Branding Banks For Shareholder Value 6.0 Brand Measurement

Branding Banks for shareholder value Discussion Draft Section 6.0 Branding banks for shareholder value Section 6.0 Measuring bank brands July 2010 1 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Delivered and planned series of papers Discussion Draft Release Date Order.Version Creating shareholder value - an outline 1.0 Mar-10 Knowing customers 2.0 Mar-10 How customer perceptions develop 3.0 Apr-10 Why brand banks? 4.0 Apr-10 Why can't banks brand? 5.0 May-10 Measuring bank brands 6.0 TBA Measuring relationship value 7.0 TBA Gaps diagnosis 8.0 TBA Bank structure and brand control 9.0 TBA Process level brand control 10.0 TBA Building the brand story 11.0 TBA Communicating bank brands 12.0 TBA Valuing bank brands 13.0 TBA Brands and the future of banking 14.0 TBA Competitive bank branding strategies 15.0 TBA Introduction My purpose, in this series of papers is to define the path from bank branding and customer perception to shareholder value. How does investment in brand and perceptions generate value? The exhibit below illustrates my starting point in making this connection. 2 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Perception of Customer price perceptions Perception of Bank Business unit specification efficiency performance fit to needs Shareholder value Perceptions Bank W Corporate of service financial centre experience structure performance Weakens Mix of Perceptions businesses of brand improves Investment in brand Investment in brand strengthens customer perceptions but reduces bank efficiency by necessarily increasing expenses. Most banks make this trade-off based on experience and judgement. While I doubt that this type of decision can be reduced to any simple equation, I do believe that better frameworks‟ for thinking about it are available. I also argue that successful branding is vital to banks but that it is at the extreme end of difficulty on the spectrum of all brands. The normal ways of thinking about corporate brands do not work well for banks. Creating and managing a bank brand is so difficult in fact that the corporate competence in surmounting the challenges is a source of sustainable competitive advantage. This advantage can only be achieved by an understanding of the issues and their implications. There must be a particularly disciplined set of decisions within a well designed policy framework. In some aspects this goes to the heart of and challenges conventional management thought. I am serialising this series of discussion drafts on LinkedIn and slideshare and welcome any comments. The papers are work in progress towards a book I intend to write one day. I am recording my own journey over many years trying to come to grips with these issues. My approach is mainly founded on practical experience but I have been dutiful in trying to make best use of theory and whatever data I could access. I am happy to be connected to anyone on LinkedIn who shares my interest in fiancé sector marketing. 3 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 I developed much of my thinking on this subject working with the Finance & Business Services team of TNS Australiai. I am grateful for their input and support. However any opinions I express are mine alone. In developing my thoughts I have drawn on the work of others. Attribution is always recorded. Should anyone reading this be concerned that their ideas have been misrepresented or used inappropriately I should be happy to amend or withdraw them. Measuring perceptions of brand In this sixth section of branding banks for shareholder value I want to discuss the measurement of brand perceptions. If we are to make a connection between perceptions of brand and shareholder value it is necessary to measure both. In this section, I want to cover:  the relationship between customer satisfaction and customers‟ perceptions of brand;  measuring customer satisfaction;  perceptions of customer satisfaction as it has been measured in three academic studies of personal finance markets;  my findings about what customer perceptions seem to make a difference to satisfaction and brand image in business markets;  the issue of multiple brand audiences;  The way forward, as I see it, in getting a better handle on how bank brands are perceived. The relationship between brand perception and satisfaction Brand as a store of satisfaction 4 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Is measuring customer satisfaction is enough to get a fix on the power of the brand? Does satisfaction = brand? To return to the definition of brand that I asserted in Section 4, the first part of which (shown in blue) I accept from John Grant as axiomatic for my purposes: “A brand is a cluster of strategic cultural ideas” that inculcates and modifies our expectations of the way the world works. The addition in green is mine. I have used this diagram to illustrate how I see the role of brand in modifying experience. BRAND Customer expectations The objective Customer quality of the perception of experience the experience In the context of bankingii, brands modify the perceptions of experience as I illustrate here. Experience modifies first, immediate expectations, and then the attitudes that give rise to expectations and finally the deeper held beliefs which are articulated in the real world through attitudesiii. Our expectations are generated through brand perception in ways I shall discuss in more depth in a subsequent section. 