.

The high returns at each end of the spectrum can be defined this way:

  • Higher end:  customers are so loyal they will talk about you and refer business to you
  • Lower end:  your cost model is so cheap, that you totally disregard service in favour of transactional efficiency, i.e. really cheap

Building the service enterprise requires careful consideration of the service process, and CFC addressed in the report this way. 

So the BPM model works for me, because its focussed on simple efficient, effective service.

….  direct execution of the business processes without a costly and time intensive development of the required software. In addition, these tools can also monitor the execution of the business processes, providing managers of an organization with the means to analyze their performance and make changes to the original processes in real-time

This definition suggests service excellence.  There is an iterative, self improving element to this model.  So, the next tasks are:

  • deeper understanding of BPM and the implications not just to efficiency but to service satisfaction
  • how do Banks’ that have attached their strategy to CRM, develop a plan to integrate BPM


Written by Colin Henderson

October 22, 2006 at 03:09

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