Are you ready for a crisis of customer loyalty?

In the middle of a crisis, it’s human nature to deal with things day by day. But a new report from Forrester Research analyst Bill Doyle asks bankers to look ahead and consider what impact the global financial crisis will have on customer loyalty.

The report reveals customer advocacy scores for US banks have fallen to their lowest levels ever – bad news for banks seeking to retain customers in turbulent times.

Closer to home, business banking research house East & Partners has found promoters and advocates are virtually non-existent in business banking in Australia. Less than 1 per cent of all businesses are willing to recommend their bank to a friend or colleague.

Retaining customers will be critical for banks in 2009, and this means bankers are going to have to get better at convincing customers they care.

The financial crisis has driven a larger number of bank mergers, which can be tough on customers. Forrester argues Washington Mutual, Wachovia and Merrill Lynch customers are all likely to experience service hiccups as they are absorbed by their suitors, something which is likely to keep customer advocacy scores low. Westpac and the Commonwealth Bank will also have to work hard to retain St George and BankWest customers.

Customer decisions to switch banks are typically driven by a desire for better pricing (interest rates), lower fees, or better customer service.

Google Insights reveals since the credit crunch there has been an upward trend in the number of searches for “cheap banking”.

Source: Google Insights for Search

The paid ads revealed alongside this search term are also revealing. Direct banking offerings from Macquarie Bank, UBank, and RaboPlus all feature, showing direct banks are ready and waiting to capture this growing group of less loyal and more price-sensitive customers.

Forrester’s Doyle rightly points out “The direct banks’ products are simple and transparent, unlike the synthetic products that got us into the current mess”.

So what are the attributes that drive loyalty?

Forrester’s research has found three attributes which drive loyalty to smaller institutions over larger ones. They are:
1) “My banking institution always honours its promises or guarantees.”
2) “My banking institution offers the best prices, rates or fees.”
3) “Even if not regulated, my banking institution would do what’s right for the customer.”

Perhaps the best thing bankers can do now is try and underpromise and overdeliver?

What's the truth behind the truth pod?

Mystery surrounds a new campaign that is asking people to enter a virtual "truth pod" and complete a survey on what most annoys them about their bank.

This campaign advertisement ironically ran alongside an SMH story on banks refusing to pass on this week's 0.75 per cent rate cut from the Reserve Bank.

The advertisement links to a campaign site http://www.truthpod.com.au/ where visitors are encouraged to step inside a virtual booth and complete a short survey.

At the end of the two-question survey participants are thanked for "telling it like it is" and advised "From November 16 your banking could change".

The truth pod looks very similar to the JetBlue story booth which was used to gather feedback on the brand from customers. Video and audio material gathered via the booth was then used in a series of advertisements for the airline.

Online Banking Review sources say the campaign appears to be the work of Sydney advertising agency Lavender which boasts Westpac amongst its list of clients.

We've emailed the feedback address for the truth pod asking them to reveal their identity, and await a response.

Mozo pitches at penny-pinchers

After months in development mozo.com.au has launched to the Australian public, hoping to capitalise on the financial crisis and appeal to consumers looking to get a better deal.

Mozo - Compare Credit Cards, Home Loans, Personal Loans and More via kwout

Mozo competitor Ratecity scores banking products with Cannex star ratings. Mozo will instead rely on consumer feedback, and partnered with Roy Morgan to generate 3,000 initial consumer reviews and ratings of individual banks for the site.

Banks were rated on five categories: trust, customer service, convenience, product features, and rates and fees. Based on the initial batch of reviews Australia's favourite banks are Bendigo Bank, Members Equity, Bank of Queensland, Suncorp and BankWest. All regionals, and all at risk of, or already being swallowed up by larger competitors.

Probably the most unique feature of the site is the “Health check” tool that enables users to compare their existing bank products with those of competitors and work out whether they would benefit from switching.

Users can shortlist the products they are interested in and come back at a later stage when they are ready to purchase. Mozo will generate revenue from leads sent to financial institutions, and display advertising.

Mozo has also secured an Australian Financial Services Licence, making it easier for the group to compare and discuss deposit products – a definite advantage given the current strong industry competition for retail deposits.

The only obvious exclusion from the site is a discussion forum, something the journos behind fatcat.com.au have managed to pull off with moneyconfessions.com.au.

The combination of qualitative and quantitative data is a must in the current climate where consumers are seeking advice and perhaps a shoulder to cry on.

We’ll be watching the social networks closely to see if Mozo pops up.

A win for the little guy

The Federal Government’s move to guarantee all Australian bank deposits has been generally welcomed by the industry, with many commentators arguing it was needed to avoid a run on an Australian bank.

The guarantee is certainly good news for Australia’s second tier and mutual financial institutions which had been subjected to increased questioning from customers on their credit ratings and overall stability.

Despite credit unions and building societies falling under the same regulatory regime as their larger bank competitors, many consumers were under the false impression these institutions were less secure and that deposits with the major banks were explicitly protected.

The guarantee puts all ADIs on a level playing field and there’s even the chance it could save Suncorp from being eaten up by one of the big four, which would ultimately be a win for competition and consumers.

Credit unions have been telling Online Banking Review for some time that they are being questioned by customers seeking to know their credit rating, usually as a result of bank branch staff hoping to deter them from moving their funds to a competitor.

Credit ratings were not even on the radar of consumers shopping around for savings products until the credit crunch emerged and direct bank RaboPlus started marketing itself as “Australia’s safest bank”.

