When consumers evaluate banks, factors such as brand image and an institution's reputation for providing good customer service strongly affect levels of consideration and selection, and ultimately a banks bottom line, according to the J.D. Power and Associates 2009 Banking Purchase Funnel Special Report.
The report, based on initial findings from the J.D. Power and Associates 2009 Bank Shopping Study, identifies the decision-making process shoppers undergo when choosing banks. It is designed to assist executives in understanding their bank's relative strengths and weaknesses during the key phases of the bank shopping processawareness, consideration and selectionwhich are collectively described as the purchase funnel. A bank's market share is driven in large part by its success at each stage of the purchase funnel.
The report finds that a bank's brand image and reputationparticularly as influenced by recent events covered in the mediahave a strong effect on consideration, and specifically, active avoidance. Among consumers shopping for a bank, 30 percent report deliberately excluding a bank from consideration due to perceived financial instability, the bank's bad reputation, or its questionable ethics.
The report also finds that banks with particularly high consideration rates are perceived as having an innovative array of product offerings. In particular, shoppers are more likely to consider banks that offer a range of online functionality, mobile banking services, debit cards with reward programs, and account alerts.
"The importance of innovation is somewhat unexpected, considering that many consumers perceive banks to be largely conservative," said Rockwell Clancy, executive director of financial services at J.D. Power and Associates. "This suggests that being on the leading edge with new products is an actionable way to differentiate an institution from the competition. What may be emerging here is a fundamental redefining of 'convenience.' In the past, this has meant having more branch locationswhich has historically been a primary reason for consumers to choose a bank. Now, convenience is more about availability at any time and any place."
The report finds that providing high levels of service to current customers drives higher levels of consideration and selection among these customers in the future. Among customers who have switched to a new bank, 27 percent attributed their decision to either having had a previous good service experience with the new bank or receiving a positive recommendation about the institution. In contrast, better interest rates, lower fees and perceptions of the banks involvement in the local community were notably less important selection drivers among customers who switched.
"Price-based differentiation can be easily matched by competitors," said Clancy. "However, good customer service is something that is much more difficult to duplicate and can create a distinct advantage."
The 2009 Banking Purchase Funnel Special Report is based on responses from 7,500 customers evaluating 25 banks, including Bank of America; Bank of the West; BB&T; Capital One; Chase; Citibank; Citizens Bank; Comerica Bank; Compass Bank; Fifth Third Bank; HSBC Bank; Huntington National Bank; KeyBank; Manufacturers & Traders Bank; National City Bank; PNC Bank; Regions Bank; Sovereign Bank; SunTrust Bank; TD Bank; U.S. Bank; Union Bank of California; Wachovia Bank; Washington Mutual Bank; and Wells Fargo Bank. The report was fielded in February 2009.
For more information, visit www.jdpa.com.