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Community Banks: Big Bank Customers Are Waiting for Your Excellent Customer Service

One of the biggest myths out there is that community banks are always better at customer service than big banks. While this may be true in aggregate across the totality of the US, no community bank that I know of is competing on that level.  Every community bank competes on the local level, and the reality is that in over 75% of local markets that we cover in the Northeast, at least one big bank ranks in the top three in customer service. That means that in the vast majority of markets, community banks cannot say to local prospects that small banks always outshine the big guys.

Community banks may be more personal, more involved in the community, and more likely to know the people who bank with them, but if they’re not delivering on key service areas, they will struggle to compete with big banks in their community. In our latest New York benchmarks, more than 40 community banks across the state were rated lower in customer service by their own customers than any of the big banks in their market. So much for the service advantage.

Yet delivering on customer service should be low-hanging fruit for community banks as a way to compete with and take customers from the big banks, so if your community bank or credit union is getting bad marks on customer service, it’s an easy place to make rapid changes and retain the customers you have and attract new ones away from the big banks. Start with these three areas:

Improve Customer Service with Better Training

Employees who are knowledgeable about your bank’s products and services make banking customers feel confident that they are putting their money in good hands. Hire the best talent for your bank. You can teach banking, you cannot teach attitude or a true desire to help customers. Once you hire the right people, make sure your employees can answer questions, provide insight, and make recommendations that make sense for your customers, beyond just which checking account they should open. This sounds obvious, but both big and small banks often are not up to the task. In our latest survey, 38% of banked adults said their bank was not proactive enough in offering solutions. Customers are asking to be cross sold more! 

Improve Customer Service with Better Communication 

Not only do your customers and potential customers need to know that you’re capable of meeting all of their banking needs, but they need to know that you offer other financial services as well. From mortgages to retirement accounts, make sure your customers know you are more than just a place to have a Christmas savings account. In our latest survey, only about 50% of bank customers concentrate most of the banking with one bank, even though the vast majority say they want to consolidate. The two top reasons customers gave for not giving their primary bank all of their business were:

  • “I did not know they offered other products” and
  • “They never asked me.”

In several cases, well-meaning community banks were missing out on potential 25%-35% growth rates, simply by not being as proactive as their own customers were wanting.

All banks also need to make sure communications are effective in letting your target market know about your community involvement – one of the ways community banks and credit unions are able to set themselves apart from big banks. This is especially important in the commercial space since community involvement is a strong driver of consideration.

Improve Customer Service with Better Technology 

Being small and local doesn’t mean you can get away with not having the latest and greatest technology to make your banking services easy to access for your customers. From mobile banking to online check deposits, customers expect you to have all the conveniences of a big bank – and when you do, it levels the playing field and gives you an opportunity to draw dissatisfied customers away from big banks. Just because you are small does not mean you cannot compete in technology. Don’t believe it? Ask your customers. We did, and found that in almost every county in the Northeast, at least one community bank ranks in the top 3 in technology. Those community banks know that the key is not just the tools, but the servicing and training around the tools.

There is enormous opportunity to improve your ability to grow your community bank or credit union, but it starts with knowing what existing customers and prospects think of you compared to your competitors. Take action now and request our benchmark study for your region.

If Your Bank is a Strong Contributor to the Community, Do You Get Recognition For It?

Many community banks and credit unions pride themselves on the contributions they make to their communities. This includes supporting local charities, funding scholarships, planting trees or otherwise helping their neighbors. While these great acts can certainly be their own reward, community banks also deserve public recognition for their great works. Other than the obvious benefits to the community, the contributions a bank makes to its community have two strong benefits for the bank itself.

The first is the influence on prospects, or non-customers. Many prospects learn about potential banks from advertising or from community involvement. Our studies show that advertisement is generally more effective at raising awareness among prospective customers than community works alone. Indeed, this is why many banks set aside large budgets for traditional marketing campaigns. However, our studies of bank customer behavior show that while ads are better at driving awareness, community contribution can be more effective at driving consideration. The latest results of the Q2 New York Bank Prospect Benchmark show that community contribution increases prospects’ consideration of your bank by an average of 126 percent. Not a bad side-effect! And for smaller banks with lower awareness, the increase is even higher.

