Focus on Building, Not Measuring, Loyalty

A recent report by Forrester found that 90% of customer experience professionals say that customer experience is a top strategic priority for their company, but a shocking 86% said that they don't actually expect to get much value from their customer experience program.Even if these figures are only partially correct, they represent an amazing self-admission by customer experience professionals. And, while the Forrester findings were not specific to banks and credit unions, I suspect many financial firms would make a similar self-admission if they were being honest.

There is tremendous value in an effective customer experience management program. The problem is most banks and credit unions (and apparently much of the rest of corporate America) do not have an effective program. Why? It's not the concept of customer experience itself, but rather the way customer experience programs are being designed and implemented.

Most banks and credit unions focus on measuring loyalty when they should be focused on making changes to improve loyalty. Oftentimes, the primary objective of a customer experience program is to report certain loyalty metrics to executive management. The programs are geared towards collecting and reporting data, which is a different objective than taking sustainable actions to actually improve the customer experience.

In order to provide insights that enable employees to make better decisions that improve customer experience and make customers more loyal, there are two key questions banks and credit unions need to answer: 

1. What decisions do employees make that impact customers? The answer is nearly every decision: technology, pricing, personnel, compensation, service, channel mix, compliance, etc. A truly effective customer experience management program needs to support decision-making in all of these areas, not just front line service.  
2. How do you actually build customer loyalty? By having employees consistently and repeatedly making better decisions across all areas of the organization, customers begin to change their attitudes, opinions and behavior in a positive way.

Since building loyal customers requires developing and implementing action plansacross nearly every area of the organization, customer experience management programs should be geared towards enabling this action planning process. Banks and credit unions need to understand the fundamental disconnect between a measurement objective and a change objective. And they should realize that if you prioritize change management, the measurement component will fall in place. It's a two-for-one special.

Regardless of how a bank or credit union approaches the concept of loyalty, return on investment should be the ultimate barometer of a program's success. Estab­lishing a measure of ROI is critical for one reason: the program ultimately cannot succeed without committed internal champions at the executive level who have a solid business case as to why investing in customer experience benefits shareholders.

ROI measures typically fall into three areas: increasing revenues via product cross-sell, new customer acquisition or raising fees; reducing customer attrition or "churn"; and increasing profitability via better resource optimization (also known as cost savings).

For organizations that get customer experience right, numerous case studies prove concrete ROI in each of these areas, ranging from five times to over 20 times the cost of the program. According to an earlier study by Forrester, banking customers with above-average customer experiences are 12% more likely to use the bank for additional products, which could be worth millions of incremental revenues.

Focusing on developing and implementing action plans in all areas of the bank based on customer feedback will generate these high levels of ROI. The high levels of ROI, in turn, will generate more executive support for the program because executives like increasing revenues, retaining customers and higher profit margins. If organizations, conversely, have measurement-oriented programs with no clear vision beyond that, they should be skeptical of the expense.

If you want to get higher ROI from your customer experience or loyalty program, change the optics to change the result.

Steve Busby is CEO of Greenwich Associates, a provider of market intelligence and advisory services for the financial services industry.