Life Changes Spark Money Moves
While fees and good service are still important, the most common reason some have for switching banks may have more to do with a change in life circumstances.
The J.D. Power and Associates’ "2011 U.S. Retail Bank New Account Study" discovered that scenario after polling 4,791 customers who shopped for a new banking account or new primary financial institution during the past 12 months. Nearly 9% of customers in 2011 indicated they switched their primary banking institution during the past year to a new provider. In comparison, just 7.7% said the same in 2010. On average, customers in 2011 said they considered 1.9 banks while shopping, which was up from an average of 1.6 banks in 2010.
The study, which did not include credit union data, showed that for customers evaluating and ultimately selecting a new bank, the most important factors driving their decision are advertising, branch convenience, products and services, promotional offers, and direct and indirect customer experience (including past personal interactions, recommendations and bank reputation).
Meanwhile, pricing, fees and interest rates carried relatively little weight in influencing customer purchase decisions, the study found.
"The increased switching rate indicates more consumers are coming into the market, providing more opportunities for banks to acquire new customers," said Rockwell Clancy, vice president of the financial services practice at J.D. Power. "These customers appear to be more discriminating and diligent when selecting a new bank."
One of the study’s most unexpected findings is that less than one-half (43%) of customers who purchased an additional banking product made that purchase at their primary bank. For customers who turn to another institution for an additional product, promotional offers such as gift cards carry the most weight in influencing the purchase decision. Banks that perform well in acquiring new customers tended to be aggressive in their advertising and promotions, the data showed.
"It’s undeniable that the blunt instruments of ad spend, branch density and promotional offers such as gift cards have been effective during the past year in capturing market share," Clancy said. "The question is whether these provide sustainable competitive advantage, particularly when compared with customer acquisition gains resulting from positive past experiences with a brand and recommendations from friends and family, which are harder to duplicate."
Customers who choose to stay with their current primary bank for additional products are most driven by positive past experience and perceptions that their bank is more focused on customers than on profits, Clancy said.
"Clearly, banks that are not providing a noticeably better experience are more likely to lose the business of indifferent customers who are more easily lured by the next attractive promotional offer to come along," he noted.
The most recent findings are in line with J.D. Power’s 2010 retail banking satisfaction study release in April 2010. The data then showed brand image of banks had continued to decline, with customers perceiving banks as being more profit-driven than customer-driven. The percentage of customers who said they definitely will not switch banks during the next 12 months had decreased significantly during the past three years to 34% in 2010, compared with 46% three years ago in the 2007 study.
Poor customer service was the most common reason given for switching banks, said 37% of customers who changed their primary bank in 2010. Performing simple service acts such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business were some ways respondents said would increase their image of banks.