Branding Banks For Shareholder Value 6.0 Brand Measurement

Branding Banks for shareholder value Discussion Draft Section 6.0

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© Geoffrey Johns 25 July 2010

Branding banks for shareholder

value

Section 6.0

Measuring

bank brands July 2010


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Delivered and planned series of papers

Discussion Draft

Order.Version

Release Date

Creating shareholder value - an outline 1.0 Mar-10

1

Knowing customers 2.0 Mar-10

2

How customer perceptions develop 3.0 Apr-10

3

Why brand banks? 4.0 Apr-10

4

Why can't banks brand? 5.0 May-10

5

Measuring bank brands 6.0 TBA

6

Measuring relationship value 7.0 TBA

7

Gaps diagnosis 8.0 TBA

8

Bank structure and brand control 9.0 TBA

9

Process level brand control 10.0 TBA

10

Building the brand story 11.0 TBA

11

Communicating bank brands 12.0 TBA

12

Valuing bank brands 13.0 TBA

13

Brands and the future of banking 14.0 TBA

14

Competitive bank branding strategies 15.0 TBA

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Introduction

My purpose, in this series of papers is to define the path from bank branding and

customer perception to shareholder value. How does investment in brand and

perceptions generate value? The exhibit below illustrates my starting point in making

this connection.


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Customer perceptions

Perception of specification fit to needs

Perceptions of service

experience

Perceptions of brand

Bank efficiency

Mix of businesses

Corporate centre

performance

Business unit performance

Shareholder value

Investment in brand

improves

Weakens

Bank financial

structure

Perception of price

W

Investment in brand strengthens customer perceptions but reduces bank efficiency by

necessarily increasing expenses. Most banks make this trade-off based on experience

and judgement. While I doubt that this type of decision can be reduced to any simple

equation, I do believe that better frameworks‟ for thinking about it are available.

I also argue that successful branding is vital to banks but that it is at the extreme end of

difficulty on the spectrum of all brands. The normal ways of thinking about corporate

brands do not work well for banks. Creating and managing a bank brand is so difficult in

fact that the corporate competence in surmounting the challenges is a source of

sustainable competitive advantage. This advantage can only be achieved by an

understanding of the issues and their implications. There must be a particularly

disciplined set of decisions within a well designed policy framework. In some aspects

this goes to the heart of and challenges conventional management thought.

I am serialising this series of discussion drafts on LinkedIn and slideshare and welcome

any comments. The papers are work in progress towards a book I intend to write one

day. I am recording my own journey over many years trying to come to grips with these

issues. My approach is mainly founded on practical experience but I have been dutiful in

trying to make best use of theory and whatever data I could access. I am happy to be

connected to anyone on LinkedIn who shares my interest in fiancé sector marketing.


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I developed much of my thinking on this subject working with the Finance & Business

Services team of TNS Australiai. I am grateful for their input and support. However any

opinions I express are mine alone. In developing my thoughts I have drawn on the work

of others. Attribution is always recorded. Should anyone reading this be concerned that

their ideas have been misrepresented or used inappropriately I should be happy to

amend or withdraw them.

Measuring perceptions of brand

In this sixth section of branding banks for shareholder value I want to discuss the

measurement of brand perceptions. If we are to make a connection between

perceptions of brand and shareholder value it is necessary to measure both.

In this section, I want to cover:

the relationship between customer satisfaction and customers‟ perceptions of

brand;

measuring customer satisfaction;

perceptions of customer satisfaction as it has been measured in three academic

studies of personal finance markets;

my findings about what customer perceptions seem to make a difference to

satisfaction and brand image in business markets;

the issue of multiple brand audiences;

The way forward, as I see it, in getting a better handle on how bank brands are

perceived.

The relationship between brand

perception and satisfaction

Brand as a store of satisfaction


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Is measuring customer satisfaction is enough to get a fix on the power of the brand?

Does satisfaction = brand?

To return to the definition of brand that I asserted in Section 4, the first part of which

(shown in blue) I accept from John Grant as axiomatic for my purposes:

“A brand is a cluster of strategic cultural ideas” that inculcates and modifies

our expectations of the way the world works. The addition in green is mine.

I have used this diagram to illustrate how I see the role of brand in modifying

experience.

Customer expectations

Customer perception of

the experience

The objective quality of the experience

BRAND

In the context of bankingii, brands modify the perceptions of experience as I illustrate

here. Experience modifies first, immediate expectations, and then the attitudes that

give rise to expectations and finally the deeper held beliefs which are articulated in the

real world through attitudesiii. Our expectations are generated through brand perception

in ways I shall discuss in more depth in a subsequent section.


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Beliefs

Attitudes(Reusable decisions)

Experience (feedback)

Choices

Outcomes

Contextualisationfeedback

Needs

Reframing feedback

Expectations

Realignmentfeedback

Interpretation

Expectations influence both the outcome and our interpretation of the outcome. The

exhibit below amplifies this a little. A customer with a favourable brand impression is

more likely to do two things. The first is to have, at the outset, a higher commitment to

the success of an interaction with the bank. By interaction I mean anything from

telephoning to make a complaint to calling into a branch to make an inquiry about

refinancing a mortgage. Banking products and services are among those that depend on

collaboration between the suppler and the customer for successful outcomes.

For example, a customer with a complaint who has a poor perception of the brand goes

into the interaction with an adversarial rather than solution seeking game plan. During

the interaction they are likely to induce a negative reaction from the bank staff members

and this, of course, can easily spiral. Similarly if the customer goes in expecting a bad

outcome the interaction is more likely to lead to one. The interaction meanders towards

the conclusion predicted in the customer‟s mind. Finally, brand influences the

interpretation of the outcome.

‘They fixed my problem just like they always do.’


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Favourable Perception of brand

Favourable expectations of the interaction

Favourable outcome

Good bank performance

Customer commitment to the interaction

Effective bank processes and

resources

Favourable interpretation of

the outcome

And there is one further feedback loop to add. Once observed, the commitment of bank

resources is reinforced, confirming the loop. The difficulty for the bank lies in the

observation of the process which is more difficult to measure than you might think.

Many banks give up on a course of action just before benefits become apparent because

their antennae are insufficiently well attuned.

Favourable Perception of brand

Favourable expectations of the interaction

Favourable outcome

Good bank performance

Customer commitment to the interaction

Effective bank processes and

resources

Favourable interpretation of

the outcome

reinvestment


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As I discussed in Section 4, there is a self reinforcing loop in the development of

customer perceptions as experience of the event interacts with accumulated brand

experience. Where brand experience and event experience conflict there is a clear

management issue at hand. But where they reinforce each other, either up or down,

there is momentum. It is true that banking momentum can appear almost glacial in its

pace. Deciding of the right things to do and consistently doing them over a long period

is a big part of the answer.

Tourist: How do you get these lawns looking so beautiful?

Gardener: We just keep watering them, mowing them, rolling them.

Tourist: That doesn’t sound difficult, how long does it take?

Gardener: About 400 years.

And while I have my old joke book out, I shall also fail to resist:

Man in sports car to wayside yokel: What’s the fastest road to London?

Yokel: Well, if I were you I wouldn’t be starting from here.

Bank brands tend not to be starting from the right place. A few decades ago might have

been better.

I used the diagram below in Section 4 – „Why brand banks?‟ to illustrate the momentum

imparted when brand experience and event experience reinforce each other.


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Why then doesn’t a successful bank just maintain this momentum ever onwards and upwards,

while the unsuccessful ones go down? I suspect this is largely due the cyclical and structural

factors I outlined in Section 5 and the interactions between them. The playing surface never

stays smooth and level for long enough. But also it is caused by flagging in management

resolve. Too often things happen too slowly or in ways undiscerned and management

support for a strategy is withdrawn. These things are hard to observe and measure. To do

so is an important management discipline.

To sum up, when we measure satisfaction, we are measuring the impression left by a series of

experiences modified by brand and changing brand perceptions. Favourable brand perception

has dimensions that satisfaction alone does not.

What does a favourable brand perception do that

satisfaction alone does not?


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Is favourable perception of the brand the same as customer satisfaction? I think not.

Perceptions of brand allow you enter the realms where experience has less power. This

happens in two ways:

First satisfaction with what is experienced can be transferred to things not yet

experienced; and

Secondly satisfaction can be transferred from the concrete particular to the

abstract universal.

I shall elaborate below. In the meantime, I don‟t want to imply here that there is a

simple path from repeated event satisfaction to favourable brand perceptions. This

repeated event satisfaction creates the opportunity for branding not the branding itself.

There needs to be a vehicle of mental pathways and associations to do that. As John

Grant says there has to be „a cluster of strategic cultural ideas’ acting as a conveyer. I

shall pursue this line of thought in Section 11 – „Building the brand story’.

Close to hand and heart

By „close to hand and heart‟ I mean those products and services that the customer needs

and uses now. Typically, bank customers are rarely satisfied in a way that transcends

the here and now. Too much is simply expected to go right. If an interaction with the

bank goes well today that‟s enough. Brands, I believe can extend that a little, however,

when they are well managed.

I want here to use a familiar marketing matrix in a different way to how it is usually

deployed. The customer‟s satisfaction with the „here and now‟ can be extended to

products, services and distribution channels:

offered under the brand that exist but that they don‟t yet use;

that they use now as they respond to their future needs; and

that the bank may introduce in the future.


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This last point is important to, for example, the future development of online banking.

Imagine being offered a new online banking service by a bank that consistently makes

mistakes in your paper statements.

Pre

se

nt

Existing

Fu

ture

New

Perception of events as

modified by perceptions of

brand




Products, services, markets, distribution channels

Tim

e p

ers

pective

Brand here fills in parts of the matrix that satisfaction alone does not fully reach into.

The reason is that bank satisfaction tends to be passive and reactive. It does not extend

unless in some way articulated. A good brand requires customer satisfaction as a base

but it requires other things as well.

More distant but more lasting

Another set of dimensions are those shown in the exhibit which follows. They appear

less immediate but because they require a greater stretch on imagination, beyond the

self and the self‟s immediate needs can create a deeper impression. Perceptions once

extended into new territory are I believe likely to be sustained. The breakthrough into


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new territories of thought is hard to retreat from. It tends to stick in people‟s minds

because it is newly created territory in their mental map.

Pra

gm

atic

Me

Ide

al

Others

Perception of events as

modified by perceptions of

brand




FocusO

utlook

I see this branding effect as having two dimensions:

First, it extends satisfaction beyond „me‟ to „us‟. „If I’m satisfied with this service so will

others be’. This inevitably carries with in people‟s mind the connotation of „us‟ as „me

and my tribe‟ or „me and the tribe I want to be in‟. The effect can be powerful. It

extends to ‘I am one of the group of people experiencing satisfaction with this brand’.

Secondly, it can go from the pragmatic to the ideal. That is to say, from the strictly

utilitarian to something socio culturally valuable independently of the user. It becomes

the right way to do things.

All the things above that I have tried to designate as „brand‟ rather than satisfaction

have one further capability. Satisfaction can be better than that of a rival bank. But it

cannot be a different kind of thing. Competition takes place along a single continuum in


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this regard. Brand opens competition to many dimensions creating, as it does so, more

opportunities for differentiation.

The foundation for brand is personal experiences but brands build bridges from personal

experiences to broader perspectives, aspirations and concerns.

Having said this, for customers, the foundation of favourable brand perception is indeed

satisfaction. It is to the measurement of satisfaction that I shall turn next. We also

need to consider the development of brand perception in the minds of non-customers

with no experience of the product or service. I shall return to this later in this section.

For now I want to conclude that favourable brands stretch customer satisfaction into

dimensions other than the individual customer‟s here and now. More than this a good

brand shifts the customer‟s mental focus from the concrete particular to the abstract

universal. For this to happen the customer must believe that the benefit that they

derive from the interaction with their bank results from some core value or institutional

capability that resides deep within the bank and is nurtured there.