5 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Beliefs Reframing feedback Attitudes (Reusable decisions) Contextualisation feedback Needs Expectations Choices Realignment feedback Interpretation Experience (feedback) Outcomes Expectations influence both the outcome and our interpretation of the outcome. The exhibit below amplifies this a little. A customer with a favourable brand impression is more likely to do two things. The first is to have, at the outset, a higher commitment to the success of an interaction with the bank. By interaction I mean anything from telephoning to make a complaint to calling into a branch to make an inquiry about refinancing a mortgage. Banking products and services are among those that depend on collaboration between the suppler and the customer for successful outcomes. For example, a customer with a complaint who has a poor perception of the brand goes into the interaction with an adversarial rather than solution seeking game plan. During the interaction they are likely to induce a negative reaction from the bank staff members and this, of course, can easily spiral. Similarly if the customer goes in expecting a bad outcome the interaction is more likely to lead to one. The interaction meanders towards the conclusion predicted in the customer‟s mind. Finally, brand influences the interpretation of the outcome. ‘They fixed my problem just like they always do.’ 6 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Favourable Perception of brand Customer Favourable commitment to expectations of the interaction the interaction Favourable interpretation of the outcome Good bank performance Favourable outcome Effective bank processes and resources And there is one further feedback loop to add. Once observed, the commitment of bank resources is reinforced, confirming the loop. The difficulty for the bank lies in the observation of the process which is more difficult to measure than you might think. Many banks give up on a course of action just before benefits become apparent because their antennae are insufficiently well attuned. Favourable Perception of brand Customer Favourable commitment to expectations of the interaction the interaction Favourable interpretation of the outcome Good bank performance Favourable outcome Effective bank processes and reinvestment resources 7 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 As I discussed in Section 4, there is a self reinforcing loop in the development of customer perceptions as experience of the event interacts with accumulated brand experience. Where brand experience and event experience conflict there is a clear management issue at hand. But where they reinforce each other, either up or down, there is momentum. It is true that banking momentum can appear almost glacial in its pace. Deciding of the right things to do and consistently doing them over a long period is a big part of the answer. Tourist: How do you get these lawns looking so beautiful? Gardener: We just keep watering them, mowing them, rolling them. Tourist: That doesn’t sound difficult, how long does it take? Gardener: About 400 years. And while I have my old joke book out, I shall also fail to resist: Man in sports car to wayside yokel: What’s the fastest road to London? Yokel: Well, if I were you I wouldn’t be starting from here. Bank brands tend not to be starting from the right place. A few decades ago might have been better. I used the diagram below in Section 4 – „Why brand banks?‟ to illustrate the momentum imparted when brand experience and event experience reinforce each other. 8 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Why then doesn’t a successful bank just maintain this momentum ever onwards and upwards, while the unsuccessful ones go down? I suspect this is largely due the cyclical and structural factors I outlined in Section 5 and the interactions between them. The playing surface never stays smooth and level for long enough. But also it is caused by flagging in management resolve. Too often things happen too slowly or in ways undiscerned and management support for a strategy is withdrawn. These things are hard to observe and measure. To do so is an important management discipline. To sum up, when we measure satisfaction, we are measuring the impression left by a series of experiences modified by brand and changing brand perceptions. Favourable brand perception has dimensions that satisfaction alone does not. What does a favourable brand perception do that satisfaction alone does not? 9 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Is favourable perception of the brand the same as customer satisfaction? I think not. Perceptions of brand allow you