What consumers value in banks

Guess what? Customers care about price more than anything else when they deal with their banks.

The other day, I came across ciao.co.uk, a shopping site that hosts user-written reviews and ratings and which includes many (most!) of the providers of financial services in the UK. For banking, users are asked to give an overall rating of the institution, as well as their individual ratings for price, staff courtesy, promptness, and efficiency.This data is interesting because it enables one to do some statistical analysis of what customers (at least in the UK), think is important in their banks.

As a data junkie, I naturally grabbed everything from the site, and, armed with Excel, did some quick analysis. Using the review scores and the score for each individual attribute (efficiency, promptness, etc) I performed standard linear regressions to see if there was some kind of relationship. I also performed some statistical tests of significance to see what kind of authority we might attach to the results.

Here's what I found out.

Firstly and foremost, the thing customers care about is price. Price is the variable most significantly related to review score, and explains 87% of the data. Next up, but significantly less predictive is staff courtesy (67% of the data), followed by promptness (59% of data) and efficiency (58% of data). These numbers came from an analysis which was significant at the p=0.01 level (for those who don't care about statistics much, that means that, statistically speaking, there is good reason to believe that there is a very strong relationship between review and the factors mentioned).

As a control, I also performed a regression on the number of reviews left for each bank by users against the review score. There was no detectable relationship, from which I conclude that the number of reviews is probably random and not related to exceptionally good or bad performance of banks. As a side note, I eliminated all banks which had fewer than 10 customer reviews, taking out mainly niche players.

It isn't surprising, I suppose, that all four factors are contributors to a customer's review score of a bank. And it is certainly not a surprise at all that price is the thing everyone cares about: everyone knows that banking products are commoditised.

But isn't it interesting that staff courtesy seems to be more predictive of review score than promptness and efficiency?

It suggest to me, at least for UK banks, that overall customer satisfaction could be improved just by goaling staff on polite behaviour. It may be that customers are less bothered by terrible business processes and waiting in queues as long as the employees they speak to treat them well.

Of course, the UK, home to the most appalling customer service on the planet, may be a skewed sample. If anyone finds any other sites with appropriate data for other markets, I'd be delighted to redo the analysis. And, if any of you would like the source data (and my analysis) in its Excel form, please mail me and I'll send it.

Update: Mike Shoeffler, at the Price of Everything blog has a very different interpretation of these results. He advances the argument, at least for deposits, that in general customers barely care about the rate, and explains why he thinks that's not incompatible with this analysis.

Further Update: Ron Shevlin explains in this comment why rate might not be the primary decision factor for customers even for mortgage.

Comments

[Mike Schoeffler]

"Bankervision analyzes customer feedback about overall bank satisfaction and comes up with some interesting clues."

http://profitdesk.com/content/2007/01/08/just-how-important-are-bank-rates/

[Iowa_John]

Warning-shameless plug for my university and two of my former professors ahead:

You might be interested in seeing Tom Gruca and Lopo Rego's analysis of ACSI & Compustat data measuring customer satisfaction across an enormous range of industries. They found that by adding a customer satisfaction variable (as well as several other measures) to time-series data predicting future cash flows. It's fascinating reading with a final conclusion that "every one-point increase in customer satisfaction generates an additional $1.01 in net operating cash flows in the following year for every $1,000 in assets" I think they also found that the increase reduced variability in future cash flows by a few percentage points, but it's been a while since I've read the study. You can see a brief description at http://www.msi.org/msi/members/insights/ins04sp-b.cfm

[Ron Shevlin]

Some great points there, James. After researching consumers' financial services attitudes and behaviors at Forrester Research for six years, please allow me to share with you what I concluded:

That consumers SAY that the most important they care about is prices. But their actions and behaviors portray a very different story. Their decisions on which firms they choose to do business with, and which firms they choose to remain customers of, have a lot more to do with the emotional connections they make than with economic considerations like price and rate.

What drives those emotional connections are driven by the experiences -- service AND sales experiences -- that they have with those firms.

Ron Shevlin
http://marketingroi.wordpress.com

[James Gardner]

Hi Ron,

That's an interesting point.. consumers might say one thing and really want something else. I do it myself, from time to time.

Does your resarch hold true for products like Mortgage as well as deposits? Mortgage tends to be contact-low (after the initial sales experience) but extremely price sensitive, one of the reasons that churn rates are so high. In fact, speaking to a banker here in the UK the other day, I found that institutions are now expecting less than three years of life in a mortgage before churn.

Surely in a low touch environment, churn can be most easily explained by a better price across the road....?

[Ron Shevlin]

While I was at Forrester, I worked with a client on a customer market research effort to help them understand why potential mortgage customers bailed out of a deal AFTER paying in the lock-in fee.

Full disclosure: This was conducted in a period when rates were declining on a nearly daily basis.

But one of the key research findings was very counter-intuitive. Fully half of the people who bailed out of the deal, said they did so for reasons OTHER than rate.

Here are actual quotes from the study (on why these consumers switched mortgage providers in midstream):

"I found the rate quote deceptive."
"They wanted money from me before any of the process went through."
"They didn't deliver on their guarantee. When I asked if I could get a better rate elsewhere, I heard a click and there was nobody."
"Too much hassle, too much work."

I don't want to downplay the importance of rate or price... but the economic notion of "just noticeable difference" applies to financial services products.

It's incumbent upon financial services firms to show why it's more convenient (or whatever) to do business with them, even if their rate isn't the best in town.

[James Gardner]

Thanks for these insights, Ron. I've updated the original post to reflect your contribution.