Measuring satisfaction

A (very) short history of customer satisfaction

measures in banking

Of course it has always been a good idea to keep customers happy. The „customer is

always right‟ has been with us for a while. I suspect, however, that systematic research

into bank customer satisfaction is relatively recent. Around 1990 I asked to see all the

customer research for Westpac‟s commercial banking unit and was directly to a rickety

but large wooden cupboard. Out fell a few dozen or so large, dusty, ring bound books of

research. They were all issue specific (this or that product or campaign) rather than

systematic tracking. Clearly each had be read once or twice, nodded wisely over and

chucked into the cupboard. It took a couple of decades to get to where we are now in

measuring satisfaction.


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There were two things that gave impetus to measuring satisfaction. One that appealed

to the thinkers in banks was ultimately caused by Edwards Deming‟s quality

management concept. Banks came late to quality management (many came not at all).

It did make sense, though, that measuring the quality of process depended on some

guide to the quality of output that customers required. Now this isn‟t easy in banking.

Compare it to, say, manufacturing a part to go into a larger assembly. If the

specification of the ball bearing is 14.25 millimetres diameter that‟s the target, no

question. Obviously, banking is harder to get that level of „hard and fast‟. Thereby

hangs a thought that I shall pursue later in another section. For now though the need to

measure satisfaction in some way or another became more important.

By contrast, the road to measuring satisfaction for the „doers‟ among bank executives

came with a realisation, which seemed to dawn on the whole world all at once during the

Nineties. We discovered that retaining customers costs a lot less than winning new

ones. By year 2000 at least two bank CEOs in Australia had satisfaction measures as

part of the KPIs agreed with them by their Boards (and probably all of them).

But then, after a few years, people began to question whether satisfaction was enough.

Criticism came mainly from two sources. First satisfaction alone did not appear to be a

good predictor of customer behaviour. Secondly, for some people, measurement of

satisfaction seemed to make life too easy for the people being measured. The bar had

not been set high enough.

To take the first point, satisfaction seemed not a good guide to customer defection or to

their value to the bank. Indeed some very satisfied customers were underpriced for risk,

so no wonder. Other dissatisfied customers were so because their bank, quite correctly,

was trying to manage credit default. But even so it was found that some satisfied

customers that a bank wanted to keep were defecting.

Some studies purported to show that satisfaction only predicts behaviour when

satisfaction scores are very high. I think the reason for this is less that there is a sudden

kink in the satisfaction / behaviour curve. I think it because a hidden dimension comes

into play. We see this at work in the Conversion Model, which I discuss later.


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The second point goes to the heart of bank management and I shall more to say about it

later in this series of papers. For now though consider the exhibit below. It shows the

result of a survey of about 23,000 relationship managed business customers. There was

a response rate of roughly half. The waves were carried out in the years 1995 to 1997,

inclusive. It was approximately two years after a major restructure and the relationship

managers and their support teams were getting good scores for customer satisfaction.

About 70% of customers were being giving scores of 8 or better. But in the minds of

some people at their head office that wasn‟t supposed to happen. It looked all too easy.

But then how do you raise the bar to 8 out 10, especially when many respondents don‟t

give 10s on principle. ‘It leaves no room for improvement’, they say.

It was generally decided; (by those not being measured) that something more

demanding was needediv.

As well as these things, banks, in my experience, are not good at linking satisfaction

measures to process management or design. Measuring satisfaction is seen as just a

way of keeping score rather taking decisions. As far as I can see, this is not a

widespread concern among others. It is, however, a central theme of this book.

Overall Rating of Relationship Manager

Service and Support

Wave 3

Avg Response 8.05

1

2

3

4

5

6

7

8

9

10

NA

0 5 10 15 20 25 30

Percentage of respondentsSource - CTS

Wave 1

Avg Response 7.23

1

2

3

4

5

6

7

8

9

10

NA

0 5 10 15 20 25

Percentage of respondents

Wave 2

Avg Response 7.98

1

2

3

4

5

6

7

8

9

10

NA

0 5 10 15 20 25 30

Percentage of respondents


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Satisfaction and the TNS Australia Business Finance

Monitor

The TNS Australia Business Finance Monitorv is a sophisticated survey of the banking

behaviour and perceptions of businesses with turnovers of up to AUD 100,000vi. For

general references to TNS and the Kantar Group, of which it is now a part, see the

endnote. I reiterate that while I am grateful for having worked with TNS Australia for

nearly a decade any views I express are mine alone and do not necessarily reflect TNS

thinking. In making reference to the BFM I use no indicators for any individual client and

only show data that is already in the public domain.

In its design the BFM survey had to do two things of special relevance to this series of

papers. One was to incorporate some measures that were a given because they were

used by one or more of the subscribing banks as part of their internal processes. For

example satisfaction measures are included in some in the Key performance indicators of

the CEOs of some banks. This means that it is vitally important to the client that the

underlying question does not change so the time series is maintained.

Secondly, the questionnaire design involved input from a group of highly experienced

and competent market research expertsvii. Naturally there was not total agreement

either on what elements to include and how to word the questionnaire. The end result

was a compromise but not, in my view, a bad one. As I progress through this section I

shall comment where my views were or have come to be at variance with the

questionnaire as it is presented here. Hindsight is of course easier than foresight and I

learned a lot during the course of my involvement.

As a result of the situation I have described, the BFM include questions from more than

one approach to measuring satisfaction:

Two different versions of a straight satisfaction question with, as far as I know,

no particular source.

The satisfaction question as it is incorporated into Jan Hofmeyr‟s Conversion

Model™;


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A version of the Net Promoter Score (NPS) question, developed by Fred

Reichheld; and

A version of the Customer Value Added question, developed by Ray Kordulpleski.

In the exhibit below I set out the text of the questions side by side. I‟m going to refer to

such questions as focal questions because they act as a bridge between understanding a

lot of detail about the customer‟s perceptions and situation and making predictions about

the customer‟s behaviour. Put simply for now.

Beliefs

Attitudes( Reusable decisions)

Experience ( feedback)

Choices

Outcomes

Contextualisationfeedback

Needs

Reframing feedback

Expectations

Realignmentfeedback

Interpretation


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Overall, on a scale from 1 to 10, where 10 means 'perfect in

every way' and 1 means 'completely

unsatisfactory', how would you rate your

experience with [name of provider] for

business banking?

Taking everything into consideration - the products, the

service you receive and the fees and charges that you have to pay - how

would you rate [main bank] overall for the value they offer your business? Would you

say they give you excellent value for

money…?

Using a scale of 1 to 10 where 1 is

'definitely would not recommend' and 10 is 'definitely would recommend', how

likely would you be to recommend [main

bank] to your business associates for their business banking needs?

Overall, how satisfied or

dissatisfied are you with your

relationship with [main bank] on a scale of 1 to 5, where 5 is as

satisfied as you could be, and 1 is as dissatisfied as you

could be. Are you…?

And thinking about all of your business

accounts, loans, investments and

service dealings with [main bank], how

would you rate their overall

performance? Is it excellent…?

Conversion Model satisfaction question

Standard satisfaction question

NPS / Advocacy question

CVA satisfaction question

Standard satisfaction question (2)

BFM Q 8-5 BFM Q 10-2 BFM Q11-6 BFM Q11-2 BFM Q11-3

Note that the Conversion Model™ satisfaction question only operates in conjunction with

the other question that combine with is to assess customer commitment. These

questions are.

Conversion Model perception of

alternatives question

BFM Q 10-1

I'd now like to ask you how you feel about different

institutions with regard to business banking. Please

indicate your feelings about each institution by giving a score between 1 and 7. If you have a very negative

attitude towards a particular institution then you should give it a score of 1. On the other hand, if you have an

exceptionally positive attitude towards it, you

should give it a score of 7.

Conversion Model importance of choice / involvement question

question

Q10-3

Thinking about the selection of a bank or other financial

institution for your business, on a scale of 1 to 5 where 5 is not important at all and 1 is extremely important, how

important to you is the decision about which provider

to go to? Is it?

[Extremely important1;Very important2;Moderately

important3;Slightly important4;Not important at

all5

Conversion Model perception of

alternatives question

Q10-4

I‟m now going to read three statements about business

banking institutions. Thinking about your business banking with each bank , please tell me which statement best

describes how you feel about this institution.

1 There are many good reasons to continue dealing with [BANK] and no good

reasons to change.2There are many good

reasons to continue dealing with [BANK] but there are also many good reasons to

change.3There are few good reasons

to continue dealing with [BANK] and many good

reasons to change.

Overall, on a scale from 1 to 10, where 10 means 'perfect in every way' and 1 means 'completely unsatisfactory', how would you rate your experience with [name of

provider] for business banking?


BFM Q 10-2

I might be uniquely positioned to talk about these several ways of getting to the

measurement of customer commitment. Surprising there seemed relatively little client


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interest in making comparisons between the focal question approaches so my data is not

as rich as it might be.

The Net Promoter Score™ (NPS)

Undoubtedly, NPS has taken the market research world by storm. „It

would be difficult to overstate the impact of Net Promoter on

management‟viii The BFM Advisory council of client representatives asked

for it to be included in the questionnaire from July 2007 as a replacement

for the advocacy question it had included, hithertoix.

Net Promoter is a customer loyalty metric developed by Fred Reichheld and

Bain & Company, It was introduced by Reichheld in his 2003 Harvard

Business Review article "The One Number You Need to Grow". It is controversial in its

claim to be ‘the one number you need to grow’. Studies such as that of Timothy L.

Keiningham et al (op cit) cast doubt over claims that NPS is a superior measure. For reasons

I’ll deal with below it probably isn’t all that inferior either. For my immediate purposes,

however, it is a measure that looks beyond the respondent’s satisfaction to look a little more

broadly at how the customer sees the brand. It asks customers to interpret their experience of

the brand in the context of their relationship with other people. I think it the question is most

useful as a guide to word of mouth but it is serviceable as a satisfaction focal question

providing you don’t get carried away by its claims to unassailable superiority.

The question itself presents a problem that seems not to have been picked up by the

various critics of NPS that I have read. Two things are, conflated: the first is the

customer‟s satisfaction with the product or service. This is saying, „I, the customer, am

so satisfied that I would take the (unusual) extra step of recommending this to others‟.

In a sense that can be expressed as „I will associate my brand with your brand‟.

The second thing is the customer‟s intention to talk about the product or service at all.

This raises questions such as does the product or service appeal especially to people who

like talking about products. Does this matter in real life? I think it can do. Are, for

example Apple computers the product of choice of the „chattering classes? I think they

Using a scale of 1 to 10 where 1 is

'definitely would not recommend' and 10 is 'definitely would recommend', how

likely would you be to recommend [main

bank] to your business associates for their business banking needs?

NPS / Advocacy question

BFM Q11-6


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are and that this has a positive impact on the Apple brand. My main point here is that

any attempt to modify the focus question in a satisfaction survey will raise complicating

issues of interpretation. This matters more when the focal question is used for deep

analysis as opposed to merely keeping score.

We have seen that the BFM asks the NPS question as well as other satisfaction related

questions. I don‟t see why this shouldn‟t be done. In point of fact, I‟d ask the word of

mouth question, ideally, a little differently. But given its apparent popularity with senior

executives I see no real harm in adopting the Reichheld wording. I should prefer to ask

other questions though concerning the frequency with which and circumstances in which

people seek and offer opinions about banksx.

A bigger question in my mind is how is that this form of satisfaction question became so

popular so quickly, a point to which I shall returnxi as I believe the underlying causes are

central to my argument.

