A J.D. Power Perspective On Issues A Bit Closer To Home

When you think of J.D. Power & Associates it's near-certain you also think of automobiles and the customer satisfaction ratings the various manufacturers are always extolling.

What's far less likely is that you would associate J.D. Power with your own credit union, and yet the company does extensive work with financial institutions. The reasons are not cosmetic or just to get another form of feedback. Instead, as Rocky Clancy, executive director of Financial Services with J.D. Power, explains, "Customer satisfaction matters. It's not just mom and apple pie. We are in this business because there was a disconnect between customer value and shareholder value."

In short, and perhaps none too surprisingly, higher levels of customer satisfaction translate into higher levels of revenue, with providers rated highest in satisfaction able to charge a premium. When Clancy, who shared his thoughts during Harland's recent Connections Conference in San Diego, talks of shareholder value his reference is to the stockholders of publicly traded firms. But many of his insights offer lessons to credit unions.

"Part of the reason I work for J.D. Power is because I believe it's true that the company shines a light on what is wrong," Clancy explained. "This is not about a customer is upset and we want to improve it. Customer service has a big impact on the bottom line."

Whether a credit union uses J.D. Power, and few likely do due to the cost, nearly all do some form of member and consumer research. One lesson J.D. Power has learned, said Clancy, is that while satisfaction is important, "By itself it is not as important as we had thought." Part of the reason, he said, is that the image a consumer/customer has of a company is somewhat irrespective to the experience. But it can be powerful, as Clancy observed, "It's one thing to be a customer, another to be an advocate. If I have customers who are more willing to give me more business, gee, guess what? Higher revenues. If I have customers willing to pay a premium price because they perceive premium value I have higher levels of revenue."

One customer satisfaction issue often overlooked, according to Clancy, is the cost side. Other than the mortgage business, the fewer contacts, the more satisfied the customer. "The fewer problems I have and the less time it takes to resolve, the better. All that takes cost out of the system." Similarly, the cost of acquiring new customers/members is also reduced when customers are making recommendations to friends and families.

"What we don't want to do as companies is be focused on the folks who hate us," Clancy said. "Let us learn lessons from them, but our job isn't to turn people from hating you to being indifferent. Where you get lift is getting people to move from being indifferent to saying, 'Yeah, these guys are really good.'"

T-Ball Data

But being thought of as "really good" is not in and of itself a reason to measure satisfaction. Instead, market research is done for two reasons, according to Clancy. The first is that a company is actually moving down the strategic path it has chosen. The second is to ensure that that chosen path is, is fact, the right road. Clancy cautioned that data needs to expose warts and all. It shouldn't be what he dubbed "T-ball data" where "everybody is a winner."

When J.D. Power does benchmark financial services satisfaction studies they are designed to explore reasons for selecting a bank and switching to a firm, identify the key dimensions of satisfaction, understand the customers' product usage, problems experienced and channel preference, and explore the relationship between satisfaction, loyalty and additional product usage.

One reality every FI must face: see things from the consumer's perspective. "When we ask people if they have had a problem with their institution lately, they don't respond, 'Yes, but I don't begrudge them because they made a policy change due to risk-management concerns.' If they don't get what they want, they're not happy."

According to Clancy, the five Ps of the customer experience are People, Presentation, Price, Product and Process. "All of these things drive satisfaction," he said. "So if you're satisfaction measurement is around the new account process, it's not the whole picture. You may be doing great here, but customers may be unhappy."

Some of Clancy's other observations:

* All J.D. Power ratings result from weighted averages. It weights various factors according to how consumers rank the importance of each.

* The buzz-phrase du jour, "Net Promoter Score," is one "nice easy number that everyone gets, but it has very little ability to predict financial outcomes, or tell me what to do about it."

* Measuring how long members have to wait in a teller line is in and of itself meaningless. More detail is needed, said Clancy. "What you're looking for is where does satisfaction start to fall off the cliff, because that's what your standard should be."

* Banking, as a more process-driven business, tends to have higher levels of satisfaction than other businesses. The exception: credit cards, where folks are "not real happy."

* Customers want multiple levels of access-the more levels the higher the satisfaction.

* Problems cause problems. "For folks who had a problem, satisfaction falls off the table," said Clancy. "One thing we asked, 'Did you contact your bank about the problem?' About 12% said they had a problem but said the hell with it, I'm not calling. The overriding reason they gave: 'I knew the bank wouldn't do anything about it.' The biggest problems are basic blocking and tackling, i.e., ATM is out of order or supplies or website accessibility. If you can get people to be delighted in how you solved the problem, you can actually get them to be happier than if they hadn't had a problem."

Frank J. Diekmann is publisher of CU Journal and can be reached at fdiekmann<at>cujournal.com.