Now in its fourth year, this year's study indicates that only 35% of customers say they are highly committed to their retail bank in 2009, compared with 37% in 2008 and 41% in 2007. On average, highly committed customers use more products, give more referrals and are much less likely to switch to another bank, compared with customers who have lower commitment levels.
The study finds that customer perceptions of bank brand image have declined for a third consecutive year. Low customer ratings in the areas of overall reputation, customer focus and personal service primarily drive the decrease in brand image among banks.
"Banks with high brand image scores typically engage in practices that focus on strong communication with customers, such as welcoming them to the branch office or following up on problems," says Michael Beird, director of the banking practice at Westlake Village, Calif.-based J.D. Power and Associates. "By focusing on aspects most critical to the banking experience, banks can win the favor of their customers, which can lead to considerable financial rewards."
The results echo a similar study released recently by Interbrand Corp., where a third of retail respondents said they had waning confidence in their banks and wanted to switch financial institutions.
Clearly, banks need to take their brand image seriously, in light of the negative publicity surrounding the bank industry in general. Greenwich Associates' recent Market Pulse survey showed that business customers care more now than before about their bank's brand. In the firm's of roughly 700 small and middle-market businesses, 65% of respondents said bank brand is now equally as important or more so than price when selecting a bank, and 79% rated brand equally or above product availability.
Notably, customers in the J.D. Power study reporting the lowest levels of commitment in 2009 happen to be those with deposit balances that are 15% higher than average.
"With this in mind, it is crucial that banks take steps to address this steady decline in customer commitment, as moving just 5% of customers from low and moderate levels of commitment to high commitment can mean additional deposit growth of more than 2 percentage points higher than average. This is critical in an environment where 4 to 5% is the norm," Beird says. The 2009 Retail Banking Satisfaction Study is based on responses from 28,570 households in January 2009 regarding their experiences with their primary banking provider.