The exhibit below compares, the NPS with commitment s measured by the Conversion

Model. The data is for Australian business banks and customers up to AUD 5 million

turnover. NPS is measured as the aggregate of scores 9 and 10 on a ten point scale

minus the aggregate of scores 1 – 6. The conversion model rating is measured by the

percentage of committed customers to all customers. I am not revealing the names of

specific banks in these papers. But it does seem useful to distinguish here between

small (S) and big (B) banks.


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You‟ll have to take my word for it that I can explain the outlying among the smaller

banks. The difference shown between the big and smaller banks is interesting, however.

Big banks seem to score less well on the NPS than measured by commitment. I think

there are a couple of reasons:

First, the smaller banks tend to have come from a background of personal

banking (mainly home loans) and are growing into their business banking

footprints attracting initially firms that are especially attracted to their business

models. I suspect that these firms tend to have a something of an evangelical

relationship with their banks;

Secondly, the smaller banks tend to have a larger proportion of customers

outside the main cities of Sydney and Melbourne in smaller towns and rural areas

where there is greater community spirit and supportiveness;

Thirdly, the smaller banks tend to have stayed closer to businesses managed-at-

the-branch model which means that there is a greater sense of community in

dealing with the bank.

B

B

B

B

SS

S

S

S

S

S

S

R² = 0.7141

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

40% 50% 60% 70% 80% 90% 100%

Net P

rom

ote

r S

co

re

Commitment

Comparison of Commitment and Net Promoter Score


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To the extent that these things are true, the NPS does pick up on intention to promote

as opposed to being merely an expression of extreme customer alignment with the bank.

This may support my view that the NPS is more useful as a measure of word of mouth

than it is of satisfaction per se.

Customer Value Analysis™ (CVA)

Ray Kordupleski, author of Mastering Customer Value Management: The Art and Science

of Creating Competitive Advantage introduced CVA and, among clients I know, it

achieved nearly the same popularity as NPS. One bank I have dealt with, Suncorp is one

of the main examples given in Kordulpleski‟s book. CVA is based on the idea that

satisfaction should be related closely to perceptions of value for money.

With candour (almost defying belief), Kordulpleaski states in the introduction to his book

that he chose the name CVA because it resonated with the Stern,

Stewart term Economic Value Added (EVA), which lent it credence as a

business. Actually, customer value measurement is vital and I shall turn

to it in the next section in this series of papers. CVA has nothing to do

with this and is simply another way of adjusting the basic satisfaction

question to get a supposedly better result. The basic thought is

customers can be satisfied with a product or service but don‟t think its

value for money. This assumes that when asked about satisfaction they

won‟t, in their assessment, take account of what it costs them. It also

directs attention towards cost away from the other three elements

recognised by Croxford et al, in the work I cite in Section 1 of this series of papers and

adapt in the exhibit below.

Taking everything into consideration - the products, the

service you receive and the fees and charges that you have to pay - how

would you rate [main bank] overall for the value they offer your business? Would you

say they give you excellent value for

money…?

CVA satisfaction question

BFM Q11-2


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Perception of price


+



experience


+

+

+

It is quite difficult to get survey respondents to think about all four elements at once. As

with all surveys the part of the totality that their mind snaps to in the instant they have

to respond will depend on factors including:

the sort of person they are (refer back to Section 2, where I introduce

segmentation by attitudes to finances);

their situation at the time they respond (for example people‟s first reactions can

change depending on whether they are at home or a work);

their most recent salient experience with the product / service;

the positioning of the question in the survey questionnaire.

As far as possible I prefer the question to be as simple as possible to avoid any leading

of the respondent.


24


The exhibit above shows a rather similar position to what we saw for the comparison

between the Conversion Model and the NPS but for different reasons I believe. I believe

it is indeed more likely that the customers of larger banks are more fully priced. Larger

banks tend to be more attuned to shareholder expectations of return. Moreover, they

can rely less on a growth premium in their share price than can smaller banks. In

addition to this their greater share of customers in urban centres may indicate a greater

focus by these customers on the cost of banking.

How the Conversion Model works

I have already introduced the Conversion Model in Section 3 of this series of papers. It

is a psychological measure developed by Jan Hofmeyr that segments customers into

eight groups as illustrated below.

B

B

BB

SS

S

S

S

S

S

S

20%

30%

40%

50%

60%

70%

80%

40% 50% 60% 70% 80% 90% 100%

CV

A s

core

Commitment

Correlation of Commitment with CVA


25


Entrenched

committed

Average

committedShallow Convertible Available Ambivalent

Weakly

unavailable

Strongly

unavailable

Committed Uncommitted Open Unavailable

Customers Non- customers

Total market

I have only worked with a slightly older version of the Conversion Model than the one

currently used. This is the one I discuss here. I understand that the version to which

TNS has proprietary rights has been simplified somewhat in application without any loss

of information content. I also understand that Jan Hofmeyr has developed a similar

model to which Synovate, a market research company, has a proprietary right. I have

no knowledge of this model.

The central satisfaction measure in the BFM is commitment derived from the Conversion

Model. In the version with which i am familiar it derives from four elements:

Satisfaction / needs fit;

Importance of the purchase decision to the customer;

Perception of alternatives;

Ambivalence.

It is a key feature of the Conversion Model that all studies which use it enter data into a

central database from which norms are generated that place the results within the

context of the country and industry. There are approximately 7,000 such studies at

present.

Satisfaction / needs fit

The Conversion Model does not abolish satisfaction. In fact satisfaction is the „active

ingredient in commitment. The other factors in commitment are primarily influenced by

satisfaction but also to some extent by intrinsic factors. I shall explain this below. The

exhibit here emphasises the dynamic nature of the development of commitment of which

the Conversion Model takes a snapshot in time.


26


Adverse experiences

Leads to

Leads to

dissatisfaction

More negative ambivalence

Increased importance of choice of bank

Enhanced perception of alternatives

Loss of business

Need for new product / service

Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Importance

The Conversion Model view of the world is that customers cannot be committed to a

product or service that is unimportant to them. Choosing a bank is more important than

choosing the office cleaners. To which a sceptic might respond – but for any category

the importance of the buying decision is of much the importance across all users.

However, this is not the case. In my research, among Australian SMEs with turnover up

to AUD 5 million, two thirds of them rated importance in the top two categories in a 5

point scale and one third in the bottom 3 categories. This confirms what many bankers

believe about the market. There are two fairly distinct groups. In the words of Alan

Pricexii „the customer you win on price today you’ll lose on price tomorrow’. In

Conversion Model terms the transition paths of ‘low importance’ customers are indicated

by the red arrows and those of „high importance’ customer by the blue arrows.

Overall, on a scale from 1 to 10, where 10

means 'perfect in every way' and 1 means

'completely unsatisfactory', how would you rate your

experience with [name of provider] for business

banking?


BFM Q 10-2


27


Entrenched

committed

Average


Weakly

unavailable

Strongly

unavailable



When we talk of satisfied customers who still defect, it seems likely to me that some of

them do so simply because a relationship with any bank is simply not that important to

them. They can be tempted on price or relaxed lending conditions.

Adverse experiences

Leads to

Leads to

dissatisfaction



Search for alternatives

Loss of business


Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Deterioration of economic conditions

Leads to

Changes in intrinsic customer

management beliefs

Can lead to

Perception of alternatives


28


The Conversion Model also takes into account customer‟s perception of alternatives. A

satisfied customer may defect simply because they might be even more satisfied with a

rival bank. This process is illustrated below.

Adverse experiences

Leads to

Leads to

dissatisfaction




Loss of business


Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Ambivalence

The Conversion Model‟s variable it describes as „ambivalence‟ is very like an intention to

switch question common in many surveys. In a sense a poor rating on this measure is a

culmination of a series of events adverse to the bank. Dissatisfaction leads to an

intensified search for alternatives weakening the position of the incumbent bank as

shown in the exhibit below.


29


Adverse experiences

Leads to

Leads to

dissatisfaction




Loss of business


Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Leads to

Dissecting the Conversion Model

None of the questions that constitute the Conversion Model are unusual. Each for them

could easily appear in any survey questionnaire. For example, the ambivalence question

is just a version of an „intention to switch‟ question. What is special about the

Conversion Model is the way in which it brings the four elements together into

commitment, based on statistically derived norms.

The following exhibits are taken from a study I did of the Australian farm sector some

years ago. From the exhibit below you can see that among farmers, frequently reported

in the Australian media as hating their banks, few fall into the South West quadrant of

the matrix. That is the quadrant where respondents don‟t like their bank but there is

inertia because they think that all banks are the same. The majority are in the quadrant

where they quite like their bank but are also open to at least one other bank.


30


1 2 3 4 5 6 7 8 9 10

7

6

5

4

3

2

1

Satisfaction / Needs fit

Attitu

de

to

ward

s a

ltern

ativ

es

5% 62%

1% 3%

29%

Looking more closely, I next introduce the ambivalence question. Of the 5% of the

market less satisfied with their bank there are still relatively few (37%) who say they

believe there are few good reasons to stay and many to change. This is where we see

the inertia in the market. It is not caused by the „all banks are bastards‟ mindset.

1 2 3 4 5 6 7 8 9 10

7

6

5

4

3

2

1

Satisfaction / Needs fit

Attitu

de

tow

ard

s a

lte

rna

tives

20%

43%

37%

74%

23%

3%

77%

19%

4%

0%

43%

57%

5 62

1 3

I offer this glimpse to make the point that the dynamics of the commitment over time

should be understood to see how the situation is unfurling. As a group, these farmers

have reached the point where they are open to alternatives but see no compelling

reason to change at this point.


31


Conversion model weaknesses

The primary problem clients seem to have with the Conversion Model is its black box

effect. Four questions are askedxiii and these are brought together in a proprietary

algorithm into a classification in to one of eight commitment segments. This has the

beneficial effect of maintain some central control over the use of the Conversion Model

that I don‟t think applies to the same extent to NPS and CVA where researchers can just

incorporate the question into a survey. They do not necessarily have a comparative

database to work with.

This is obviously an advantage for the Conversion model in normalising outputs by

industry and country. But it does have a serious downside. A great issue that client side

market researchers have is this. Consider when they are being questioned by segment

managers as to why, say, the commitment measure (on which their performances might

be measured) has fallen. How well does it go down, do you think, when they have to

say they don‟t know what happens when the responses to the four questions goes into

the black box?

Now this doesn‟t much worry me. I don‟t see why, for performance measurement,

banks don‟t just use the satisfaction / needs fit part of the Conversion model measure.

Nothing is lost from what they would have anyway. The reply then seems to be, “ah but

people might measure me by commitment anyway. It is part of a wider problem in

using research data. It is one I shall return to after a brief discussion of some related

issues.

General issues with measuring satisfaction

Statistical validity


32


Users of satisfaction scores no matter how they are derived seem to spend a lot of time

considering the „statistical validity‟ of the results. Well I can sort this out for everyone

straight away. There is none: well, none worth speaking of – not in a scientific sense..

The first rule of sampling is that every member of the population has an equal chance of

being selected. With customers, this never happens, ever. It doesn‟t even happen with

a staff survey over which you have more control.

I‟ve never seen good evidence about who responds to surveys but, like pretty much

everyone else, my experience suggests to me that it is people towards the high end of

satisfaction and the dissatisfied. Mind you, I haven‟t really seen the twin peaked

distributions that you‟d expect if this were true.

With panels you get people who want to be on panels. With incentives you get people

for whom the incentive means something. But whatever you get is not going to be

statistically valid.

Let me offer two anecdotes and you can make a judgement about how rare you think

these instances might be.

