Community banks should be relationship experts. Smaller branches have extensive opportunities to immerse themselves in their communities, which allows staff to know customers on a personal level. Customers prefer engaging in a friendly conversation with familiar faces to standing at an ATM, so why are people switching to other banks? You could have the friendliest staff in the world, but if you do not understand what is hurting your relationship with consumers, your bottom line will suffer.
Customer loyalty is process driven.
After analyzing the hundreds of millions of data points we collect from customers of small, medium, and large banks, we discovered that difficult processes are a primary point of contention between customers and banks. For example, a customer typically comes into a branch for a reason, expecting help with a loan or other financial document that they cannot complete without assistance. A painful personal loan process can frustrate a customer to such an extent that they look to switch banks. If your branch is unhelpful with common financial needs and questions, the relationship with your customers will deteriorate quickly.
Expectation management is crucial.
The assumption that loan applications are generally difficult leads to expectations of frustration. However, the process does not have to be difficult. In our research, we have seen community banks that increased customer loyalty by offering a better process and better handling of documents. But we have also found other banks that increased loyaltly even when their loan processing was average in terms of length and complexity. The question is, how can a bank make customers happy even when their loan process is average at best? The answer: expectation management. Before a pen is put to a single loan application, the best thing your staff can do is to stop processing and just talk to customers about the entire process. Take the time to walk the customer through the necessary steps and offer estimates regarding how long the typical process takes. Informed customers are more likely to feel positive about their banking relationship when their expectations of the process are managed, even if the loan is ultimately not approved.
Efficiency is appreciated.
Although mistakes do occasionally happen, such as incomplete paperwork or missed steps, if you do not keep customers informed of things that might delay or derail their application, the relationship might take a negative turn when expectations are not met. Banks that were able to approve a loan, but only after an onerous process, saw those customers more likely to leave the bank in the next 1.5 years than customers who did not get a loan, but whose expectations were met.
It is not the outcome of a banking transaction that is most important to the relationship with consumers, but the process. Staff cannot always prevent a loan from being denied, but they can facilitate a straightforward process and offer consultation for alternative financial action. If you are wondering why customers are leaving your community bank, the first place you should look are processes or procedures that are potentially frustrating those who walk through your door. All too often, very friendly and responsive front line staff are not enough to overcome those internal issues.
There is enormous opportunity for you 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.