enter the realms where experience has less power. This happens in two ways:  First satisfaction with what is experienced can be transferred to things not yet experienced; and  Secondly satisfaction can be transferred from the concrete particular to the abstract universal. I shall elaborate below. In the meantime, I don‟t want to imply here that there is a simple path from repeated event satisfaction to favourable brand perceptions. This repeated event satisfaction creates the opportunity for branding not the branding itself. There needs to be a vehicle of mental pathways and associations to do that. As John Grant says there has to be „a cluster of strategic cultural ideas’ acting as a conveyer. I shall pursue this line of thought in Section 11 – „Building the brand story’. Close to hand and heart By „close to hand and heart‟ I mean those products and services that the customer needs and uses now. Typically, bank customers are rarely satisfied in a way that transcends the here and now. Too much is simply expected to go right. If an interaction with the bank goes well today that‟s enough. Brands, I believe can extend that a little, however, when they are well managed. I want here to use a familiar marketing matrix in a different way to how it is usually deployed. The customer‟s satisfaction with the „here and now‟ can be extended to products, services and distribution channels:  offered under the brand that exist but that they don‟t yet use;  that they use now as they respond to their future needs; and  that the bank may introduce in the future. 10 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 This last point is important to, for example, the future development of online banking. Imagine being offered a new online banking service by a bank that consistently makes mistakes in your paper statements. Products, services, markets, distribution channels Existing New Perception of events as Perceptions of Present modified by brand perceptions of Time perspective brand Perceptions of Perceptions of Future brand brand Brand here fills in parts of the matrix that satisfaction alone does not fully reach into. The reason is that bank satisfaction tends to be passive and reactive. It does not extend unless in some way articulated. A good brand requires customer satisfaction as a base but it requires other things as well. More distant but more lasting Another set of dimensions are those shown in the exhibit which follows. They appear less immediate but because they require a greater stretch on imagination, beyond the self and the self‟s immediate needs can create a deeper impression. Perceptions once extended into new territory are I believe likely to be sustained. The breakthrough into 11 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 new territories of thought is hard to retreat from. It tends to stick in people‟s minds because it is newly created territory in their mental map. Focus Me Others Perception of events as Pragmatic Perceptions of modified by brand perceptions of brand Outlook Perceptions of Perceptions of Ideal brand brand I see this branding effect as having two dimensions: First, it extends satisfaction beyond „me‟ to „us‟. „If I’m satisfied with this service so will others be’. This inevitably carries with in people‟s mind the connotation of „us‟ as „me and my tribe‟ or „me and the tribe I want to be in‟. The effect can be powerful. It extends to ‘I am one of the group of people experiencing satisfaction with this brand’. Secondly, it can go from the pragmatic to the ideal. That is to say, from the strictly utilitarian to something socio culturally valuable independently of the user. It becomes the right way to do things. All the things above that I have tried to designate as „brand‟ rather than satisfaction have one further capability. Satisfaction can be better than that of a rival bank. But it cannot be a different kind of thing. Competition takes place along a single continuum in 12 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 this regard. Brand opens competition to many dimensions creating, as it does so, more opportunities for differentiation. The foundation for brand is personal experiences but brands build bridges from personal experiences to broader perspectives, aspirations and concerns. Having said this, for customers, the foundation of favourable brand perception is indeed satisfaction. It is to the measurement of satisfaction that I shall turn next. We also need to consider the development of brand perception in the minds of non-customers with no experience of the product or service. I shall return to this later in this section. For now I want to conclude that favourable brands stretch customer satisfaction into dimensions other than the individual customer‟s here and now. More than this a good brand shifts the customer‟s mental focus from the concrete particular to the abstract universal. For this to happen the customer must believe that the benefit that they derive from the interaction with their bank results from some core value or institutional capability that resides deep within the bank