Poor Service Tops Bank Users' Hit List

The Sunday Age

Sunday September 9, 2007

Peter Weekes

FOR bank customers it's a no-brainer, but for the institutions it may as well be rocket science - how do you retain customers?

As bank profit margins have been put under pressure due to intense competition - which is likely to increase as the fallout from the US sub-prime mortgage market continues - banks have fought each other for market share.

Branches have been remodelled into consumer-friendly retail outlets with a greater sales focus, and customers now have a much larger range of self-service options for managing their accounts, portfolios and policies.

However, according to a report by business consultants Fujitsu, about a third of the money spent on keeping customers happy is wasted. "Many organisations focus their spending on initiatives to create a fantastic customer experience. However, customers are more concerned with the things that cause them the most irritation and frustration," the report says.

And surprise, surprise, the survey of 26,000 customers found the number one irritant was poor service. "The pain of poor service far outweighs the pleasure derived from customer acquisition or retention activities. Banks that recognise this are more likely to focus their attention on addressing the real issues for their customers," Fujitsu's Toxicservicing report says.

"Our research highlighted that toxic servicing has created a high degree of instability among customers, with the majority (80 per cent) saying they were ready to switch."

And it appears that toxic servicing is threatening to eat away at all customer segments, including high-value and long-term clients, not just the more demanding generation Y.

This is bad news for banks and their shareholders. The report says the cost of attracting new customers in Australia has jumped by more than two-thirds over the past five years to as much as $800 per client.

However, the cost of cross-selling products to existing customers is only $100 a pop.

"With customer churn at an all-time high, businesses can be robbed of this chance to grow revenue," the report warns. "Therefore, retaining customers, particularly the most profitable customers, is critical."

© 2007 The Sunday Age

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