IS 'MANAGING CUSTOMER EXSPECTATIONS' REALLY MANAGEABLE

Part Three

While these two reasons do indicate the possibility of loyalty, it would be naive to believe they are sufficient indicators of loyalty. We need to determine whether customer retention and/or repurchase are due to inertia or a lack of options? Or, is it due to high switching costs? For example, several people retain their bank accounts in a particular bank only because that is where their employer is willing to credit their salary. Can we really consider them as loyal customers? The fact is many of such customers will have accounts with more than one bank, and will move business elsewhere if communications on offerings are not done routinely and well, Ultimately, given an option many of these customers will easily migrate elsewhere.

A study reported in an article by Stephanie Coyles and Timothy C. Gokey, "Customer Retention is not enough," in The McKinsey Quarterly, 2002, Number 2 indicates that more customers tend to change their spending behavior rather than defect. They report that at one retail bank five percent of checking-account customers defected annually, taking with then 10 percent of the bank's checking accounts and three percent of the balances. But, every year, the 35 percent of its total balances, while the 35 percent who increased their balances raised its total balances by 25 percent. Obviously, merely retaining accounts is not good enough.

A better measure of loyalty is when customers are active and emotive loyalist who have no problem in being unpaid referrals and advocates. These are customers who have a high level of satisfaction and have no intention of reassessing their banking options. Research shows that these are the customers who typically end up spending the most.

The conclusion is that customer loyalty is a complex phenomenon and heeds to be approached from different directions, behavioral as well as attitudinal. A few good places to start would be understanding expectations, and use it to shape customers' perceptions of results. But, customer loyalty could also be incresed by raising switching costs and building defection barriers.

IS 'MANAGING CUSTOMER EXPECTATIONS' REALLY MANAGEABLE?

Part Two.

The other part of the customer satisfaction equation is the customers' perception of results. For fat too long, institutions have had a narrow focus in this area. Attention has been given to 'checking' customer perceptions instead of trying to 'shape' it. The focus has been on asking 'how are we doing?' Instead, making customers see what the institution has been (doing) and is doing for them, will yield better results. Research shows on average customers defect to competitors simply because they have failed to perceive the value received from their current institution. What this means to institutions is to manage expectations better, they should make it a priority to ensure their customers are aware of everything being done fro them. Institutions should not assume that customers will automatically make the perceived value connection.

A bank in Montreal tested out this conclusion by instruction its staff to inform all customers who came into their bank about 'all' the services and products the bank had on offer. Result? The bank experienced an 18 percent increase in sales during the first month of the programme. Institutions typically make the mistake of not making it a routine to communicate with exciting customers about their product offerings. For any number of reasons a customer may have initially declined a product or service at the time of opening their account. Failing to communicate product and service offerings after the account is opened can lead to customer's using a competitor for a product or service available at the institution. The value of spaced repetition to existing customers on the bank's offerings cannot be overemphasized.

A few words on loyalty are necessary especially since it is defined in different ways. Some consider customer retention or just continuing to bank with them as enough evidence of customer loyalty . Several banks in the Gulf offer better rates to customers based on the length of time the account has remained with them. Other consider a repurchase as an indicator of customer loyalty.

To be continued................

IS 'MANAGING CUSTOMER EXPECTATIONS' REALLY MANAGEABLE

Part one

An international study on customer loyalty in financial services was presented at the 17th World Conference of Banking Institutes in year 2007 Toronto.

Dr. J. Bergeron of Univesity du Quebec, Montreal, reported results of this study that covered 1,000 financial advisors and 2,000 customers. The bottom line of the study was the number one factor to influence customer satisfaction and loyalty is to "manage customers' expectations."

This is in line with the mantra being chanted by customers relationship management experts for the past few years that "managing customers' expectations is the surest way to build customers loyalty". While the formula appears quite simple, it would be native to think that managing expectations is easy.

It is usually as tricky as answering a question, "Have you stopped beating your wife?" A 'yes' can get you in trouble as it is an admission that she was being beaten in the past, and a 'no' is even worse! So is the task of setting, meeting, and exceeding customers expectations - or the art of managing expectations.

So how are expectations managed? A customer's satisfaction is measured by the difference between his expectations and perception of the results. Service experts advocate that the golden rule of customers service is 'under promise and over deliver.' Such an approach raised the ethical question "are we manipulating customers?"

The golden rule implies that institutions will reduce (hopefully within reason) customer expectations to make it easier to impress them. But, the simple truth with expectations is Yeasterday's differentiators in customer accuracy and speed have become today's 'givens'.

To be continued................