and is nurtured there. Measuring satisfaction A (very) short history of customer satisfaction measures in banking Of course it has always been a good idea to keep customers happy. The „customer is always right‟ has been with us for a while. I suspect, however, that systematic research into bank customer satisfaction is relatively recent. Around 1990 I asked to see all the customer research for Westpac‟s commercial banking unit and was directly to a rickety but large wooden cupboard. Out fell a few dozen or so large, dusty, ring bound books of research. They were all issue specific (this or that product or campaign) rather than systematic tracking. Clearly each had be read once or twice, nodded wisely over and chucked into the cupboard. It took a couple of decades to get to where we are now in measuring satisfaction. 13 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 There were two things that gave impetus to measuring satisfaction. One that appealed to the thinkers in banks was ultimately caused by Edwards Deming‟s quality management concept. Banks came late to quality management (many came not at all). It did make sense, though, that measuring the quality of process depended on some guide to the quality of output that customers required. Now this isn‟t easy in banking. Compare it to, say, manufacturing a part to go into a larger assembly. If the specification of the ball bearing is 14.25 millimetres diameter that‟s the target, no question. Obviously, banking is harder to get that level of „hard and fast‟. Thereby hangs a thought that I shall pursue later in another section. For now though the need to measure satisfaction in some way or another became more important. By contrast, the road to measuring satisfaction for the „doers‟ among bank executives came with a realisation, which seemed to dawn on the whole world all at once during the Nineties. We discovered that retaining customers costs a lot less than winning new ones. By year 2000 at least two bank CEOs in Australia had satisfaction measures as part of the KPIs agreed with them by their Boards (and probably all of them). But then, after a few years, people began to question whether satisfaction was enough. Criticism came mainly from two sources. First satisfaction alone did not appear to be a good predictor of customer behaviour. Secondly, for some people, measurement of satisfaction seemed to make life too easy for the people being measured. The bar had not been set high enough. To take the first point, satisfaction seemed not a good guide to customer defection or to their value to the bank. Indeed some very satisfied customers were underpriced for risk, so no wonder. Other dissatisfied customers were so because their bank, quite correctly, was trying to manage credit default. But even so it was found that some satisfied customers that a bank wanted to keep were defecting. Some studies purported to show that satisfaction only predicts behaviour when satisfaction scores are very high. I think the reason for this is less that there is a sudden kink in the satisfaction / behaviour curve. I think it because a hidden dimension comes into play. We see this at work in the Conversion Model, which I discuss later. 14 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 The second point goes to the heart of bank management and I shall more to say about it later in this series of papers. For now though consider the exhibit below. It shows the result of a survey of about 23,000 relationship managed business customers. There was a response rate of roughly half. The waves were carried out in the years 1995 to 1997, inclusive. It was approximately two years after a major restructure and the relationship managers and their support teams were getting good scores for customer satisfaction. About 70% of customers were being giving scores of 8 or better. But in the minds of some people at their head office that wasn‟t supposed to happen. It looked all too easy. But then how do you raise the bar to 8 out 10, especially when many respondents don‟t give 10s on principle. ‘It leaves no room for improvement’, they say. Overall Rating of Relationship Manager Service and Support Wave 1 Wave 2 Wave 3 Avg Response 7.23 Avg Response 7.98 Avg Response 8.05 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 10 10 NA NA NA 0 5 10 15 20 25 0 5 10 15 20 25 30 0 5 10 15 20 25 30 Percentage of respondents Percentage of respondents Percentage of respondents Source - CTS It was generally decided; (by those not being measured) that something more demanding was needediv. As well as these things, banks, in my experience, are not good at linking satisfaction measures to process management or design. Measuring satisfaction is seen as just a way of keeping score rather taking decisions. As far as I can see, this is not a widespread concern among others. It is, however, a central theme of this book. 15 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Satisfaction and the TNS Australia Business Finance Monitor The TNS Australia Business Finance Monitorv is a sophisticated survey of the banking behaviour