Anyone wishing to receive the New York Bank Prospect Benchmark results can contact Customer Experience Solutions for the specific community contribution results as rated by each bank’s own prospects. All of the data cited in this article is based on that study.

Community contribution increases consideration by prospective customers by 126 percent.

The second impact that community contribution has on a bank’s business in on its current customers. When current customers see their bank’s involvement in the community, it can improve the esteem they already have for their bank. Our research has shown that the positive impact can increase their loyalty to the bank, meaning they are less likely to leave and more likely to increase long-term spending with their bank. The latest New York Bank Customer Benchmark report showed that recognition of community contribution increases customers’ share of wallet significantly with their bank and their long-term loyalty goes up by 88 percent.

Community contribution increases current customer loyalty by 88 percent.

While it is probably not a big surprise to some that contribution to the community has an impact on the top and bottom lines, many banks are not actually getting the benefit they should be. Many community banks and credit unions spend a lot of money and effort contributing to the community, but their current and potential customers simply don’t know about it. This is very frustrating to marketing and community giving leaders in some banks, and a wasted opportunity for many. It is very important to know just how much recognition you are getting for your good work, and how you can improve that ROI. The challenge for banks is breaking through the clutter to ensure your customers and prospects appreciate your contribution.

In our research, we saw that in one specific market, two community banks had equivalent amounts of community involvement in terms of gifts to charity, hours volunteered by their staff, sponsorships, etc. However, one of the two banks was rated 275 percent higher in terms of community contribution by their respective customers and 388 percent higher by non-customers. While each bank did similar levels of community outreach effort, one was using much more efficient channels and co-opting local nonprofit partners to get the word out. Not coincidentally, the bank with the better outreach is currently achieving stronger growth in new customers, especially commercial customers.

The first step to getting the maximum credit (and business impact) from your community contribution, is to understand how you currently stand with customers and prospects, in your specific market and in relation to your competition. Do your current customers see and appreciate your good work? Do your prospects? The second step would be to make reasoned adjustments and tweaks to the programs to see what the impact is. A bank may need to improve its community outreach to gain greater recognition, or it may need to emphasize different types of community involvement to broaden its exposure. Spring and summer are times of increased giving and involvement in community affairs so recognition can go up. But it can also be harder to differentiate since other institutions are increasing their involvement as well.

The third step is to measure how much the changes have moved the needle in terms of recognition of community contribution. And just as importantly is to track the impact that they recognition is having on awareness of the bank and consideration to use the bank in the future. Tracking your ratings over time will show you exactly how your community contribution, and all other marketing efforts, are truly impacting how your prospects and customers view you. This will allow you to fine tune your programs so you get the maximum benefit for the bank while doing the maximum good for the community.

So as the weather grows warmer, consider your community involvement activities – what are you currently doing? Are you sure you are getting the credit you deserve? What can you do differently? And most importantly, what you can you do to make sure your current and prospective customers see what you’re doing?

The New York Bank Benchmarks are based on over 75,000 unbiased consumer and business reviews in New York State, gathered in May-June 2017.  

*Community Contribution Rankings, Q2 2017, as rated by banked adults in New York State:

  1. Watertown Savings Bank
  2. Tompkins Trust Company
  3. Glens Falls National Bank
  4. Adirondack Trust Company
  5. Canandaigua National Bank
  6. Richmond County Savings Bank
  7. Rhinebeck Bank
  8. Jeff Bank
  9. Ulster Savings Bank
  10. Adirondack Bank
  11. Solvay Bank
  12. Canandaigua National Bank & Trust
  13. Ballston Spa National Bank
  14. Walden Savings Bank
  15. Tioga State Bank
  16. Bridgehampton National Bank
  17. Fairport Savings Bank
  18. Saratoga National Bank
  19. Tompkins Bank of Castile
  20. TD Bank

 *This is the contribution that the public sees, and does not necessarily line up with the actual level of community contribution.

Originally published in Banking New York 3Q 2017

To Recruit From The Big Banks, It’s All About The Message

Community Banks Excel At Customer-Focused Technology

The potential to recruit new customers from big banks is strong, if community banks can convince them that they’ll find comparable technology offerings at their hometown banks.

Two-thirds of Connecticut residents say they plan to increase the amount of electronic banking they are doing, according to the results of the most recent Connecticut Bank Benchmarks survey.