An elderly woman I know took pity on a cold wet door-to-door research woman one

Yorkshire Sunday. She answered some door step questions and accepted £5 to fill out a

„phone directory sized questionnaire. But as she was frail and tired my partner and I

took on the task of completing the questionnaire on her behalf. Much of it didn‟t apply,

for example cosmetics, overseas travel and theatre going. It still took us, taking turns,

on and off the best part of a week. We did do our best though to reflect what we

thought he lady‟s thoughts would be.

I once had dinner with a half a dozen Barossa Valley winemakers and their accountant –

himself a winemaker. They were all customers of my bank. When I asked about the

client survey I had used recently, the accountant told me that all the others gave him

the questionnaire to complete for them. He told me he did try to reflect the individual

experiences of each of them.


33


Well, did you expect every bit of market research to come to you in dust free laboratory

condition?

Sample sizes

Sample sizes are rarely what we should like them to be. In my experience we

sometimes say that around thirtyish is enough. It is, sometimes. But that is in limited

circumstances where the dimensions we are sampling for are few (well one actually). So

in predicting the proportion of red billiard balls in a bag of red and white ones it might be

ok. But in ascertaining the loan balances of a sample of customers it is less so. I expect

it‟s always hard to satisfy statistical standards. In my practical experience it‟s best to be

nervous with any sample shy of 100 or so.

Incomplete population data

What actually is the population that is being sampled? This is not as straightforward as

it sounds. Take the segment, often used in Australia of SMEs with turnover less than

AUD 5 million. From memory there are an very large uncounted number not captured

by government Goods and Services Tax returns alone. These returns are the main basis

for keeping count od Australian businesses.

What is being measured, actually?

In my experience this is often a poorly understood issue, even among market research

specialists. In banking what to you want to measure? Is it something about the

customers themselves or something about their value to shareholders? For example,

supposing you discover that the proportion of customers with turnover < AUD 5 million

committed to their bank is 50% by number. It could easily be the proportion of their

(say) loans from the bank held by committed customers is 70% a big difference. So

what do you want to measure? In most cases i would want to know the characteristics

of my balance sheet rather than of my customers. But most bank research doesn‟t tell

you that.


34


Measurement scales

A variety of scales are used. Sometimes people get very hung up on this. I tend to use

1 -10 because respondents are most used to it and it presents as little barrier as possible

between them and the script. But even discrete data can be deceptive. The gap

between 1 and two rating, for example is 100%. The gap between 9 and 10 is 10%.

Valid responses

Having met the cost of getting through to a valid respondent, naturally you want to ask

as much as you can. My best information is that there is deterioration in response and

an increase in the dropout rate if an interview goes much longer than 20 minutes.

Telephone seems to work best as far as I can see but is expensive and increasingly will

run counter to privacy regulation. Panels will become important but while a panel can

tell you a lot about the voice of the market it is less useful for the voice of the customer.

It is hard to find a panel that can be made representative of a defined customer base.

The auto pilot response to ratings

My experience of people answering any form of satisfaction question on the telephone is

that they immediately get what the questioner is on about and translate that in their

minds directly to he / she wants to know how much I like it. This actually mostly gives

you the right answer but doesn‟t add much for the case for subtly worded questions.

Respondents screen out the subtlety because they get what you mean almost before you

say it.

Also, people have some tendency to get into a rut when answering a series of questions.

‘How responsive are they?.... 6

How consistent are they? ....6

How well do they support the community?...6

What’s your favourite colour?...6’


35


Questionnaire design issues

There is never a perfect design but be aware of this. Introducing a satisfaction question

in the wake of a series of questions about face to face service will almost certainly

condition the respondent to answering about their satisfaction with face to face service.

If you wanted to know about their satisfaction with the bank as a whole, including,

products and other distribution channels, you are not likely to get it.

So what is the big problem I was talking about earlier?

All these little problems come together as one very big problem when mixed with one

important fact of banking. Some people have a vested interest in looking hard for and

imperfections in the data. As we have seen these are inevitable so a hard look need not

take that long. These people are really anyone in a management position who is being

measured by satisfaction scores and for whom the numbers come up wrong. I am

reasonably certain that I know of specific cases where senior management have adopted

market research policies designed to disguise their failure.

This is a really big problem with using satisfaction research for measuring performance

as opposed for to taking marketing decisions. And some clients, perhaps most clients

see performance measurement as the main or sole purpose of satisfaction surveys. In

these circumstances there will also be a tendency for clients to try to discredit the

research. Market research is always a bit like holding an X-ray up to the light and

wondering if the patient really did swallow a hammer. If it suits a senior manager to

render the research process toothless is usually possible to do so. But it isn‟t something

that can be turned on and off. There are banks that are opportunistic and banks aren‟t.

I‟m going to hold off for a bit before I decide on the right work for them. But in the

meantime I will say that a bank can‟t have it both ways. Or at least they can only fool

some of the people some of the time. Handling market research well is a demanding

organisational skill. It takes a certain kind of maturity. This must be based on a realistic

understanding of what research can achieve coupled with profound understanding of the

industry context.

The relationship between quantitative and qualitative research


36


Qualitative research never measures anything. This shouldn‟t need saying but I‟ve

heard clients drawing conclusions about what the market thinks from a couple of focus

groups too often to know that it does.

Quantitative research

Qualitative research

DesignInterpret

„We’ll run it past a couple of focus groups’ is one of those marketing phases that give a

pretty good clue that not a lot of thinking is going on.

Qualitative research can be very useful indentifying things like:

The way customers related to the product or service;

The language and terminology they use to talk about it;

How they use it;

What they see as benefits;

How they compare providers;

How central it is to their lives.

But it tells you next to nothing about how much the respondent‟s views are shared by

others. These things though do help in formulating quantitative surveys and interpreting

results. But is only the quantitative survey that is in any way helpful to the

measurement of brand.


37


Why the obsession with asking just one question?

Would CEOs be happy if the CFO said he or she could tell them all they needed to know

about the business with just one line of the profit and loss statement?

Too much emphasis gets put on the focal satisfaction question. It is never the only

question you need to ask. It is next to useless if you can‟t go backwards from it to

comprehend the underlying reasons. Also you need to be able to identify the

characteristics of respondents in terms of their underlying characteristics and their

banking behaviour. Without this, measuring satisfaction no matter what question you

prefer is unattainable. It is just keeping score.

The exhibit below outlines the overall research framework that needs to be established.

I have heard managers saying that their approach, say, CVA is best and then go on to

describe the framework of questions and analyses that interprets the CVA question in

terms of the framework below and predictions of its outcome. They believe that all of

this is integral to CVA. It is important to realise that these are common to all focal

satisfaction questions. The overall framework is the same whatever the focal question.

The framework can vary a lot depending on the industry and sometimes the individual

organisation. These difference must not be attributed, however to the satisfaction

question being used be it CVA, NPS, Conversion Model or anything else.


38


Facts about the respondent‟s banking

behaviour

Facts about the respondent

Facts about the respondent‟s

perceptions of specific banks

Predictions about the respondent‟s behaviour

Projected stimuli

Affluence

Age

Attitude to finances

Products held, which bank(s)?

Distribution channels used, frequency

Satisfaction with bank A

Perception of brand A

Alternatives

Customer defined perception criteria

Action threshhold

Customer defined switching, seeping

criteria

Some concluding thoughts on measuring satisfaction

I have tried to outline the satisfaction measurement approaches with which i am

familiar. There are surely others of which I am unaware. Those i have described,

however, are all used extensively in banking and other industries. I hope they are at

least representativexiv.

Here is my verdict. I would prefer, given a blank sheet, to use the Conversion Model

rather than any other approach I know of. I like it because while it contains a simple

unadorned and uncontaminated satisfaction it has, in the concept of commitment, more

predictive power.

It is a segmentation tool that is calibrated to a large number of studies even though the

mechanism by which this is achieved is opaque.


39


However, I do understand that it hard for bank to move away from an existing approach.

The break has to be for a significant and demonstrable improvement. Otherwise the

disruption to management thinking and the loss of historic data is hard to justify. For

these reasons, approaches such as CVA and NPS are not far inferior (though they are

not, in my view in any sense, superior) to the Conversion Model PROVIDING:

All respondent ratings of other institutions that they deal with or know of are maintained

AT THE RSPONDENT RECORD LEVEL. That is to say that an approach that gives, say, a

CVA score of 40% to one bank and 55% to another based on their customers is inferior if

we do not know how each is rated by each respondent. This is possible with the

Conversion Model but not intrinsically, unless specified, with any other methodology.

Three academic studies in personal

finance

I want to turn to exploring some of the drivers of customer satisfaction in personal

banking. Fiordelisi and Molyneux (op. cit.) refer to three academic studies of customer

satisfaction in relevant fields. Not being an academic and not have access to the

necessary search tools, I don‟t know if these are comprehensive. I expect that they

might be, Fiordelisi and Molyneux are thorough, I‟d say, and know their way round

academic research. But even if they are not, they are, in my experience, representative.

In any event, these studies are a good starting point. The exhibit below shows indicates

where we are in analysis of satisfaction. We are attempting to uncover the descriptive

criteria attributes in which customers think about what makes them satisfied by a bank‟s

services.


40


Facts about the respondent‟s banking

behaviour

Facts about the respondent

Facts about the respondent‟s

perceptions of specific banks

Predictions about the respondent‟s behaviour

Projected stimuli

Affluence

Age

Attitude to finances

Products held, which bank(s)?

Distribution channels used, frequency

Satisfaction with bank A

Perception of brand A

Alternatives

Customer defined perception criteria

Action threshhold

Customer defined switching, seeping

criteria

My purpose here is to begin to work towards a useful taxonomy of perceived benefits

that is valid across all banking markets and across all brand audiences. This might not

equate exactly to the design of a survey questionnaire but at some level of aggregation

it is desirable to express a total brand view. An element, say „responsiveness‟ may

require different wording in the personal banking market than for rating agencies. But

the broad concept should remain the same. In this case, that concept is the banks

willingness to interact with an external group with a willingness to interact and respond

to their needs. In my experience of deterioration of bank brands a failing in this area at

the branch level is mirrored in a failing at the top floor of the head office.

Conceptual Model of Service Quality (Parasuraman et alxv)

This study focused on service firms in general. They identified ten dimensions of

customer satisfaction. These were reduced to five as the elements shown below showed

a high rate of correlation. They were brought together under the term „empathy‟.


41


access

courtesy

communication

credibility

security

understanding / knowing the

customer

empathy

I‟m wary of this. I am indeed wary of letting statistical analysis over-ride business

judgement rather than acting as a pointer to something interesting. The above elements

may all correlate but that doesn‟t make them much the same from a customer‟s

perspective. Moreover, I doubt if a high level of correlation would be found in personal

banking. Access would not be seen as much the same as understanding / knowing the

customer, for example. It is quite easy to experience courtesy from a banker who quite

evidently has no understanding of your financial situation. In business banking, where I

have deeper experience, „understanding my business‟ is a key discriminator between

banks from a customer‟s experience.

In general, however, I don‟t doubt that empathy does matter. Key elements, I believe,

include:

Knowing me and my situation;

Knowing how I like to communicate and deal with people; and

Engaging with my values and aspirations.

However, to go along with Parasuruman et al, the dimensions we are left with are now:

Reliability (the consistency of performance and dependability eg the company

performs the service right first time and honours any promises);

Responsiveness (the willingness or readiness of employees to provide services);


42


Assurance (the knowledge and courtesy of employees and their ability to inspire

trust and confidence);

Empathy (the care and individual attention that a company provides its

customers);

Tangibles (the physical evidence of the service).

These are close to my own understanding of what matters in the market.