and perceptions of businesses with turnovers of up to AUD 100,000 vi. For general references to TNS and the Kantar Group, of which it is now a part, see the endnote. I reiterate that while I am grateful for having worked with TNS Australia for nearly a decade any views I express are mine alone and do not necessarily reflect TNS thinking. In making reference to the BFM I use no indicators for any individual client and only show data that is already in the public domain. In its design the BFM survey had to do two things of special relevance to this series of papers. One was to incorporate some measures that were a given because they were used by one or more of the subscribing banks as part of their internal processes. For example satisfaction measures are included in some in the Key performance indicators of the CEOs of some banks. This means that it is vitally important to the client that the underlying question does not change so the time series is maintained. Secondly, the questionnaire design involved input from a group of highly experienced and competent market research expertsvii. Naturally there was not total agreement either on what elements to include and how to word the questionnaire. The end result was a compromise but not, in my view, a bad one. As I progress through this section I shall comment where my views were or have come to be at variance with the questionnaire as it is presented here. Hindsight is of course easier than foresight and I learned a lot during the course of my involvement. As a result of the situation I have described, the BFM include questions from more than one approach to measuring satisfaction:  Two different versions of a straight satisfaction question with, as far as I know, no particular source.  The satisfaction question as it is incorporated into Jan Hofmeyr‟s Conversion Model™; 16 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0  A version of the Net Promoter Score (NPS) question, developed by Fred Reichheld; and  A version of the Customer Value Added question, developed by Ray Kordulpleski. In the exhibit below I set out the text of the questions side by side. I‟m going to refer to such questions as focal questions because they act as a bridge between understanding a lot of detail about the customer‟s perceptions and situation and making predictions about the customer‟s behaviour. Put simply for now. Beliefs Reframing feedback Attitudes ( Reusable decision) s Contextualisation feedback Needs Expectations Choices Realignment feedback Interpretation Experience feedback ( ) Outcomes 17 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Standard Conversion Model NPS / Advocacy CVA satisfaction Standard satisfaction satisfaction question satisfaction question question question question (2) Overall, how Overall, on a scale Using a scale of 1 to Taking everything And thinking about satisfied or from 1 to 10, where 10 where 1 is into consideration - all of your business dissatisfied are you 10 means 'perfect in 'definitely would not the products, the accounts, loans, with your every way' and 1 recommend' and 10 service you receive investments and relationship with means 'completely is 'definitely would and the fees and service dealings with [main bank] on a unsatisfactory', how recommend', how charges that you [main bank], how scale of 1 to 5, would you rate your likely would you be to have to pay - how would you rate their where 5 is as experience with [name recommend [main would you rate [main overall satisfied as you of provider] for bank] to your bank] overall for the performance? Is it could be, and 1 is as business banking? business associates value they offer your excellent…? dissatisfied as you for their business business? Would you could be. Are you…? banking needs? say they give you excellent value for money…? BFM Q 8-5 BFM Q 10-2 BFM Q11-6 BFM Q11-2 BFM Q11-3 Note that the Conversion Model™ satisfaction question only operates in conjunction with the other question that combine with is to assess customer commitment. These questions are. Conversion Model Conversion Model Conversion Model Conversion Model satisfaction question perception of importance of choice / perception of alternatives question involvement question alternatives question question Overall, on a scale from 1 to I'd now like to ask you how Thinking about the selection I‟m now going to read three 10, where 10 means 'perfect you feel about different of a bank or other financial statements about business in every way' and 1 means institutions with regard to institution for your business, banking institutions. Thinking 'completely unsatisfactory', business banking. Please on a scale of 1 to 5 where 5 about your business banking how would you rate your indicate your feelings about is not important at all and 1 with each bank , please tell experience with [name of each institution by giving a is extremely important, how me which statement best provider] for business score between 1 and 7. If important to you is the describes how you feel about banking? you have a very negative decision about which provider this institution. attitude towards a particular to go to? Is it? 1 There are many good institution then you should reasons to continue dealing give it a score of 1. On the [Extremely important1;Very with [BANK] and no good other hand, if you have an important2;Moderately reasons to change. exceptionally positive important3;Slightly 2There are many good attitude towards it, you important4;Not important at reasons to continue dealing should give it a score of 7. all5 with [BANK] but there are also many good reasons to change. 