In general, big banks perform better than small banks in terms of technology: According to the second quarter results of the Bank Benchmarks survey, 19 percent of small bank customers thought the technology at their bank was out of date. In comparison, only 9 percent of the big bank customers felt theirs was out of date.

However, smaller banks should not cede the technology high ground to the big banks. In fact, many are taking on the big banks – and winning. Across Connecticut there are eight smaller banks that beat out every single big bank in their market in terms of technology rating by customers. So although some small banks are falling behind in terms of technology, other small banks are leading the way.

Additionally, 37 percent of Connecticut customers are already using non-bank providers to manage some of the financial tasks that have traditionally been the purview of banks. This includes SOFI, Acorn, Laurel Road, Venmo, Digit, Vibe, Lending Club, Paypal and many others. Customer satisfaction with these providers is significantly lower than it is with community banks, creating an opportunity for a smaller bank to capture share with some leading technology partners.

And more than 40 percent of big bank customers say they would prefer a small bank. One of the main barriers to them switching is the technology offerings. It is just a matter of time (and marketing) until customers learn that small banks can provide adequate technology and tools, or in some case even better ones than they are used to.

Ten percent of big bank customers say they will leave their bank before the end of 2017 and 35 percent of customers overall will seek a new banking product before the end of the year. There is a significant opportunity for small banks to capture market share if they can convey that they provide the “technology surrounded by customer service” that so many customers are seeking.

Originally published on The Commercial Record

Finding Success as a Community Bank, Part 3: Personalization

 This is the final part of a three-part series on finding success as a community bank.

Read part one here.

Read part two here.

As a community bank or credit union, personalization is the strongest weapon in your arsenal, because large financial institutions can’t compare. They simply do not have the capability of providing an individualized experience, and this is exactly what customers are searching for. Our insights reinforce the fact that bank customers want to be recognized as individuals and seek in-person interaction in the local branch.

Be Available 

Recognize that customers want access to information immediately, and being able to reach a real person – without a long wait – is still important to them. Even though there is an increase in electronic banking, about 50% of bank customers in the Northeast US prefer to interact with their bank personally, over the phone or in the branch. Surprisingly to some, this 50% applies not just to the elderly:  more than 45% of millennials also prefer the in-person interaction. And more importantly, these numbers go way up for transactions that the customer deems as more important, such as applying for a loan, discussing investments, etc. So, while the number of branch visits are declining, the importance of those visits are far greater than ever before.

One of the biggest frustrations across all industries is the move toward impersonal communication, and this is often the only way larger companies can access their consumers. Complicated phone trees, constant pushing to online options, limited hours for live help, and automation are frustrating fails in customer service that community banks and credit unions can avoid. The easier a consumers can access a live representative, the better the relationship. 

Take Small Risks

Identify potential customers who, despite the risks, have specific qualities that make a small risk acceptable. (This might include children of long-standing clients, for example). Provide a specific benefit to them, such as a lower interest rate or longer payment terms, that will increase their appreciation and loyalty without creating an unmanageable risk. This personal touch is something that only community banks or credit unions can offer. But don’t stop there. The recent Benchmark results show that some community banks in the region have done a poor job of making a one-product customer (who comes in for a good CD rate, for instance) into a long-term loyal customer. There are a significant number of community banks (36%) that have decreased their long-term customer loyalty this year because of such programs. However, almost the same amount (34%) have increased their customer loyalty because they have been conscious of cross selling new products to these customers, and not too worried about slight increases in the PUSHY scores as long as their PROACTIVITY SCORES (tracked in the benchmarks) increase much more. [IF you would like to know how your customers see you on the PUSHY-PROACTIVE spectrum, please contact us as we already have results from every bank in the Northeast].

Incentivize Referrals

Look for way to incentivize referrals from current customers. This could be lower interest rates, credits applied to loan balances, waivers of certain fees, or any other benefit that is of real value to the customers. Community banks and credit unions can also go as far as to extend the reward to the new customer, encouraging a positive relationship from the very first moment. Again from the Benchmarks, we see that over 62% of loyal customers are willing to recommend their bank to friends and colleagues. The #1 reason that they have not:  the bank never asked.