The determinants of Service Quality: Satisfiers and Dissatisfiers” R Johnstonxvi

This study identifies these drivers of satisfaction.

reliability

commitment

ability to answer customer‟s need

flexibility

integrity

competence

functionality

access

aesthetics

courtesy

care / attention

friendliness

communication

tidiness

comfort

safety

Johnson distinguishes between hygienic factors – those that do not create satisfaction if

well managed but create dissatisfaction if poorly managed – and those that create

satisfaction, more or less in proportion to how well they are managed. This is related to

Kano Analysis, which is discussed in detail elsewhere in this series of papers. The

elements in italic font above are seen as hygiene factors.


43


Also Johnson contains elements that parallel some that Parusuraman groups under

„empathy‟. I show the correspondences below.

access

courtesy

communication

credibility

security

understanding / knowing the

customer

competence

reliability

commitment

flexibilty

ability to answer customers‟ needs

courtesy Care, attentionfriendliness

communication

functionality

access

comfortaesthetics

tidiness

integrity

safety

Not comparable

Parusuraman Johnston

Of these, it seems to me access matters too much to be grouped under empathy.

Access is not easy to define. It is about providing customers with ease to access to the

bank, in branches and offices, though Point of Sale machines and Automatic Teller

Machines; through „phone and online. More importantly it is about integrating these.

Most of the studies I discuss here were made at a time when this integration was not so

important.

Courtesy, friendliness are certainly important. They matter because much of banking

is a commodity so a smile does make a difference. They also matter because banking of

anything is a a little stressful for customers. They could come under the heading

empathy but I wonder if perhaps they should be there in their own right and, in the

questionnaire at least not masked by an abstract term.


44


Communication is another masking abstraction. Also it covers many media, face to

face, „phone, letter. Is it communication by the bank or the customer? It should be kept

in mind but expressed in another way.

Credibility is a rather complicated. It is in a slightly different category to, say,

responsiveness. Credibility is a customer‟s belief about future bank actions. It is

somewhat akin to trust or brand in that regard.

Security means different things in different circumstances. To take two polar extremes,

on the one we have „all customers have the right to feel safe on our premises’. Which is

true but which is a bit specific to events that are fairly rare and sometimes trivial. They

are not my „top of mind‟, for a satisfaction survey.

Security from fraud and identify theft are another matter. How banks react to this sort

of thing is a subject of much concern to customers. Expectations that a bank would

aggressively try to prove the breach was the fault of the customer and there for no

liability to the bank can be a major source of customer concern.

Understanding / knowing the customer can have a different emphasis in different

markets.

Demographic Discriminators of Service Quality in the Banking Industry –MR Stafford

MR Stafford Demographic Discriminators of Service Quality in the banking Industry

(1996) identifies these drivers of satisfaction.

reliability and fairness

tellers

ATMs

availability and convenience

relationship with customers

rates and costs

branch atmosphere


45


It should be noted here that, in the minds of many people, retail banking is mass

consumer banking. Various forms of private banking and business banking tend not to

be “top of mind” for people without experience of retail banking.

Reliability and fairness is a double barrelled criteria that, in market research, we are

enjoined to never to use. The reason is that respondents may have a bank that is one

or the other. Customers are thought to be unable to weigh up a score for both together.

I‟m more easy going than most on this but I‟d say that reliability and fairness are a bit of

a squeeze in one line.

The word tellers is too vague. Tellers do matter lot but they can be a problem in

satisfaction in several ways including: being insufficient in number. Being poorly trained;

being unfriendly; not spending enough time customers facing. It is hard to be specific

about what are teller issues, teller supervision issues; policy issues; equipment issues

and so forth. On a somewhat narrower range of things ATMs present much the same

problem.

Relationship with customers is just too broad to be useful.

Rates and fees. This is the only element in these three surveys to cover this one of

Croxford et al‟s four drivers of customer satisfaction.

Bank marketers make much effort in deciding on the ideal branch configuration (within

the constraints of the buildings they inherit. I guess branch atmosphere is important

to satisfaction.

Summary of the three academic studies

As you might expect there is not a lot of conflict in the three studies.


46


In the exhibit which follows, I have tried to line up the drivers of satisfaction identified in

the academic research into similar categories and also group them against the headings

I have taken from Croxford et al.

Shareholder Value creation

Improve the

relationship

between shareholders

and other

stakeholders

Optimise

customer

satisfaction

Optimise bank efficiency

Optimise bank’s

financial

structure

Optimise the

mix of business

activities

Controllable at business unit level

Final Goal

Endogenous

goal

Endogenous drivers

Controllable at corporate level

Adapted from Shareholder Value

in Banking, Franco Fiordelisi ,

Philip Molyneux 2006

Brand = trust

comfort

Customer service =

customer

experience

Bank costs =

price to the

customer

Products /

services (fitness

to the purpose)

= what I want

Customer

satisfaction

Source: Adapted from The Art of Better Retail

Banking, Hugh Croxford, Frank Abramson,

Alex Jabonowski John Wiley & Sons Ltd 2005


Perception of price


Perceptions of service experience


Bank efficiency

Bank financial structure

Mix of businesses

Corporate centre

performance


Shareholder value


47


A diagrammatic summary of correspondences

reliability

responsiveness

competence

empathy

tangibles

assurance

reliability

commitmentflexibilty


courtesy Care attention friendliness

communication

functionality

access

comfortaesthetics tidiness

integrity


tellers ATMs



Rates and costs

branch atmosphere

safety

Pro

duct,

serv

ices

specifia

ction

Bra

nd,

trust

Serv

ice c

usto

mer

experience

Fees,

charg

es,

rate

s

Croxford

Parusuraman

Johston

Stafford

Commentary

Service quality / customer experience

Perception of price


+



experience


+

+

+


48


The four elements identified by Parusuraman et al seem to be fairly well confirmed by

Johnson and Stafford. Courtesy, friendliness, care / attention and communication,

identified by Johnson seem to correspond to the several factors grouped by Parusuraman

et al under the umbrella of empathy. Some confirmation is offered by Stafford.

My interpretation is that at the heart of customer experience are two things:

Stability, consistency, reliability; and

Adaptability, flexibility, responsiveness.

There are a couple of things to be said about these as satisfaction criteria.

First they can be contradictory: „I want a bank that is consistent and reliable so i

understand the ground rules and can predict their behaviour BUT when I want them to i

want them to bend the rules specially for me’. This means that banks have a bit of a

juggling act to perform. Customers are quite capable of changing their attitudes

overnight as their interests change.

Secondly, from the customer‟s perspective stability and adaptability relate both to the

bank itself and a business organisation and to the bank as it is part of the system of

which they are the centre. A bank that cannot both adapt and stabilise is not strong

enough to help them.

Thirdly, the qualities of adaptability and stability are familiar ones. We find that they are

goals of all open systems that desire viability. This of course is not evidence that these

criteria are the right ones. But is does give some confidence that we are on the right

track. Can we integrate into this though pattern the two other elements that came from

Parusuraman.

The other elements (putting aside tangibles) are:

Empathy (something of a ragbag that I want to strip of some of its elements);

and


49


Assurance, (by which as i take it Parusuraman something more like perceived

competence than trust in the meaning of Croxford.). Stated by Fiordelisi &

Molyneux as: ‘the knowledge and courtesy of employees and their ability to

inspire trust and confidence’. It actually goes a bit beyond objective competence

to highlight the customer‟s perception of competence.

Let‟s summarise a favourable customer perception.

My bank is consistent so I know where I am with them;

I have a relationship with them, they understand me, and we get on; so

they are flexible in managing my accounts. and

they have the competence to create solutions for me.

reliability

responsiveness

empathy

competence

stability

adaptation

Internal within the bank

Brought to my service

Compare this to the stories that customers tell themselves in their heads that i described

in Section 3 – How customer perceptions develop.


50


They value me

as a business

customer

Understands my

business

Responsive and

flexible

Helpful and

supportive

Helps

businesses

achieve their

business goals

Primary

causality

Positive

feedback

We can begin to see how satisfaction research can begin to evaluate and measure the

power of these stories.

reliability

responsiveness

empathy

competence

stability

adaptation

Internal within the bank

Brought to my service

Reaches back to organisational or personal

skills and resources

Reaches forward towards customer needs

Within the framework of the four key customer experience / service attributes we can

cover most of the related attributes. For example and bank being classed as proactive

in its customer service has really taken responsiveness one step forward away from a

reactive stance.

Product / service fit to needs


51


These are the elements of the three academic studies that seem most closely related to

product / service needs fit.

functionality

access

tellers ATMs


Pro

duct,

serv

ices

specifia

ction

It doesn‟t really seem to cover the field. Let‟s look at some of the elements. These are

the product features that the bank has designed to respond to customer perceived

benefits. The Croxford approach separates these features from the actual service

delivery of them.

Perception of price


+



experience


+

+

+

In terms of the Gaps model I have referred to earlier, and illustrated in the exhibit

below, we are trying here to distinguish between the effects of two separate failings.

The first is the design of the product service offering in response to indentified customer

needs (Gap 2). The second is the failure to deliver that offering through service.

Ideally, these two separate performance gaps should be distinguished as a guide to

management action.


52


Comprehension of customer beliefs, needs, values and behaviour

Design of product service offering range

Executing the solution

Selecting / specifying the market

Shareholder value

Communicating the product service offering

Creating the solution

Gap 1

Gap 2

Gap 3

Gap 6

Gap 7

Gap 4

Gap 5

Gap 8

Price

Perception of price


+



experience


+

+

+

Bank pricing involves, interest rates, fees and charges is relatively complex. The

academic studies under review have only one reference to it. They are, of course,


53


focussed on service but service I believe can only be interpreted in the light of

functionality and price.

reliability

responsiveness

competence

empathy

tangibles

assurance

reliability




communication

functionality

access


integrity


tellers ATMs



Rates and costs

branch atmosphere

safety

Pro

duct,

serv

ices

specifia

ction

Bra

nd,

trust

Serv

ice c

usto

mer

experience

Fees,

charg

es,

rate

s

Croxford

Parusuraman

Johston

Stafford

I shall return to the issue price in my discussion of measuring business banking

customer satisfaction below.


54


Comprehension of customer beliefs, needs, values and behaviour

Design of product service offering range

Executing the solution

Selecting / specifying the market

Shareholder value

Communicating the product service offering

Creating the solution

Gap 1

Gap 2

Gap 3

Gap 6

Gap 7

Gap 4

Gap 5

Gap 8

Brand

Perception of price


+



experience


+

+

+


55


reliability

responsiveness

competence

empathy

tangibles

assurance

reliability




communication

functionality

access


integrity


tellers ATMs



Rates and costs

branch atmosphere

safety

Pro

duct,

serv

ices

specifia

ction

Bra

nd,

trust

Serv

ice c

usto

mer

experience

Fees,

charg

es,

rate

s

Croxford

Parusuraman

Johston

Stafford

In much the same way as I believe service cannot be divorced from functionality and

price, I also believe that it must be seen against the backdrop of brand.

Business banking case study

Having covered some of the academic studies around satisfaction in personal banking

markets, I want to turn to the business market. I see this as covering all businesses

from the smallest up to low range corporate. The latter I define broadly as ones more

likely to turn to banks for finance than securitised debt. However, the evidence I shall

use is based on the part of the TNS Business Finance monitor that deals with businesses

with up to AUD 5 million annual turnover.

First, some background.

TNS

At the time of writing, TNS is the second largest market research company in the world

and the largest in custom research. The finance sector is one of its main areas of


56


industry expertise. In Australia the TNS Finance and Business Services team and I

developed and worked on the BFM.

