We know that social media, or what we now describe as social business, is great for improving the customer experience, building loyalty, improving retention, and for gaining really hot for new ideas for services – business innovation. But for some banks this is a waste because on the face of it they don’t need to go to this trouble in order to continue to generously reward their shareholders (and executives).
Take the Westpac Bank, one of 5 banks of the banking oligopoly in Australia.
- On May 4 Westpac announced a record profit, “shatters record” – not bad coming out of the GFC
- On May 5 a survey found a full 43% of respondents to a national survey voted this same Westpac the worst bank in Australia for customer service;
- On May 14th it was reported that David Cunningham, general manager of marketing and products at Westpac in New Zealand, doesn’t believe there is such a thing as innovation in banking:
“We all offer very much the same thing,” he says. “The best approach to innovation is to arrive best dressed and last—then you can get your offer better than the others.”
Bottom line
- It shows the power of being in an oligopoly. For example Commonwealth Bank, one of the Australian oligopolist banks, just reported it is on target to produce a full year profit result of close to or above $6 billion. Not bad for a consumer bank in a total population of 22 million people AND over the period of the GFC; and,
- It shows how insular the thinking in any organisation can become when it’s just a matter of apparently turning up best dressed – again a function of lack of competition.
Social media investment not a priority
My byline was actually serious. While the demise of banks has been forewarned by many as we head into the full power of Gen-C, and in time it may be true, the impact over the next decade in markets where there is little competition will be small.
Of course my supposition begs the question of competition. How about the new forms of competition which will attract Gen-C’s attention, the ones which allow them to control more of their own destiny?
I think that these new entrants will thrive, and they’ll provide alternative options which will grow. But in an oligopolistic world as in Australia where the five oligopoly banks control 80%+ of all mortgage loans and 90%+ of small business loans to the entire country, then they are not going to be severely dented even over a decade.
Banking isn’t like IT where the industry has to reinvent itself every decade. As Huub van den Berg , former corporate relationship manager at Rabobank in the Netherlands, says “Apart from shifts in technology, there aren’t really going to be any big challenges to banks”.
Therefore, if you are a bank executive reviewing costs, and investment proposals, why in your right mind would you waste your money on social business initiatives when you can just raise your loan interest rates by say 25 basis points and cut back on customer service expenses?
OR?
Are there significant ROI opportunities for entrenched banks even where they can raise margins at will and provide poor customer service and return record profits? What do you think?
There’s still much to discover in using social media for customer service, brand awareness, and the like. Our research indicates nearly 35% of consumers are willing to use social media for service, but it won’t be possible to extrapolate “behavior” from “intent” until the medium matures.
I’d like to take this opportunity to look at how customer experience correlates to retention for retail banks.
In early 2010 Convergys executed its annual Scorecard Series Research, which examines the preferences, behavior and beliefs of consumers across many industries in the US and UK (we’ll have data for China soon).
Consumers that had a bad experience with a retail bank defected from that bank 57% of the time. That’s a significant number, and certainly does not suggest today’s consumers is either a pushover or lazy.
Before making a final decision to switch, more than 60% of consumers contacted the bank to seek final resolution to their bad experience and issue. Unfortunately, only 40% of the time their issue was resolved, and 20% of the time it didn’t even garner a response. Lack or response typically entailed consumers using more “passive” channels of communication, such as e-mail, texting, or submitting a comment through the bank’s website.
Much of this is very new from what we saw in 2008, just before the recession officially started. Today’s recession-hardened consumers are more likely to have a bad experience with a bank, much more likely to report it and seek a final resolution, and prepared to walk if their needs aren’t met.
Today’s consumer rightly or wrongly feels more empowered, and they’ll leave a bank if they don’t have consistently satisfactory experiences, and especially if they don’t get immediate resolution to a bad or unsatisfactory experience. The stakes are high, but banks that find a way to balance automation, analytics and agent-based interactions will likely be gaining new business at the expense of their competition.
Social media may not be appropriate for all banks, but those that allow bad experiences can expect their customers to use it. Over 80% of disgruntled bank customers told friends or family about their bad experience, and 11% submitted a post on either Twitter or Facebook. Consider the fact that the average customer in our study reached 45 people with their post, and that 11% becomes exponentially more meaningful.
For more information on our research, feel free to click here to access our research pages, which contain industry breakdowns, aggregate views, research briefs, papers, podcasts, webinars, etc.
Jeramy Fishel
Convergys Corporation
[email protected]
Jeramy, thanks for the summary of your Scorecard series, they are very useful statistics.
I’d very especially keen to see what you might find in Australia if you ran the survey since, as you read in my post, we have a 5 bank oligopoly. Although people don’t trust or like the banks, as survey after survey shows, they do seem do think that at least the big banks have procedures and safety nets which work and will protect their money. This seems to override complaints about poor service. They also seem to regard all the big 5 to be “as bad as each other” and therefore churn is remarkably low given the level of chronic dissatisfaction.
Could social media help one of the 5 actually gain some market share i.e. take it from the other 4, probably so.
Walter Adamson @g2m
Certified Social Media Consultant
http://NewLeaseG2M.com
Melbourne, Australia
My social spaces and places: http://xeesm.com/walter