These efforts are focused on one core goal: building strong, lasting relationships. The small banks and credit unions that succeed to the greatest degree know their customers, and their customers are equally familiar with the welcomed expectations. These companies are successful because they actively seek out specific customers, communicate regularly and intentionally, and make themselves available. It is more than simply a business decision to trust and reward customers, because this is your community. Personalizing services differentiates community banks, and it’s a tool that should remain in your arsenal.

Ask The Right Questions

For Staffing Issues, The Right Questions Yield Surprising Insights

As bank executives think about ways for their business to survive and thrive, they are beginning to take a hard look at staffing – both hiring and retaining the best people for their banks.

But before they can do that, they need to be asking the right questions: What are tomorrow’s staffing needs and why? Customer service choices are growing rapidly as we apply more uses for technology to include the world of AI and robotics.

And once you’ve asked and answered those questions, do you have access to the customer data and information that will point you in the right direction? Perhaps this article will provide an approach to assist you in finding the right questions leading to the right answers for your situation.

First, a look at where we are; then perhaps rethink where you need to go.

As management guru Peter Drucker phrased it, “quality in a service or product is not what you put into it; it is what the customer gets out of it.”

Here are some of the findings from the most recent Customer Experience Solutions research in Connecticut.

The Purpose of Customer Service

Ninety percent of customers surveyed said the staff at their bank is friendly and treats them with respect. However, 29 percent said they sometimes have to ask more than one person to solve an issue and 20 percent said that staff sometimes can’t solve the issue at all. So it’s no wonder that despite 95 percent saying the staff is friendly, 11 percent said they are about to switch banks.

Personal Staff Interactions

More than a quarter of respondents said the staff is not proactive enough in suggesting solutions to meet their needs, but you need to balance that against being pushy: 11 percent say the staff at their bank is too pushy (because they don’t know what the customer needs).

For example, there’s one community bank in Fairfield County that has the balance correct: 89 percent of respondents said that bank’s staff are proactive; only 4 percent said they are pushy. And there’s one mega bank that has it exactly wrong: 52 percent of their customers said they are pushy and only 21 percent said they are proactive.

It’s little wonder that almost 30 percent of the mega bank customers are currently looking to switch banks, while less than 5 percent of the community banks’ customers say the same.

‘How Can I Help You?’

Self-directed interactions and call centers are a very important element of customer service. Over 40 percent of customers said they preferred to solve problems using the phone rather than online or by using the mobile app. A poorly performing call center can be a major driver of dissatisfaction and defection from a bank.

Connecticut banks in general do not perform well in this category. Overall, customers are more satisfied with service online and through mobile apps than the service they get over the phone – which is their preferred method of communicating with their banks.

Some banks are getting it right and increasing customer loyalty with top-notch call centers. Some are not, with one community bank achieving a very rare negative score – meaning that customers would be better off just accepting the problem than calling in to try to fix it!

There is also some variance even within the same bank: one bank had the third highest rating in one county and the single lowest rating in another.

Retail vs. Commercial

Fairfield County banks provide the highest average levels of customer service for retail customers; New London County banks provide the highest levels for commercial customers. Customer service ratings are higher for community banks as a whole, but in six of Connecticut’s eight counties, at least one of the big banks ranks in the top three. So community banks certainly do not have a monopoly on service.

Connecticut banks do better at serving retail customers than serving commercial customers, according to those customers themselves. We suggest staffing needs – the types of positions and the numbers of them – be aligned with the bank’s goals and strategies to acquire and retain customers. It helps to know as much as possible about your customers and your prospects.

In assessing your human resources and technology capabilities consider Peter Drucker’s advice about focusing on the customer. The latest tech may be exciting, and it may even be fun talking to a robot. At the end of the day, did you solve the customer’s problem per their expectations and use of their resources (time and money; physical and mental)? Follow the money by following your customers.

Originally published on The Commercial Record

Finding Success as a Community Bank, Part 2: Marketing

Last month, we discussed the challenges that community banks and credit unions face – and even some of the opportunities they have – when competing against megabanks. One way to level the playing field is through marketing efforts. Community banks and credit unions can build a successful marketing strategy by understanding who to attract, how to reach them, and when to communicate.