Until recently the Australian Bankers’ Association had always opposed deposit insurance, arguing it was costly and problematic, most likely because of the moral hazard issues it presents. Ultimately it means all financial institutions will come under increased scrutiny with regulators looking more closely into their investment practices.

So it will be interesting to see if any of the big 4 banks start using the guarantee as a marketing tool.

Following feedback from customers, RaboPlus moved quickly to add information about the guarantee to its site – nothing like a big red “guaranteed’ stamp to instill confidence.

High interest savings, term deposits, managed funds, online investments from RaboPlus via kwout

The Commonwealth Bank continues to heavily promote its “Determined to be strong in volatile times” brand messaging, but a quick glance of all the major bank’s websites shows no obvious references to the Government guarantee.

NAB’s new direct banking arm UBank has not added any reference to the guarantee, referring instead to the strength and “global capability” of its parent.

UBank - A good place for money - Backed by NAB. A direct bank with term deposit via kwout

mecu, one of the only Australian credit unions to have a credit rating, has added a fact sheet to it’s site (in their haste they spelt Government incorrectly), something likely to be replicated by more institutions in coming days.

Goverment Deposit Guarantee - Fact Sheet via kwout

Update: Citibank has also added a banner to its home page:

Citibank Australia via kwout

Marketing the Wesabe way

Wesabe is one of the few finance-related companies which seems to truly understand the role of social media marketing to building a brand. Which is why I asked Wesabe VP of marketing Gabriel Griego to speak at last month's Innovative Marketing of Financial Services forum.

Gabe was kind enough to Skype in for questions after the presentation. No mean feat, given he was on holidays in Nicaragua at the time.

It turns out Gabe simply believes in using new media techniques to conduct traditional marketing, as you'll see from this 15 minute video.

Wesabe makes a genuine effort to engage with bloggers, uses Twitter to announce and get feedback on upgrades to its service and, as James Gardner put it so aptly, engages in "community management" rather than PR.

If it sounds like I've drunk the Kool-Aid, it's because I find this quite rare. As an Australian-based journalist covering banking innovation I spend most of my time seeking innovation, searching for examples that stand out, and then trying to convince those involved to speak about it.

Perhaps it's because bankers generally fear failure that they are hesitant to promote new things before they're cemented in the day-to-day. Or maybe they define innovation differently to me.

At last month's innovative marketing forum we had an interesting panel discussion about innovation. Commonwealth Bank GM of digital marketing Trent Moy made the point that people looking at innovation often get caught up in the "shiny new things" as opposed to structural or systems innovation that can actually deliver better results to the bottom line.

This is true, but equally damaging is a hesitance to even consider a new thing before three of your competitors are using it and customers are asking why you're not there yet.

Let's debate innovation in Australian bank marketing

What’s more important in the current climate: Sticking to traditional messages that promote trust in your brand, or embracing innovative Web 2.0 marketing efforts? Can financial services marketers do both?

This is just one of the issues participants will be debating at this year’s Online Banking Review Marketing forum coming up in Sydney on August 28.

Ahead of the forum we’d like to open up the discussion to our audience. We'd love to hear your opinion on the current state of affairs in financial services marketing.

Is the current culture of online participation causing damage to bank brands?

Should marketers be re-directing the money they spend on TV campaigns to building better products & services that will then be spread via online networks?

How can financial services marketers get away from the current price-driven focus of online marketing activity?

Are we getting closer to the death of the campaign where activity is ongoing and integrated campaigns are less important?

We’ll be discussing these issues in more depth when we break for an interactive roundtable session being led by Hitwise analyst Sandra Hanchard at the forum.

Register for the forum before July 31 and you can take-advantage of our early-bird offer to bring a colleague for free. This offer will end on July 31, so let your colleagues/clients know about it today.

Speakers are already confirmed from Forrester Research, HSBC, Google, Ideal Interfaces, Commonwealth Bank, RaboPlus, and Citibank, with more to come.

I look forward to continuing the conversation..

Merger madness grips banking industry

I received one of those outbound sales calls from a bank last week. Thanks to its apparently sophisticated CRM system, NAB has built a reputation for leading the pack at this.

To give NAB due credit the call was well-timed, but I was quite surprised by the sales tactics of the caller in trying to get me to switch part of my business banking from Westpac to NAB.

On hearing I was with Westpac the caller commented along the lines of “You don’t really know what’s happening with Westpac – with this St George merger who knows what could change.”

It certainly got me thinking – how many sales people and relationship managers are busy telling Westpac/St George clients now is the time to jump ship?

Mergers are certainly a distraction, and if handled poorly can lead to a mass defection of customers. Which is why Gail Kelly has been busy encouraging customers to write to her personal email address with their concerns and feedback. (Thanks to burningpants for the pic)

Personally I’d rather see this type of communication out in the open. Maybe its time Gail Kelly started blogging. At the very least I think customer survey submissions to the ACCC’s review of the merger should be made public.

NAB is rumoured to be considering a counter-bid for St George. If this is the case then the marketing and PR teams should already be working on the communication plan. That would make my sales caller look as if he was sitting in a glass house throwing stones.

Bank marketers need to consider what sort of message they want to be sending consumers about mergers. On the one hand we have senior NAB executives pushing for a removal of the four pillars policy, and on the other sales staff that won’t hesitate to tell customers mergers are bad for them.

It's a classic case of banks failing to serve two masters - shareholders and customers. Is it any surprise customers view all of the big 5 banks as the same?