The Business Finance Monitor (BFM) The BFM surveys the banking behaviour and attitudes of 2,000 agricultural businesses

and 10,000 non-agricultural businesses with turnover up to $300 million each year, and

has collected data from over 79,000 businesses since its inception. Prior to October

2002, the BFM interviewed businesses with annual turnover up to $40 million. Sample

quotas align businesses to the market by activity, size and location. The data is also

weighted to Australian Bureau of Statistics information to ensure the results are

representative of Australian businesses. The Business Finance Monitor is conducted by

TNS using computer assisted telephone interviewing (CATI). The BFM interviews the key

financial decision maker in the business, whether this is the owner or an employee of the

business. Interviewing is conducted continuously on weekdays during business hours 50

weeks of the year. Continuous quality control (monitoring and call backs) is

administered to ensure data accuracy.

The Conversion Model™ The Conversion Model is a TNS proprietary methodology, which I have fully described in

this and other papers in this series.

The imagery component of the BFM

The imagery component of the BFM was introduced by Gary Lembit. I wasn‟t wholly

behind the idea at the time but I have through experience learned to appreciate the

depth it adds to analysis. It allowed the collection of the data I am going to refer to here.

In another part of the BFM, respondents are asked to rate their main bank (only) against

performance attributes on a 1-5 scale. Imagery is dealt with differently.

Respondents are read a series of statements and are asked what banks they associate

with those statements whether they deal with them or not. We record the incidence of

nominations for each bank against each statement. The list of statements that we offer

respondents is shown below listed alphabetically. In the actual interviews the order they

are asked in is rotated by the CATI system to help eliminate order bias.


57


Best Bank for Women in Business

Clear, simple and consistent processes

Competitive rates and fees

Convenient

Helpful and supportive

Helps businesses achieve their business goals

Honest and trustworthy

Innovative products and services

Investment expertise

Offer a full range of products and services

Proactive service

Responsive and flexible

Reputation as a business bank


Support the broader community

They value me as a business customer

Understands my business

Very professional

The list was established at the outset of the BFM. As I said above it was partially the

result of a process of negotiation between banks and TNS Australia. However, as the

imagery component was new to business banking tracking, there was less need to

replicate what had been done in the past. Some elements such „Best bank for women in

business‟, Support the broader community‟ and ‘Investment expertise’ which may appear

to stand out a bit were in response to the strategies at the time of one or more of the

participating banks.

As a first step to coming to grips with this I have analysed the imagery attributes

according to the main drivers of customer perceptions that I took from Croxford et al.

They don‟t exactly dovetail to each other but all bases are covered in one way or

another.


58






ConvenientHelps businesses

achieve their business goals




Provides value for money

Proactive service

Offer a full range of products and

services





Responsive and flexible Very professional

Pro

duct,

serv

ices

specifia

ction

Bra

nd,

trust

Serv

ice c

usto

mer

experience

Fees,

charg

es,

rate

s

I shall now compare the BFM imagery questions with the framework developed by

Parasuraman et al having eliminated the attributes that are outside Parasuraman‟s scope

– shown in orange below.





ConvenientHelps businesses

achieve their business goals





Proactive service

Offer a full range of products and

services





Responsive and flexible Very professional

Pro

duct,

serv

ices

specifia

ction

Bra

nd,

trust

Serv

ice c

usto

mer

experience

Fees,

charg

es,

rate

s

The comparison with Parasuraman then looks like this.


59


Reliability

Responsiv

eness

Em

path

yAssura

nce Innovative products

and services


Convenient

Helps businesses achieve their

business goals


Proactive service




Very professional

Bear in mind that a full comparison would also take into account the BFM‟s performance

attributes which comprise:

Offering flexibility;

Pricing competitively;

Responding to your needs quickly;

Offering sound business banking advice;

Recognition for the business you do with them;

Providing the latest in electronic and internet banking services;

Understanding your business and its history;

Providing a comprehensive product range;

Providing access to specialists;

The knowledge and expertise of the bank‟s representatives;

Service provided by senior bank representatives you deal with.

In particular the attributes above cover the two things important to customers that are

not present among the imagery attributes – quick response and access to specialists.


60


With the wisdom of hindsight I should like to see more on reliability and something more

direct on competence (covered by Parasuraman under „Assurance’ ).

I want now to understand better what customers see as the main differentiators among

banks.

The sample size used in this analysis The sample for this analysis is taken from the BFM for the three years to March 2007.

This gives a large sample to work with. I believe that how people form impressions of

banks to which they are committed or otherwise changes little over a three year span.

By working with such a large sample it becomes possible in subsequent analysis to break

down the data in a number of different ways that clients may require.

It should be noted that the observations are based on all respondents irrespective to

who they bank with. Therefore a respondent may be committed to more than one bank

and may be open to several banks. The exhibit below summarises the overall results.

This part of analysis is concerned with the perceptions that shift respondents from

ambivalence to availability as indicated by the red arrow. I have omitted weakly and

strongly unavailable respondents from this chart as they are large in number so they

distort the picture and are irrelevant to the analysis. Broadly we can think of ambivalent

non-customers of a bank as being ones that don‟t have any particular aversion to it and

don‟t have a strong connection to their existing bank(s). On the other hand available

non-customers of a bank are somewhat well disposed towards that bank (although they

may be well disposed towards other banks too).


61


Sample size by category

5,014

9,955

13,64315,842 14,975

45,140

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Entrenched Average Shallow Convertible Available Ambivalent

Category

Observ

ations

Entrenched

committed

Average


Weakly

unavailable

Strongly

unavailable



Total market

Contextualising the results Using a shorter form of the attribute descriptions for ease of graphical presentation, we

looked at the relationship between the attributes that were:

most often nominated by respondents; and

showed most differentiation between ambivalence and availability.


62


Our first conclusion is that there is a tendency for that factors that best discriminate

between availability and ambivalence to be the hardest to achieve. The line of least

squares shown on the chart above has a somewhat downward slope. I interpret this to

mean than there is a tendency for the most important discriminators between available

and ambivalent customers to be difficult to achieve in the perceptions of non-customers.

In any event the incidence of any nominations among non customers is harder to achieve than

among customers, which have experience of a bank. For example the percentage of

entrenched committed customers nominating ‘They value me as a business customer’ is 79%.

We are interested in the joint effect of the two measures on the axis of the graph because the

more nominations an attribute has which associate it with bank the more likely it is that the

bank can project this attribute to the market. So, for example, the most nominated attribute

above is ‘Offer a full range of products and services‟. This is relatively easy for non-

customers to observe by the presence of branches and volume of advertising. But is

does little to make an ambivalent customer available. The rate of nominations among

Discrimination v difficulty

women

investment

communityinnovativeproactivehelps goals

rates and fees

reputation

responsive

clear processes

trustworthy

full range

convenient

professional

value me

supportivevalue for money

understands

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%

Incidence of nominations by available customers

availa

ble

/ a

mbiv

ale

nt

nom

inations


63


available customers is about 50% higher than for ambivalent ones. On the other hand

the attribute - Understands my business is a better discriminator. For every nomination

by an ambivalent customer it gets more than three from an available one. The problem

here is it doesn‟t get many nominations at all – a bit more than a third of those for ‘Offer

a full range of products and services‟. This means that a bank will find it hard to convey

to non- customers.

So if a bank has to focus its brand message to win business from non-customer

businesses the „sweet spot‟ is where there are a number of nominations and powerful

discrimination. I shall look more closely at those but first at the individual attributes.

Detailed commentary They value me as a business customer

This factor is the most significant discriminator but is rarely nominated. It is perhaps

difficult to understand how business people can feel valued by a bank they don‟t use.

Nonetheless nearly thirteen hundred respondents in our sample nominated a bank they

did not use. The statements specifically refers to business bank so it is unlikely they the

response is based on a personal banking relationship. Nor does they question in which

banks that are used refer to a bank the respondent has dealt with in the past.

The most likely explanation is that the respondents feel that this bank would value them.

A feeling of being valued is an important part of the story that customers frame in their

minds about the relationship they have with their bank.

‘Because my bank values my business they are responsive and flexible in

their dealings with me.’

Understanding how these stories develop is an important element in designing marketing

communications.



64


Along with Helpful and supportive, this is the second most important discriminator. At

least part of the way a business bank prices its services is opaque, even to customer.

This is another general impression that has formed in some peoples‟ minds. It is a

significantly stronger discriminator than Competitive rates and fees. This suggests that

respondents‟ minds are more on the „value‟ part of the equation than the „money‟.

It seems likely that value for money becomes a strong discriminator when a business

respondent feels they are not getting it from their present bank(s)


Businesses that value a relationship with a bank are likely to do so because they are

looking for a bank that would be supportive in times of difficulty. Two-thirds of all

respondents rate the importance of who they bank with as extremely important or very

important. This indicates that they want a mutual relationship with their bank.


Responsiveness and flexibility are to a large extent about the customer‟s perception that

they somehow get special or individual treatment. At one level it can be judged by how

a bank deals with a problem it has caused by making a mistake. At a completely

different level it can be judged by how the bank responds when it is the customer that

has made the mistake. In particular, business customers prefer a bank‟s credit

standards to be tempered with an understanding of their business.

Best Bank for Women in Business Best bank for women is a significant discriminator with a low incidence of nominations. I

expect that this is because a large majority of nomination are made by women. I have

not been able to measure this but, if true, it is an important piece of information.

Understands my business This factor normally rates highly as a driver of customer satisfaction. However, it is

often seen as something that business people do not really expect a bank to be able to

do. It is important to customers because they often believe it underpins a bank‟s ability


65


to offer responsiveness and flexibility. Because a banker understands their business, the

banker is able to be more flexible. For example, they might understand the demands

place on credit by seasonality. In this analysis, however, understanding of the business

in not frequently nominated and is not a high discriminator.

Clear, simple and consistent processes I believe this to be connected to reliability. As such it tends to be expected of a bank

rather than being a motivator in itself. It is likely to be associated with a bank that a

business does not deal with when the business‟s present bank or banks are perceived to

be deficient.


As I say above, rates and fees tend to be opaque even to businesses that deal with the

bank. Nominations for this are, therefore likely to be impressions and related to

perceptions of inability of a businesses‟ present bank or banks to deliver on this criteria.

Proactive service / Innovative products and services

These rate less well; than impressions of supportiveness and responsiveness as a

discriminator.


This has relatively few nominations and is not a particularly strong discriminator. I

suspect that this is something business customers do not really expect from a bank.

However, it may delight them when they experience it.

Support the broader community This factor gets a relatively large number of nominations and is also quite an important

discriminator. It would be interesting to see how it rated for individual banks (e.g.

Bendigo) which emphasise this aspect.



66


By contrast to some of the other elements this is one that is expected by customers and

is most valued only in its absence. This may be one of the factors that comes to the fore

when a respondent perceives that their present bank lacks it.

Very professional

Possibly this factor may be one that can be readily influenced by a bank‟s marketing

communications. People do have a clear idea of what „professional’ looks like.

Sometime it might be difficult to elicit it from them but not impossible. Certainly it‟s

worth a try as it is one of the higher nominations attributes if not a particularly good

discriminator. The fact that it may be relatively easy to communicate and may be one of

the more easily recognised factors comes together fortuitously.

Investment expertise This appears to be a weak discriminator with few nominations. More detailed analysis

may interest banks with a strong interest in cross-selling investment products.

Certainly, this is a key factor in achieving economies of scope as I shall discuss in a later

section in this series of papers.

Convenient / Reputation as a business bank / Offer a full range of products and services

These are all factors that are relatively easy to observe for non-customers. They get a

large number of observations but are weak discriminators.

Interpretation I suggest that the criteria circled in red below are those that a bank should first examine

in deciding the messages it should send to the market in order to convert ambivalent

non-customers to available ones. However, for each individual bank this generalised

comment should be modified in the light of its unique commitment profile.

The factors circled in blue are less strong as discriminators but may well be necessary to

instil in the minds of ambivalent non-customers before they consider the elements that

will truly attract them towards availability.


67


To summarise, the top three things to communicate for acquisition in the Australian less

than AUD 5 million turnover business segment are being:

helpful and supportive;

responsive and flexible; and

value for money.