Target Your Market

Understand and be able to articulate what you have to offer, then identify the types of people who are most likely to benefit from your customized programs. Market almost exclusively to your target demographic and advertise your specializations, while still recognizing that you will receive inquiries from people outside of this spectrum. Simply put, focus your marketing on the types of people who are most likely to bank with you.  In New York State, for instance, 46% of customers would prefer to bank with a “smaller bank or credit union.” (35% have no preference and only 19% actually prefer a bigger bank).

Craft Compelling Messages

As a community bank or credit union, your business revolves around more than direct deposits. Identify your selling points beyond the traditional banking needs, and advertise the larger financial picture. Create multiple messages focused exclusively on the unique elements you offer, and direct them to people who fit the profile of your most interested consumers.  According to the results of the Q2 2017 Bank Benchmarks across the tristate area, the #1 product currently being sought by commercial customers (small business, middle market, and large corporate) are retirement accounts (followed by insurance), and the #1 product for consumers are brokerage accounts (followed by checking accounts).  A message crafted around those specific needs will be much more salient to prospects than a general branding approach.

Communicate Regularly and Effectively

Establish an expectation of positive communication between your representatives and customers. Ask your customers which communication method is most preferable, then communicate via that medium. Have a purpose for each communication, but be willing to respond to whatever comes up in the discussion. Identify legitimate reasons for your managers and officers to communicate directly with your key customers. Consider using chat options for those who can’t visit a physical location.

Understanding your market is essential to a successful business strategy. You may not have the brand recognition of a larger bank, but there are services and products that can be offered that are unique to your business and location. With a focus on those you can serve best, you can attract a multitude of different customers.

Finding Success as a Community Bank, Part 1: Challenges and Opportunities

Small community banks and credit unions face rising pressure in today’s economy to compete with large, multinational banks. This challenge to remain relevant has existed for a long time, but it has become increasingly difficult to remain so in an expanding age of globalism and corporate consolidation. Understanding how to attract new customers, while simultaneously employing a multi-generational approach, is critical to continued success and sustainability. It is possible for small banks and credit unions to compete – and even thrive – in our current market, but it requires focus, purposeful action, and a recognition of their unique strengths and advantages.

Opportunities Abound

For community banks, competing against megabanks can be a daunting challenge, but there remains enormous opportunity. In 1990, the five largest banks controlled less than 10% of all bank assets. In the last 25 years, that share has jumped to 44%. Today, approximately half of all new accounts (two-thirds of which are opened by Millennials) are established with the largest four banks (JPMorgan Chase, Wells Fargo, Bank of America, and Citibank). However, according to our own benchmark studies, an average of 13% of those megabank customers – as high as 20% in some markets – prefer a community bank.

Success Factors for Community Banks and Credit Unions

One of the most important success factors is to offer flexible, customizable services that allow your customers to choose what they want and when they want it, regardless of their age, income, schedule, or relationships. This is not only true for the younger customers but is becoming a key driver of loyalty for Gen Xers and Baby Boomers. Despite Millennials opening new accounts with larger banks, many still want the personal touch: As of June 2017, over 45% of Millennials said they preferred in-branch interaction over electronic interaction with their banks.

Keep it Personal

Most consumers are still searching for a personalized banking option, and community banks that take the important steps to capitalize on that demand will thrive. Look at examples of successful organizations from other industries that are facing the same general issue: competing with large corporations. Find out what local restaurants are doing to compete with fast-food retailers. Discover why the local auto mechanic is so successful when a chain auto-repair shop is right around the corner. The basis of any functioning business is a good relationship with its customers.

Some trends may favor large, multi-national banks, but deliberate, personalized attention can not only even the playing field, but tip the balance in favor of a community bank or credit union. With an understanding of your competitive advantage as a small, local financial institution, you can capture plenty of loyal customers that will bring success. Contact us if you would like customized benchmark reports for your region.

Next month, we’ll continue our Community Bank Success series by exploring Community Bank and Credit Union Marketing.

Improve Community Banking through Stronger Customer Engagement

Community banks enjoy a significantly higher customer satisfaction rate than larger, national banks. But the comprehensive breadth of services used among community bank customers is relatively low, and many community bank customers turn to larger, national banks for their larger financial needs (like investment and retirement services, as well as large-scale loans). Addressing the reasons for these discrepancies can help community banks improve customer engagement and strengthen industry standing and profitability.

