Wednesday, 2 February 2011

If switching is to become easier then banks need to excel at retention

As the banks, under pressure from both the Independent Commission on Banking and the Treasury Select Committee on Competition in Banking, have indicated that they are looking to improve the speed of switching current accounts from one provider to another (see ), they need to ensure that this improved capability is used as little as possible by their customers. (If it wasn't for the implied threat of regulation why would banks want to invest in making it easier for customers to leave them?).

This potential loss of customers throws the spotlight on retention. The banks should take a leaf out of the book of some mobile phone companies who have invested heavily in having teams of people who at even the hint of a request for a PAC code go out of their way to persuade the customer not to switch providers. Mobile phone retention teams are empowered to make the customer better offers including offering new handsets, improvements in tarriffs and other give aways.

Whilst all banks have some form of retention process or even dedicated retention teams, the question is whether in the new world, where customers expect to be able to switch providers ever more frequently, do they need to raise their game?

For banks the retention process needs to start even before a customer walks into a branch or calls a phone centre and says that they would like to transfer their current account to another provider. With all the data that the banks have about their customers in terms of the transactions they are making, banks should be able to be monitoring and acting on the leading indicators of potential defection, such as sudden reductions in savings account balances, stopping of standing orders, closing of direct debits or missed salary payments into accounts. These cues should be used to trigger such activities as putting a phone call into the customer to see if they are happy with the service being provided by the bank and ensuring that the teller or personal banker has this information available to them the next time the customer comes into the branch (though it may be too late by then).

Once the customer has actually made the request to transfer their bank account then the full retention programme needs to be  put into action. Just like the mobile phone retention teams, those responsible for retention need to be empowered to make better offers whether it be upgrades to different tiers of value added accounts, adjustments to overdraft fees, changes in savings/loan interest rates or additional features for their account.

To raise retention to world class standards there needs to be:
  • Predictive data based on customer transactions and behaviours
  • A method of delivering that data to those responsible for retention (whether it be the branch staff, the branch manager, the contact centre operative or a dedicated retention team) in a meaningful, simple and clear way
  • A measure of the customers current and protential lifetime profitability to the bank
  • Staff with strong interpersonal skills passionate about retaining customers
  • Empowerment of staff so that they can make meaningful (to the customer) offers whilst understanding the impact on customer lifetime profitability
  • An incentive scheme that makes successful profitable retention of a customer financially meaningful to the staff member who achieves the save
  • A hero culture where those most successful at retaining customers are acknowledged and held in high regard
Of course not every customer should be retained. For those customers who's lifetime value to the bank is negative or below a certain profit threshold then they should be able to take advantage of the new and improved switching process to join their new bank.

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