Ipsos Loyalty Industry Reports - 2011 Retail banking – Australia

What is your customer retention & growth strategy?

What follows are highlights of our findings.

What do I need to do to acquire more customers? ACQUISITION

What do I need to do keep the customers I have? CUSTOMER RETENTION

How do I get my current customers to use me for more of their banking products & services? SHARE OF WALLET

Customer Retention

Share of Wallet

Aquisition

We have some ideas. In early 2011 we spoke to 1,000 Australians

about their experiences in retail banking with the specific goal of

understanding what was driving their behaviour.

Why did they choose their bank? Why are they loyal to their bank?

Where are the opportunities to grow your business with existing

customers?

A record $12 billion collective profit for the first half of fiscal year 2011 and Australia’s big four now rate in the top 20 for banks globally (in terms of market value). With the help of a few purchases (St. George & Bankwest) and GFC related consumer flight, Australia’s big four have seen their share of deposits swell from 69 to 81 percent. Quite the enviable position to the American big four where they hold roughly 39 percent of all customer deposits.

Quite the list of accomplishments but these successes are drawing

unwanted attention – often in the form of negative media and most

recently in the form of a government inquiry aimed at improving

“competition and efficiency in the country’s banking sector”.

What will this translate to? A more level playing field for smaller

banks perhaps. An increase in viable banking options for banking

customers? Only time will tell.

In some ways this retail banking back-story is just noise –

from a customer retention & growth strategy, the questions

haven’t changed:

Results in 30 seconds! The key findings you need to take away are: A. Customers continue to rely on experiences and reputations when choosing their banks B. Top 4 banks lead on share of wallet but trail on almost every other loyalty and satisfaction measure

44%

38%

34%

26%

26%

Previous experience with this bank

Fees and Interest rates

The reputation of the company

Friends or family recommended it to me

The experience at the branches

Why did you choose your main bank? A Top 4 Banks vs Other Banks –

Key loyalty measures B

52 64

75 89

25

58

77 80 83

27

Loyalty Index

Brand preference

Likely to stay

Share of core

business

Recent trend in spend

Top 4 banks Other banks

Smaller banks lead on loyalty except for share of wallet

Experiences and reputation are key attractors

Results in 30 seconds! The key findings you need to take away are: C. Leading on share of wallet means top 4 banks have more high value customers

but many are vulnerable in terms of loyalty

D. Australian banks compare favourably with other banks globally on loyalty although they are lagging a little in brand preference and satisfaction, suggesting a degree of loyalty may be due to behaviour and habit

Are your valuable customers at risk? C How does the Australia banking industry

compare to the rest of the world? D

28%

21% 25%

34%

28%

22% 20%

23%

Top 4 banks Other banks

Low value vulnerable Low value content

High value vulnerable Profitable Loyal

Loyalty Index Brand Preference Satisfaction Recommendation

Australia US UK China India

Service, ease and problem resolution We all know that rates & charges and products are important and our analyses confirmed this. But what is really interesting is what else is coming together for customers to make them feel that extra bit of loyalty to their bank?

After the basics, the most important drivers of loyalty are those things you do to make life easier for your customers – personalised service in the branch and on the phone, resolving their problems, and making key personal contact points easy (ease of getting in touch and ease of using your phone banking system)

Top 10 drivers of retention

Overall customer serviceService in branch

Service on phone

Internet service

Staff knowledge

Friendliness

Ease of getting in touch

Personalized service

Ability to resolve issues

Ease of telephone bankingsystemInternet bankingWaiting time in branches

Waiting time on phone

Branch convenience

Complaints handling

Products & services

Range of products

Financial advice

Accurate statements

Loyalty/rewards scheme

Rates and charges

All Banks

Top 4

Other

Where are the leaks? Sometimes your customer retention & growth strategy isn’t about getting new or keeping existing customers

• For many companies the major gains from their customer growth strategy will come from getting their current customers to give them a greater share of their banking wallet.

• Customer deposits in the forms of saving and checking accounts are key to a stable banking business but too many customers are getting other banking products from other providers.

84%

69%

57%

38%

15%

5%

4%

79%

53%

54%

29%

10%

2%

2%

Savings accounts

Credit cards

Day to day current or checking accounts

Mortgage

Personal loans

Insurance to cover your income, mortgage / creditrepayments

Sharedealing / investment trading accounts

% with product % having this product with main bank

Around 23% of credit card holders are leaking to other banks

Around 24% of mortgage holders are leaking to other banks

1

15

12

4

-6

6

-2

-16

-1

-5

7

-2

0

5

1

-2

What’s the norm? Normative data can provide crucial contextual information – nobody likes rates and charges so how do you know if you’re performing well? And if you’re leading the pack locally how do you know if you’re stacking up internationally?

Australian banks compared quite well globally on loyalty but in terms of brand preference, satisfaction local banks were more mediocre – potentially due to a perception that there is a lack of choice. Recommendation is reasonably strong here, whereas in the UK this just doesn’t appear to be something they enjoy doing.

LOYALTY INDEX BRAND PREFERENCE RECOMMENDATION SATISFACTION

On the whole, UK bank customers are less loyal than Australian bank customers.

Australia’s scores are represented by the blue dotted line and all other scores are relative to Australia.

US bank customers are a bit more likely than Australian customers to recommend their bank.

US UK China India Australia

What’s behind the Ipsos Loyalty Index? Ipsos surveyed 10,000 customers of different brands in different sectors; and surveyed them again a year on. The variables that best predicted Loyalty were used to create the Ipsos Loyalty Index.

Loyalty, from our research and experience, is about attitudes AND behaviour and it is the combination of both of these in the Loyalty Index that provides the extra predictive validity above and beyond single item measures.

Customer Attitudes + Behaviour = Loyalty

ATTITUDINAL LOYALTY

BEHAVIOURAL LOYALTY

Brand preference

Likelihood to stay

Share of business

Recent spending

Loyalty Index

Prediction of 12 month churn

55%

44%

57% 49%

60% 51%

73% 68%

All industries Banking

Loya

lty

Ind

ex

Likelihood to recommend (NPS)

Satisfaction

Likelihood to continue

Loyalty Index

About the research

We surveyed 1,000 Australians and asked them a series of questions aimed at understanding what was driving their behaviour towards their main bank. Questions included:

• What banks do you currently have a relationship with?

• What bank do you consider to be your main bank?

• What banking products do you currently own?

• What banking products do you currently own with your main bank?

• How well is your main bank performing across categories like customer

service, having quality products and rates & charges?

We analyzed this information to answer questions like:

• What is the relationship between customer advocacy and new customer acquisition?

• What are the key drivers of customer retention? • Where are the opportunities for banks to increase their share

of their customers banking spend?

Let us know if we can help! Brett Tucker | Managing Director, Ipsos Loyalty brett.tucker@ipsos.com +61 2 9900 5130 - office