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Need to shift mind set to focus on improving customer experience

There is a clear mismatch between what board members and senior management see as the key priorities in terms of investment and focus in UK financial services organisations.

Among senior managers, nearly fifty percent say the top priority for the year ahead is to improve the customer experience (48%) – a view held by less than a third of the board (29%). Instead, reduced interchange fees are cited as a key concern for 36% of board members compared with only 23% of senior management.

This is the key finding of an international survey[1] of financial services board members and senior management by Collinson Group, a global leader in influencing customer behaviour, with over 25 years’ experience working with some of the world’s largest global financial services companies.

Christopher Evans, director, Collinson Group
Christopher Evans, director, Collinson Group

Christopher Evans, director, Collinson Group said: “This misalignment is due to the differences between the responsibilities of board and senior level management. The board are required to have a longer term view of performance and are accountable for longer term profits, whereas senior management are tasked with delivering quarterly and annual targets. This is particularly prevalent in the wake of reduced interchange fees due to come into effect in 2016, which are cited as a key concern among board members. Senior managers are instead grappling with updating legacy IT systems in order to improve the customer experience.”

Building and rewarding customer loyalty

Both senior management and board members (64%), recognise the main challenge impacting their organisation in the year ahead is customer profitability placing equal prioritisation on acquisition and retention. But only 14% of senior managers and 29% of the board see recognising and rewarding existing customers as key to achieving their goals over the next 12 months.

An additional study commissioned by Collinson Group’s loyalty specialist business, ICLP, and, Forrester2, identified that of all the different programmes available, 68% of consumers said that they would value a banking loyalty programme the most. However, only 15% of this group are actually members of programmes operated by their bank.

The research also shows that three fifths of respondents across both board and senior management (60%) see increased competition as a significant challenge to achieving their goals. According to the Collinson Group research, management are concentrating on regulatory pressure (65%) and modernising older technology systems (54%) in order to compete, however barely a third cite brand differentiation as important in terms of standing out from rivals.

Evans continued, “Increased competition from new entrants and payment methods alongside the pressure to end free banking will make it even more important for banks to show they value their customers. There is a growing trend towards driving emotional engagement with customers which is being led by several retail brands investing significantly in enhancing the customer experience. That the gap between the consumer need for banks to reward customer loyalty and bank action is so wide, is clear evidence of untapped potential.”

The new report also highlights different expectations regarding the length of customer relationships across different segments of the financial services sector.  Credit card providers say they only expect to hold on to customers for one-to-three years whereas retail banks think in terms of four or five year relationships. Insurers say they expect to retain their customers for six or more years.

Evans concludes, “Although the focus for board and senior management appears different, the solution is the same.  Banks and the financial services sector will be able to better combat the pressure of reduced interchange fees and drive increased customer profitability if they firstly, invest in customer insight to better understand their customers and secondly, seek to add value at all customer interaction points in a relevant way.

Delivering value is not only important to retain customers but also in terms of customer acquisition, It takes time to achieve high levels of customer engagement, so it is important for banks to build the foundations now. For this to succeed, it needs endorsement at the highest level, insights need to be shared across the organisation, and the process of improvement needs to be integral to the organisation and continuous.

We encourage banks to act now if they are to counter the stark reality of reduced profitability or risk being left behind by competitors who do prioritise customer experience”.

[1]Online B2B survey of 300 senior professionals working in UK, UAE and Singapore Financial Services, conducted by Research Now. For further detail regarding the key findings in the other markets, contact Collinson Group. A significant finding of contrast in different markets is the concern over regulatory pressure which is of great concern in the UK (57%) whereas it is less so in UAE (39%).

2 Forrester online survey on behalf of ICLP Plc, August 2012.