Emphasize Personal Attention in All Financial Matters

Community banks must not abandon their focus on being small and friendly, but they must redefine those terms to include financial expertise. They must be centers of professional bankers, investors, retirement planners, etc. They must emphasize the important of making the most critical, impactful, complicated decisions with people who are trustworthy, knowledgeable, expert friends, not with people whose only concern is making a large commission from their customers. This process of building relationships is already a hallmark strength of community banks; they must extend it more broadly across more financial options.

Insist on Early, Active, Comprehensive, Unapologetic Sales Practices

Sales does not have to be impersonal, hyper-aggressive, and manipulative. It is best when done personally, assertively but naturally, and honestly. Community banks are perfectly positioned to do it well. What the process cannot be is ambiguous or slow-moving. Customers who open  new accounts should sit down with people they consider to be financial experts, to go over all their financial options.  These experts are referred to as financial advisers or some other title that suggests that they are more than simply money handlers (which is how customers generally view tellers). The goal of these advisers is not to make any additional sales at that moment (unless that occurs naturally) but instead to ensure that every customer is aware of available services.

Invest in Omnichannel Integration

This solution is non-negotiable. It simply is a reality in the world today and will continue to be so in the future. Frankly, this topic is too broad to handle adequately in an introductory post (and it will be the subject of a future post), but this integration must happen if community banks are to continue to compete and thrive. The reality is that most relatively small organizations lack the resources and technical expertise to accomplish this on their own, and partnering with an expert organization in this area usually is significantly less expensive in the long-run. Thus, the best solution for most community banks is to find a trusted partner and collaborate with that partner to achieve omnichannel integration.

Is Your Community Bank Missing Opportunities with Millennials?

Emerging generations are the largest in history – even larger than the baby boomers.

  • They have access to more money than any previous generations in history.
  • They value interpersonal interactions and relationships as much as any generation in history.
  • They prize social engagement and are suspicious of large corporations to an extent never seen in any previous generation.

Despite all of this, many are less likely to use community banks than their parents and grandparents. But that does not have to be the case. These younger generations represent an enormous opportunity for community banks to thrive and grow.

Imbalance in Being “Small,” “Neighborly,” and “Friendly”  and Demonstrated Financial Expertise

Generally, people don’t go to friends and neighbors for complicated investment and retirement advice. They go to people they consider to be experts. Exclusive focus on size and personality has established among community bank customers a strong degree of personal loyalty for basic deposits, but it has weakened some of those customers’ confidence in community banks as experts in more complex financial matters, creating a perception of community banks as places where good people take care of money, not where financial experts handle complicated, consultative financial conversations. Community bank customers store their money with good people; they discuss how to use their money with good bankers.

Failure to Embrace Active, Early Sales Practices and Opportunities

Continue reading “Is Your Community Bank Missing Opportunities with Millennials?”

How Is Banking Like Baseball?

And How Is Community Banking Like ‘Moneyball’?

The idea that you can create a template that will work forever doesn’t happen in any business. There are some really, really bright people in this business. You can’t do the same thing the same way and be successful for a long period of time.” But maybe you can be Billy Beane. Are you like Billy Beane, the general manager of the mid-market team the Oakland A’s? As the protagonist in the book and movie “Moneyball,” he is responsible for successfully competing with big-market, deep-pocket teams such as the New York Yankees and the Boston Red Sox. How did Billy (as played by Brad Pitt in the movie) do it?

“We can’t do the same things the Yankees do. Given the economics, we’ll lose. Smaller market teams, when you hit bottom, you hit with a thud,” Beane has said.

The game of baseball has changed. It’s a data-driven sport that allows managers to manage to different situations and strategies. What works for one team or one situation may not work for the other. The challenge is to figure out what data you need, how to gather that data, and how to use it to meet your goals.

Billy Beane’s genius was his decision to do more research on players and his openness in looking at the research data in different ways to achieve success, despite the A’s budget limitations.

For example, general managers need to put together a multi-talented team where one size does not fit all. Today, a team consists of core players, specialists and multi-position players. The key is having the type of talent that fits the playing conditions. In baseball those conditions include the league (American with designated hitters), the field (Yankee Stadium with its short right field, or Colorado with its thin air) and, of course, the salary cap. In community banking, those conditions are urban versus rural, customer demographics, competitor strengths and weaknesses, and budgets for marketing.

Continue reading “How Is Banking Like Baseball?”