These are not the best of times to be a financial institution, but for Texas-based Frost Bank, a commitment to listening to the voice of the customer to drive loyalty and retention is now proving helpful.
"We've been around 140 years, and it's been our motto since Day 1," said Mary Ann Beach, executive vice president of research and strategy. "The customer experience is part of our culture."
Yet things have changed in the past 140 years, and Frost Bank has had to adjust. Nowadays, it surveys customers every other month.
"Prior to that, we did a lot of project-oriented research," Beach said. "Our overall customer satisfaction and loyalty [survey], we would only do every three years. We felt consumer expectations and behavior don't change that quickly. So we would do this huge study, and it would take us six months to get it completed and get results out. The world is different today. We're in a different economic climate. The industry is kind of in jail with the consumer perceptions right now. So we needed to have a more constant pulse with the consumer and a more real-time result."
Amidst the global recession, organizations are taking a closer look at how to
Operational loyalty vs. long-term loyalty initiatives
"I don't think it's ever too late," said Adam Sarner, principal research analyst with Stamford, Conn.-based Gartner Inc. "There's an idea around what I call operational loyalty and long-term loyalty. They can work in a down environment and a growth environment."
Operational loyalty offers a payoff -- buy nine, get the 10th free, for example. Long-term loyalty initiatives depend on building trust and affinity.
"You want to engage customers, so when everyone's ready to take advantage of an up market, they think of you," Sarner said.
Michael Lowenstein, senior vice president and senior consultant with Harris Interactive Loyalty, said that companies that focus on what drives customer commitment and trust, and how employees build loyalty through optimizing the customer experience, have lower costs. That often means they are able to maintain higher profitability even in difficult times.
"In this economy, companies that are smart are going to look beyond the nadir and realize that if they're not taking care of the customers they have, when things turn around they'll be left behind," he said.
That doesn't necessarily demand a huge investment, either.
"Start with information and training," Lowenstein said. "If you get customer support, people who are very passive and reactive versus owning the problem and relating to the customer, customers remember that."
Turn to the Web, Sarner advises.
"Engagement practices, including accrual and redemption, [are] a good idea," he said. "Making your loyalty program easy is a giant step."
Yet accrual and redemption of loyalty points offers little in the way of differentiation if the only reward is free items.
"If BlockBuster is offering a free movie with every nine rentals and Netflix is offering the seventh free, you're easily paid off," Sarner said. "Everybody has more than two loyalty programs in their wallet at one point in time."
Rather, companies need to use their points and accrual systems to understand and anticipate customer needs.
"The more relevant you are to the customer, the more likely they will be loyal to you," Sarner said. "There's no sense doing a loyalty program that benefits the business and doesn't benefit the customer at the same time."
Social networks and CRM
The rise of social networks offers a new opportunity to connect with customers and build loyalty and affinity -- often requiring no more investment than some staff time. Start small, Sarner advised. Figure out who are the advocates for your product and service, and talk to them, he said. You may find only four people, but they connect with 400.
"These people are major influencers, so give them free points or mobile minutes or a new product," Sarner said. "They might give some incentive to those influencers."
Simply scanning message boards and social networking platforms responding to questions or comments about an organization can promote loyalty, as well.
In fact, social networks are becoming something of a lifeline for marketers in the recession. Many were born out of the dot-com bust, when people suddenly had time on their hands and came out with innovative ideas, Sarner said.
"The ability to communicate and get more say and control of how customers are being marketed and sold to are more important than ever," he said. "This is that targeted, very relevant conversation that you can have."
Companies should also be looking to their existing data, Lowenstein said. For example, the Royal Bank of Canada has 20 million customer sub-segments.
"It's basically material they already have in hand, making sure communication is more targeted and customer care is more sensitive and personalized," he said. "The more relevant you are to the customer, the more likely they will be loyal to you."
Ask your customers
Emailed surveys offer Frost Bank the opportunity to carefully monitor and engage its customers. It uses a specialized questionnaire from Allegiance Inc. that measures a customer's engagement level.
For example, the bank recently launched a new hybrid checking and savings account to attract new customers. As part of their on-boarding process, new account holders receive a survey to gauge their satisfaction, their usage and their perspectives on the product features.
"We get in excess of a 25% response rate," Beach said. "In addition to that, I would venture to say no less than 60% include comments. We've been overwhelmed by the response."
The bank now takes the engagement scores it receives from those customers and segments out its customer base -- for example, analyzing a segment of customers that came to it through an acquisition.
"We look at legacy customers and do some comparisons and contrasts," Beach said. "Because of the drill-down capability and because our customers have been willing to write us essays, we've been able to pin down certain areas that had best practices we could relocate in other locations."
Customer engagement extends to the rest of the organization as well. A process called a "care report" at the bank demands that whenever a customer calls the contact center, or comes into a financial center with a compliment or complaint, that information is logged into a system with a management escalation process.
"We're constantly looking at those," Beach said. "Any compliments or complaints get routed to me, and I have a team that's expected to act upon it. Every manager in our company responds to [the] voice of the customer on a continuous basis."
Price is not the answer
While reduced or special pricing may be a powerful way to attract customers in a down economy, it's a risky way to foster loyalty, Lowenstein warns.
"Companies that start pushing on price and stinting on service or other value components because they think lowering the prices will carry them through, they almost invariably fail," he said. "Look at Caldor. Look at Bradlees."