22squared Igniting Advocacy In Retail Banking
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igniting advocacy in retail bankingHow acting more like friends than foes is the key to growth.
table of contents
01 introduction: igniting advocacy in retail banking
02 about our research
03 brand advocacy is a predictor of business growth
05 the advocacy gap: retail banks have few friends
08 running with the wrong crowd
10 back to basics
12 retail banking trends are eroding friendships
19 benefits of friendship: top-line growth
23 breaking the codes of traditional retail banking
24 conclusion: three ways to improve the customer experience
25 about 22squared
This is an all-too-familiar sentiment in the world of retail banking. And while we chose to keep the name of the bank anonymous, the comment is indicative of the state of relationships between customers and their banks. In fact, retail banks have some of the worst and most contentious relationships with their customers among the 35 categories and over 180 brands weve studied in the past two years. Now that consumers have platforms to instantaneously share and rate their experiences on everything from eco-friendly cleaning products to vacation destinations, customer relationships are even more important. In the Web 2.0 world of social media networks and online communities, consumers join groups that identify with and advocate for the brands with which they hold close relationships. Likewise, critics who are extremely disappointed with brand experiences use these stages to warn others about entering into relationships that do not live up to their promises. These information-active consumers, whether theyre advocates or critics, hold some serious power.
I would rather keep my money under the mattress than bank with these thieves!
I have been with Bank X for 6 months and
they have used every way possible to collect
fees from us!Source: Rate it all.com
introduction: igniting advocacy in retail banking
The 22squared Friendship Model Research is a tool that:
1) Measures advocacy levels and ratios within a brands customer base
2) Evaluates the health and nature of the brands customer relationships
3) Assesses brand performance on actions that drive advocacy4) Predicts changes in advocacy levels in accordance with
changes in performance
We measure advocacy in a unique way that takes into account both the customers behavior (recommendations or critiques) and the customers attitude (commitment to the brands success or failure). In partnership with Karl Schmidt, founder of the research firm Consumer Insights Inc., weve studied more than 180 brands in 35 categories with over 20,000 customers. The research has helped us identify a set of brand behaviors that are shown to drive advocacy across categories. These behaviors are rooted in social psychology and the behaviors people exhibit in developing meaningful friendships.
We interview only customers and recent customers of the brand, via an online methodology. For retail banks, we interviewed those who are current customers or were customers within the past two years. There are no in-category comparisons across attributes; instead the research provides a detailed assessment of the relationship between the customer and the brand, and the customers influence on others. We then compare brands within their own categories, along with analyzing the data within the context of our normative database. Brands and categories researched included durable goods, packaged goods, retailers, and service providers.
Our research on retail banks was conducted in March of 2008 and included Bank of America, Citibank, Wachovia, Washington Mutual, Umpqua, and ING Direct.
about our research
The Breck shampoo advertising of the 1970s touted the power of advocacy with the She Told Two Friends Who Told Two Friends advertisement. Online or offline, savvy consumers enter into new brand relationships after first seeking the opinions negative or positive of those who have experience with those brands. Insights from 22squareds quantitative study on brand advocacy, 2008 Friendship Model Research, reveal that brands perceived to act on their customers behalf have 32% more advocates.1 The studys overall True Advocacy scoresthe metric that predicts the number of consumers actively endorsing the brand in the marketplacedemonstrate a positive correlation between business growth and customer advocacy.
brand advocacy is a predictor of positive business growth
true advocacy = % advocates - % criticsEach customer is classified into an advocacy segment based on relationship and level of commitment to advocating the brand to others. The critics are subtracted from the advocates, while the ambivalent buyers are left out of the calculation, to reveal the true number of advocates effectively sharing the brand with others.
Brands perceived to act on their
customers behalf have 32% more advocates.
DISSATISFIED BUYER ACTIVELY
ADVOCATE BUYER CRITIC
true advocacy and financial growth
-30%-10% 0% 10% 20% 30% 40% 50% 60%-20%
210,719Bubble size = Q208
interest bearing deposits, in millions
True Advocacy is a predictor of customer endorsement beyond repeat buyers or satisfied customers. It is a measure of the commitment level of high-involvement customer typesshareholders, evangelists, and recommenders and is, therefore, a good forecaster of annual sales growth. Those brands with stronger customer relationships receive higher True Advocacy scores and reap the rewards of positive business growth.
Growth in deposits from Q107 to Q208. *ING Direct reports changes in number of clients for the US market instead of deposit growth (a reasonable comparison).
Bank of America
For retail banksa category2 bubbling over with negative sentiment associated with a witches brew of consumer complaints, including a perception that banks actions are irresponsible and self-servingrecovery requires taking action to heal damaged consumer relationships. The Friendship Model Research reveals that the average True Advocacy score [True Advocacy = % advocates - % critics] for the retail bank category is 9%, significantly lower than the multi-category norm of 21%.1 With the overwhelmingly negative reverberations from industry consolidation, a weak residential housing market, and predatory creditors, consumers have grown mistrustful and weary of their retail bank relationships. A recent study by IBM found that Fifty percent of customers harbor an adversarial relationship with their retail banking brand.3 Contrary to the passionate evangelists of the Apple, JetBlue, and Target brands who proclaim their brand relationship at the most aspirational of levelssoulmate and close friend consumers endorsements of retail banks overall are weak, and they are even weaker for the larger traditional banks. Indeed, rather than endorsing these brands, consumers are more likely to be passionate about their dislike for their traditional retail bank.
the advocacy gap:retail banks have few friends
While retail banks have an average number of advocates compared with our cross-category mean, they have the highest number of critics of any category measured.
retail banks have the most critics
bank meancross category meanThe average True
Advocacy score for the retail bank category is 9 percent, significantly
lower than the multi-category norm of 21%.1
In the Friendship Model Research, Bank of America and Citibank received negative True Advocacy scores, -12% and -9%, respectively, representative of their weak customer relationships. Although the smaller, regional banks, Wachovia and Washington Mutual (WaMu), have shifted from product-focused to customer- focused strategies, inconsistent practices toward customers have led to comparatively low advocacy scores, 5% and 9%, respectively. Detracting from top-line growth, their negative momentum scores indicate that a higher percentage of current customers are moving away from the brand than toward it. With advocates barely outweighing critics, there is little reason to whoo hoo.
58% 10%31% 48%ING
39% 28%33% 11%Umpqua
31% 22%48% 9%Washington Mutual
30% 25%45% 5%Wachovia
24% 36%40% -12%Bank of America
47%22% 31% -9%Citibank
[true advocacy = % advocates - % critics]
13%39% 48% 26%ING
26% 28%46% -2%Umpqua
28%22% 50% -6%Washington Mutual
32%15% 53% -17%Wachovia
43%12% 45% -31%Bank of America
52% 37%11% -26%Citibank
movING awaystablemovING toward
In contrast, a new style of banking, responsive to consumer preferences, is wooing customers. Taking the True Advocacy and True Momentum [True Momentum = % moving toward - % moving away] scores together, ING is the only bank in the study claiming both positive True Advocacy