J.D. Power and Associates reports: Achieving higher-than-average customer satisfaction can lead to two to five percent increase in deposit growth for banksMortgagePress.comJ.D. Power and Associates, Novantas LLC, banking branches, Rockwell Clancy
Banking institutions that achieve above-average satisfaction
levels among customers can potentially secure an increase of two to
five percentage points in additional deposit growth, according to a
report by J.D. Power and Associates and Novantas LLC.
J.D. Power and Associates has collaborated with Novantas, a
provider of management consultancy and information services to the
financial services industries, to determine the impact of customer
satisfaction on the financial performance of banking institutions.
The research links customer satisfaction data from the J.D. Power
and Associates 2008 Retail Banking Satisfaction Study,SM to the
normalized deposit growth rates of branches where customers banked.
The J.D. Power and Associates and Novantas research compares growth
rates for customer banking branches within six individual
metropolitan markets, including New York City, Chicago, Miami, St.
Louis, Cincinnati and Minneapolis.
"In this challenging economy, where executive focus is on the
'must-haves' of capital, credit and cost-cutting, the temptation is
to place customer satisfaction on the back burner until conditions
improve," said Rockwell Clancy, executive director of financial
services at J.D. Power and Associates. "This is absolutely the
incorrect thing for executives to do. Our work with Novantas
indicates that among all of the factors that drive deposit
growthincluding the number of branches in a bank's network, rates
and fees and advertisingcustomer satisfaction accounts for 15 to 20
percent. Additionally, across all driving factors, satisfaction
provides the most sustainable competitive advantage."
The report finds that bank branches with more highly satisfied
customers experienced faster annual growth (two to five percentage
points higher, on average) compared with branches that had
customers with lower satisfaction levels. This is particularly
noteworthy as the market for deposit growth increased only 6
percent overall in 2008.
"The difference between satisfaction index scores of 600 and 800
points for a 500-branch network can be worth as much as $1.5 to
$2 billion in additional annual deposit growth and $90 million in
additional pretax profit," said David Kaytes, managing director of
Novantas. "In today's difficult economic environment, few banks can
afford to miss capturing this kind of value."
J.D. Power and Associates and Novantas are currently initiating
a second phase of the report, investigating the impact of customer
behaviorsuch as attrition, loyalty and purchase of additional
productson the growth and profitability of a bank. This phase,
available in early April, will link specific drivers of customer
satisfaction and commitment, such as convenience, interaction, and
confidence, with specific customer behaviors.
To view a whitepaper on the research findings, click
For more information, visit www.jdpa.com or www.novantas.com.