Discrimination v difficulty

women

investment

communityinnovativeproactivehelps goals

rates and fees

reputation

responsive

clear processes

trustworthy

full range

convenient

professional

value me

supportivevalue for money

understands

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%

Incidence of nominations by available customers

availa

ble

/ a

mbiv

ale

nt

nom

inations


68


The point I wanted to make here is that it is possible to get a good measure for the

attributes to

Measuring brand among stakeholder audiences

In Section 5, I argue that one of the challenges facing banks in branding is that these

brands have multiple audiences. Correspondingly we need to measure brand

perceptions in each of these audiences. Ideally, also we need a way to integrate the

pictures we derive of each brand audience‟s reaction to the brand.

Hitherto, in this section, I have spoken only if customers (shown in orange in the exhibit

below).

Retention discrimination v difficulty

full range

convenientcommunityinvestment

reputationinnovative

professional

women processes

proactive trustworthy

rates and fees

value for moneyhelps goals

supportiveresponsiveunderstands

value me

1

1.5

2

2.5

3

3.5

4

4.5

5

9% 14% 19% 24% 29% 34% 39% 44% 49%

Incidence of shallow nominations

Sh

allo

w / c

on

ve

rtib

le n

om

ina

tio

ns


69


Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

There are several categories within the aggregate of customers representing different

markets in which the bank can participate. Each of these segments has different needs

– or why segment them? The survey instrument that the bank uses for each will be at

least slightly different in each case. However there should be an overarching framework

that supports bringing together a bank-wide view. At this point I have to confess, in the

two senior bank marketing roles I have held I would have been mad as hell to be told I

had to conform to the overall design of a another division of the bank. In fact in one

bank I decided to ignore the fact that I was supposed to use the market research

department of the personal banking division. I mention that just so no one

underestimates the difficulty of the achieving the cross corporate, integrated view that I

am speaking about. And is this is difficult across customer segments, it is harder still

among non-customer brand audiences. I shall talk about the organisational problems

more in Section 9 – Bank structure and brand control.

The exhibit below shows some of the key satisfaction criteria for the customer brand

audience. I have attempted to group these by the four main groupings of customer

perceptions that I have identified in this section:


70


Reliability;

Responsiveness;

Capability; and

Empathy.

It is these that I propose to use as the key unifiers of the data to be collected across all

customer segments and brand audiences.

I have also tried to align the perceived attributes against the three Kano Analysis

groupings of attributes:

Dissatisfies;

Satisfiers; and

Delighters.

I want to do this because, I believe that they offer thresholds that once crossed can take

brands into new dimensions. By using the categories I define above, there thresholds

can be delineated.


71


Customer perceptions of primary service attributes

Reliability

Responsiv

eness

CVapability

Em

path

y

Proactive

Convenient

Consistent

Flexible

Helpful

Supportive

Knows / understands me

Innovative products / processes

Values me

Shares my goals

Open / transparent

CapableProfessional

Integrity

Access how I want

Communicates what I need to

know

Tailored solutions

Access to experts

Timely

Accurate

Kano dissatisfiers Kano satisfiers Kano delighters

Good network

Innovative solutions

In addition to the four attributes above I have done a similar exercise for the other three

elements that I have identified as determinants of customer perceptions. (Note that as I

work through the key brand audiences below, I shall only show the non-service

classification where is relevant.

Capability

Reliability

Empathy

Flexibility

Perception of price

Perception of specification fit to

needs

Perception of service

experience

Perception of brand


Bank efficiency

Bank financial structure

Mix of businesss


Corporate centre

performance

Shareholder value

Perception of event


72


Customer perceptions of non service satisfaction attributes

Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation

Change flexibilty

Supportive of the community

Innovative solutions

The bank for people like me

Clear specifications / documentation

Product specific capability

Integrated with society

Access / transact how I

want

Easy to track / integrate with my records

Tailored solutions for me

Product expertise support

Accurate / timely reporting

A range that meets my needs

Good range integration

Right mix of distribution

channels for me

Value for moneyCompetitive

pricingInnovative

pricingTailored pricing

to my needs

Tax effective pricing

A bank that moves things

forward for the better

Prestigious

Fair


Staff

Staff should be surveyed in conjunction with customer surveys although survey

frequency need not be the same. The exhibit below tells part of the story. There may,

however need to be greater granularity in practice. In practice I have in the past

conducted staff surveys in parallel with customer surveys. However, I lacked at that

time the prescience to develop questionnaire surveys instruments capable of integration.

The staff surveys, at a time of rapid organisation change were half-yearly and the

customer surveys were annual, supplemented by quarterly syndicated studies.


73


Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

Staff perceptions of primary service attributes

Reliability

Responsiv

eness

Capability

Em

path

y

Consistent treatment of

staff

Friendly and supportive

Knows / understands me

Financially succesful bank

They value me

I can realise my goals here

Open / transparent

Capable managementProfessional

Integrity

Timely, open staff

communication

Flexible working condtions

Access to colleagues as

needed

Par of a winning team

Good counselling and

feed back

Training based on my needs

Good growth prospects

Good working standards and

policies

Clear personal and team goals


Fairness

Exposure to leading edge

work

Access to external experts

in my field


74


Staff perceptions of non service satisfaction attributes

Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious


Clear job description

Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation





Prestigious



Clear objectives

Clear rewards system

Clear incentives

Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation


The employer for people like

me


A bank I can be proud of

Prestigious




Clear incentives

Fair pay

Good rewards relative to the

industry

Objectives well integrated with those of others

Clear hierarchy and reporting

lines

Clear directions / delegations

Providers of capital and commentators

The third key stakeholder group are the providers of capital. My preference is to group

those media commentators directly concerned with the share price with providers of

capital and those concerned with other aspects of a bank‟s performance and role in the

community with regulators. However this is largely a matter of choice.


75


Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

Financial media

Providers of capital perceptions of non service satisfaction

attributes

Reliability

Responsiv

eness

Capability

Em

path

y

Capable management

Professional

Timely, open communication to

market

Capable Board


They mean what they say

Management understand the needs of the finance

market

Adequate statutory financial statements

Clear relevant strategy

Well defined position in industry

Investment in key resources

Ownership of strategic assets

Effective response to unexpected

events

Capable CEOCapable CFO


76


Intermediaries

Intermediaries‟ needs are broadly a cut down version of customers‟ needs. My

qualitative research into intermediaries of various kinds, including mortgage brokers and

financial planners strongly suggests to me that they greatly value consistency,

predictability and reliability. They tend to value these things more highly than what

banks think of as the more value added aspects of service. Intermediaries I have found

often judge their own performance by throughput of deals. Moreover, they tend

mentally to discount things that might strengthen the banks‟ relationship with the end

client at the expense of their own.

In many ways intermediaries are similar in their perceptions of banks to affiliates and

suppliers. They are most distinguished by being smaller organisations, sometimes one-

person businesses. Under some circumstances they could be more susefully grouped

together.

Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

Accountants

Other


77


Intermediary perceptions of primary service attributes Reliability

Responsiv

eness

Assura

nce

Em

path

y

Convenient

Consistent

Flexible

Helpful

Open / transparent

CapableProfessional

Integrity

Access how I want

Communicates what I need to

know

Access to experts

Timely

Accurate


Intermediary perceptions of non service satisfaction attributes

Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation





Prestigious



Clear joint objectives


Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation

Integrated into the communities in which they do

business

Known in the industry to be

solid performers

The best partner among all those available to us

Prestigious to be connected to


Clear relationship agreement

Fair division of jointly created

value

Alignment with co related

organisations


78


Affiliates and suppliers

It has been said that a key determinant of success in banking is to be linked into the

best networks. Card schemes are of course important. But as a more general point it is

the placement of a bank within the networks of suppliers of technology that matters

most. I have discussed earlier how the primacy of banks in the development of their

own technology has been somewhat eroded over time. A large part of the institutional

skill associated with technology is dispersed and possibly mercenary. Given that ICT is

such a large part of the future (quite possibly fronted at the customer interface by

intermediaries) this needs some thought. The patterns of institutional relationships that

banks construct around themselves now will involve some big decisions that may be

hard to reverse. And brand is a large part of this. Brands that are enviable, brands are

compatible, brands with a future will all matter a lot.

Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

Accountants

Other

Outsource

providers


79


Affiliates and supplier‟s perceptions of non service satisfaction

attributes Reliability

Responsiv

eness

Capability

Em

path

y

They are friendly and supportive to deal

with

They knows and understand our

organisation

Financially succesful bank

They value the relationship with

us

The relationship helps us realise our own

goals

Open / transparent

Capable managementProfessional

Integrity

Timely, open communication

Good feed back on our

contribution

Good growth prospects

Sound operating procedures


They give us exposure to leading edge work

They have world class expertise in key areas that affect us jointly

They have a thorough understanding of the sector in which we

cooperate

Affiliates and suppliers perceptions of primary service attributes


80


Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation





Prestigious



Clear joint objectives


Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rate

s,

fees

charg

es

Pro

duct

/ serv

ice s

pecific

ation



Prestigious



Bra

nd

Rew

ard

sRole

specific

ation

Integrated into the communities in which they do

business

Known in the industry to be

solid performers

The best partner among all those available to us

Prestigious to be connected to


Clear relationship agreement

Fair division of jointly created

value

Alignment with co related

organisations

Commentators and regulators

I group commentators and regulators together just for convenience and sample size.

Regulators clearly have more „skin in the game‟ when things go wrong. I suggest taking

out those media commentators whose field is valuing securities. They are more usefully

grouped with the suppliers of capital.


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Brand audiences

Staff

Customers

Suppliers of

capital

Regulators

Stock analysts

Credit ratings

agencies

Personal

business

Mass market

Affluent

Institutional

Corporate

Medium

Small

Commentators Media

Consumer groups

Politicians

Suppliers

Management

Operational

ICT

Management

Consultants

Asset advisors

Independent

intermediaries

Unions

Ad agencies

Mortgage brokers

Financial Planners

Insurance brokers

Institutions

Bank Supervisors

Consumer / trade

Employment

Affiliates

Joint ventures

Card schemes

Accountants

Other

Outsource

providers

household money

consumer

general


82


Commentators and regulators‟ perceptions of non service

satisfaction attributes

Reliability

Responsiv

eness

Capability

Em

path

y

Capable management

Professional

Timely, open communication to

market

Capable Board


They mean what they say

Management understand the needs

of regulators

Adequate statutory financial statements

Clear relevant strategy

Well defined position in industry

Effective response to unexpected

events

Capable CEOCapable CFO

Capable Board Risk Rommittee

Strong sense of corporate responsibility

Rapid and effective

response to queries

Some concluding comments

My main purpose in this subsection has been to try to show that there are strong

commonalities among the research attributes for each brand audiences and that these

can be brought together into a common framework to allow a stakeholder wide

perception of brand.

The actual wording I have used may not be exactly what I would use in a real survey.

That are certainly indicative, however, of the main things I should want to test. I offer

them in some detail in this paper so that if you wish to pursue this line of thought, you

will at least not be starting with a blank sheet of paper. It is a difficult task and one that

I have not been able to achieve more than cursorily. I wish, however, that I had.


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Grouping attributes by Kano Analysis categories should of course be done through

surveys of the market. However, I attach as an Appendix an instrument I used once for

an internal rating when I was trying to get some feel for it with no funds for proper

research.

The exhibit below suggests the direction in which a bank should be attempting to take its

brand.

EmpathyCompetence Reliability Responsiveness

Capability underpins everything. Without

it a brand doesn't get to first base

Capability means little if the

customer can‟t rely on it

Responsiveness channels

capability to the customer

Empathy relates capability to

customer needs

Dissatisfiers

Delighters

Satisfiers

The way forward in measuring

bank brands

It is a theme of this series of papers that being serious about branding is a choice each

bank has to make. Being serious about branding is difficult, expensive and making

certain decisions about the sort of organisation you want to be. These choices are

defining ones not easy to reverse although much easier to lapse from. I shall discuss

this in more depth in later sections. However, as I say elsewhere deciding not to brand

in any serious way is certainly an option for a bank. Branding, of course, to some extent

happens anyway, well or ill. Purposeful, favourable branding does not just require time,

effort and money. It also more that you might think defines the sort of organisation a

bank will be and will become. I believe a bank can be successful without good branding.


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I will explain how in the papers of this series in which I deal with implementation. Such

banks, however, are not the ones that I would wish to work in.

I‟m not arguing that to measure its brand successfully a bank must do everything that I

say in this section. Much of what I say here is to offer bank marketers starting points in

deciding what is best in their circumstances. I think, however, there are some key

points.

1. Measurements are necessary if progress is to be managed.

2. Satisfaction is an important starting point but it is not the whole story of brand

measurement.

3. There are several approaches to selecting a focal satisfaction question. I would

choose the Conversion Model, given a blank sheet of paper to start with.

4. However, there are other approaches that would probably work just as well

providing:

each respondent‟s satisfaction data with all providers is maintained at the

respondent record level; and

the framework of explanatory attributes is well designed.

5. It is not enough to measure customer segment satisfaction. There must be

measures for all key brand audiences.

6. There must be a viable framework of attributes to allow the integration of

responses.

7. Ideally, these should include something like the service classification that I have

adopted above of:

a. capability;

b. reliability;

c. responsiveness; and

d. empathy.

8. Kano analysis should also be supported. In this way thresholds are created that

allow the progress of brand development to be better measured.

9. There needs to be corporate skill in understanding market research and

interpreting its findings. This skill must be based on a certain management

maturity in working with the limitations of research.

10. None of this can be achieved unless designed into management structures and

processes.


85


In the next section I shall turn to valuing customer relationships.


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Appendix 1 – An instrument I used to be able to experiment with Kano Analysis without the expense of

surveying clients

Background to the survey I foreshadowed this survey at the TNS Business Finance Monitor Advisory Council meeting on 20 April. I emphasise that I'm

asking for your input as part of my private research into using customer satisfaction (or commitment) to improve shareholder

value. At some point this information may be of use to TNS and its clients but right now it is only a priority for me. You are

under no obligation to respond but, of course, I hope you do.

Purpose

The end purpose of this survey is to help TNS and its clients to be better able to use understanding of the drivers of customer

commitment in the BFM to design organisational responses that create shareholder value.

Your response I am seeking the response of individuals with some experience and an involvement in the industry. You were selected because

you attended the Advisory Council meeting. I am not seeking a bank response. If you believe that other people in your

organisation should also respond who meet the criteria of having and interest in and knowledge of the subject, I should be

delighted to include their response separately. Please note I have not asked you to rate the relative importance of the attributes.

This is because these can be derived from the BFM and a separate study is dealing with this aspect.

How the research will be used

I shall report the results to all respondents with my commentary. If, as a result of that report, respondents wish to change their

assessments, they are welcome to do so. I shall report to BFM subscribers further on my findings of how investment in

customer satisfaction can create shareholder value. Any BFM subscriber who wishes to use the classification of BFM

attributes in the reports they receive from TNS can do so by consulting their TNS relationship manager.

Timing

I shall begin my analysis of responses on June 1.

The BFM imagery and performance attributes The imagery attributes can be associated by respondents with any bank, whether they deal with them or not. The performance

attributes are rated by respondents for their main bank only.

The Questionnaire About you


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Individual responses to this survey will be confidential. I will not reveal them to TNS. However, I do want

to report accurately the names, titles and experience levels of the people who contributed. The

classifications I shall use in reporting the results will not include the financial institution the respondents

work for.

Your name

Job title

Department / business unit

The name of your financial institution or market research provider

Which of the following statements best describes your background in relation to this survey? Please type X next to one only

market researcher - client side

market researcher -agency side

marketing in a financial institution but not specifically market research a line management role in a financial institution

Approximately how many years of work experience do you have that you think are in some way relevant to retail banking?

How controllable are the attributes? I want to get your estimate of how easy it is for a bank to control this attribute from the corporate centre. Some

performance attributes are relatively easy to control from the centre others are not. For example decisions about the terms and conditions of a banking product can be relatively easily made by the heads of business banking, credit, or products whereas changes to the way a field force of relationship managers deal with their customers day to day are harder. Please use your judgement to rate each of the attributes below on a scale of 1 to 10 where 10 means :highly controllable by the corporate centre and 1 means uncontrollable by the corporate centre. Remember, I am not asking what happens in your bank just for your opinion of what is likely for business banks in general. .

Your rating




Convenient







Proactive service







Very professional


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Offering flexibility

Offering sound business banking advice

Pricing competitively

Providing a comprehensive product range

Providing access to specialists

Providing the latest in electronic and internet banking services

Recognition for the business you do with them

Responding to your needs quickly

Service provided by senior bank representatives you deal with

The knowledge and expertise of the bank's representatives

Understanding your business and its history

How do the attributes affect customer perceptions?

Your rating




Convenient







Proactive service







Very professional

Some people use a classification of attributes based on Kano Analysis. In this, some attributes are

considered to be dissatifiers. That is to say they are expected by customers. They do not

especially satisfy the customer when they are done well but cause dissatisfaction when they are

managed poorly. An example might be the accuracy of bank statements. Other attributes are

satisfiers in that they engender customer satisfaction more or less in direct proportion to the

customer’s perception of how well they are managed. An example might be bank representative’s

responsiveness to expressed customer needs. Still other factors are sometimes called delighters.

These are not usually expected by customers but, when managed well, can delight the customer

beyond mere satisfaction. An example might be assisting the customer with a risk management

problem that the customer did not know they had. Please use your own judgement to classify the

attributes below by using the following numerals:Dissatifiers = 1; Satisfiers = 2; Delighters = 3.


89


Offering flexibility

Offering sound business banking advice

Pricing competitively

Providing a comprehensive product range

Providing access to specialists

Providing the latest in electronic and internet banking services

Recognition for the business you do with them

Responding to your needs quickly

Service provided by senior bank representatives you deal with

The knowledge and expertise of the bank's representatives

Understanding your business and its history


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Note and comments to Section 6

iAmong TNS people whose contributions I especially value are:

Gary Lembit;

Sharon Taggart;

Duncan Rusby;

Danny Meisels;

Tania Kullmann;

Jenny Powell.

I am sure there are other names that I have inadvertently omitted.

ii Possible in other sectors also, However, in this series of papers, where I can speak

authoritively at all, it is only about banking and related financial services.

iii As I have said before in this series, I am not a psychologist but that model has been

useful to me over the years.

iv Actually bank customers seen to rarely get cross with the bank staff that they actually

deal with. They instinctively know that the people they deal with work within the

constraints of the system. However, the head office designers of the system naturally

prefer to measure satisfaction with the people at the customer interface.

v TNS, which recently merged with Research International, is the world‟s largest custom

research agency. TNS offers comprehensive industry knowledge within the Consumer,

Technology, Finance, Automotive and Political & Social sectors, supported by a unique

product offering that stretches across the entire range of marketing and business issues,

specialising in product development & innovation, brand & communication, stakeholder

management, retail & shopper, and qualitative research. Delivering best-in-class service

across more than 70 countries, TNS is part of Kantar, the world‟s largest research,

insight and consultancy network.


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In Australia, the TNS Finance and Business Services team is a dedicated division with

extensive experience and expertise in financial services. They conduct qualitative and

quantitative research in both the B2B and B2C arena, on behalf of the leading players in

Australia‟s finance and business sector. The team of consultants has expertise and

qualifications in finance, management, human resources, psychology, statistics,

commerce, business and marketing. www.tnsglobal.com.

The Kantar Group is one of the world's largest research, insight and consultancy

networks. By uniting the diverse talents of more than 20 specialist firms the group aims

to become the pre-eminent provider of compelling and actionable insights for the global

business community. It has 26,500 employees working across 80 countries. The group‟s

services are employed by over half of the Fortune Top 500 companies. The Kantar

Group is a wholly-owned subsidiary of WPP Group plc. www.kantargrouptns.com.

The TNS Business Finance Monitor is the Australian Industry currency in measuring

the attitudes and behaviour of Australian businesses towards their finances and financial

institutions, and is subscribed to by Australia‟s leading banks.

This report provides insights into business banking customer satisfaction trends in

Australia. It tracks long-term trends since inception in June 2002 and more recent trends

over the last two years.

The BFM collects information on an extensive range of topics including: business

characteristics, business health, banking profile, banks used, products used, transaction

profile, satisfaction levels (the topic addressed in this report), commitment levels

towards each bank (using the TNS Conversion Model™), relationship management,

business needs, bank image, and external influences.

This report is available to all current subscribers of the satisfaction data (which is

collected as part of the TNS Business Finance Monitor) with the intention of providing a

standard comparable measure across the industry.

http://www.tnsglobal.com/

http://www.kantargrouptns.com/


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Each year, the BFM surveys the banking behaviour and attitudes of 2,000 agricultural

businesses and 10,000 non-agricultural businesses with an annual turnover up to $300

million. It has collected data from over 93,000 businesses since its inception. It is

important to note that the data in this report is based on a rolling six-month sample and

a rolling twelve-month sample; the latter is comprised of approximately 9,900 non-agri

businesses with annual turnover up to $100 million.

vi In fact for some clients this figure rises to AUD 300, 000 but the main part of the

survey is up to AUD 100,000.

vii These included at the time Gary Lembit, then of TNS now at Macquarie Bank,

Catherine Paton for the Commonwealth Bank, Peter Harrington for Westpac, now

Managing Director, Director at QAI Consulting, and John Marinopolous, then of NAB now

Managing Director of the Strategic Intelligence Group. The latter two can be found on

LinkedIn.

viii Timothy L. Keiningham, Bruce Cooil, Tor Wallin Andreassen, & Lerzan Aksoy

A Longitudinal Examination of Net Promoter and Firm Revenue Growth

ix Which one of these statements best describes how you feel [MAIN BANK]? Do you?


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[SINGLE response. Read out]

Definitely make a point of speaking favourably about them 1

Mention them favourably if they came up in discussion 2

Mention them unfavourably if they came up in discussion 3

Definitely make a point of speaking unfavourably about them 4

Wouldn't talk about banks at all 5

Refused 8

Don't know 9

Actually, I like this question because it includes the option „wouldn‟t talk banks at all‟, I

rather suspect there‟s a lot less talking about banks that bankers think..

x Which is not to imply thay these need to be asked as part of a tracking study along

with satisfaction questions.


94


xi My first experience of this type of question actually came in around 1993 when Dr

Robert Joss then CEO of Westpac introduced it into a staff questionnaire I had drafted as

his only amendment – would you recommend Wespac to a family friend or relative as a

place to work. So I think the basic idea has been around quite a while.

xii At that time Chief Manager, Commercial banking at Westpac.

xiii Three in the more recent version of the Conversion Model.

xiv One TNS proprietary approach that i should know more about than I do is TRI*M™. I

apologise to its adherents.

xv Parusuraman, Zeitaml and Berry “A conceptual Model of Service Quality and its

Implications for Future Research”, 1985 Journal of Bank Marketing 49,

xvi “The determinants of Service Quality: Satisfiers and Dissatisfiers”, International

Journal of Service Industry Management (1995), and “Identifying the Critical

Determinants of Service Quality in Retail Banking: Importance and effect”, International

Journal of Bank Marketing 1997

Branding Banks For Shareholder Value 6.0 Brand Measurement

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