3There are few good reasons to continue dealing with [BANK] and many good reasons to change. BFM Q 10-2 BFM Q 10-1 Q10-3 Q10-4 I might be uniquely positioned to talk about these several ways of getting to the measurement of customer commitment. Surprising there seemed relatively little client 18 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 interest in making comparisons between the focal question approaches so my data is not as rich as it might be. The Net Promoter Score™ (NPS) NPS / Advocacy question Undoubtedly, NPS has taken the market research world by storm. „It would be difficult to overstate the impact of Net Promoter on Using a scale of 1 to 10 where 1 is management‟viii The BFM Advisory council of client representatives asked 'definitely would not recommend' and 10 is 'definitely would for it to be included in the questionnaire from July 2007 as a replacement recommend', how likely would you be to for the advocacy question it had included, hitherto ix. recommend [main bank] to your business associates for their business banking needs? Net Promoter is a customer loyalty metric developed by Fred Reichheld and BFM Q11-6 Bain & Company, It was introduced by Reichheld in his 2003 Harvard Business Review article "The One Number You Need to Grow". It is controversial in its claim to be ‘the one number you need to grow’. Studies such as that of Timothy L. Keiningham et al (op cit) cast doubt over claims that NPS is a superior measure. For reasons I’ll deal with below it probably isn’t all that inferior either. For my immediate purposes, however, it is a measure that looks beyond the respondent’s satisfaction to look a little more broadly at how the customer sees the brand. It asks customers to interpret their experience of the brand in the context of their relationship with other people. I think it the question is most useful as a guide to word of mouth but it is serviceable as a satisfaction focal question providing you don’t get carried away by its claims to unassailable superiority. The question itself presents a problem that seems not to have been picked up by the various critics of NPS that I have read. Two things are, conflated: the first is the customer‟s satisfaction with the product or service. This is saying, „I, the customer, am so satisfied that I would take the (unusual) extra step of recommending this to others‟. In a sense that can be expressed as „I will associate my brand with your brand‟. The second thing is the customer‟s intention to talk about the product or service at all. This raises questions such as does the product or service appeal especially to people who like talking about products. Does this matter in real life? I think it can do. Are, for example Apple computers the product of choice of the „chattering classes? I think they 19 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 are and that this has a positive impact on the Apple brand. My main point here is that any attempt to modify the focus question in a satisfaction survey will raise complicating issues of interpretation. This matters more when the focal question is used for deep analysis as opposed to merely keeping score. We have seen that the BFM asks the NPS question as well as other satisfaction related questions. I don‟t see why this shouldn‟t be done. In point of fact, I‟d ask the word of mouth question, ideally, a little differently. But given its apparent popularity with senior executives I see no real harm in adopting the Reichheld wording. I should prefer to ask other questions though concerning the frequency with which and circumstances in which people seek and offer opinions about banksx. A bigger question in my mind is how is that this form of satisfaction question became so popular so quickly, a point to which I shall return xi as I believe the underlying causes are central to my argument. The exhibit below compares, the NPS with commitment s measured by the Conversion Model. The data is for Australian business banks and customers up to AUD 5 million turnover. NPS is measured as the aggregate of scores 9 and 10 on a ten point scale minus the aggregate of scores 1 – 6. The conversion model rating is measured by the percentage of committed customers to all customers. I am not revealing the names of specific banks in these papers. But it does seem useful to distinguish here between small (S) and big (B) banks. 20 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Comparison of Commitment and Net Promoter Score 50% R² = 0.7141 S 40% S 30% 20% Net Promoter Score S 10% S S 0% S S S -10% B -20% B B -30% B -40% 40% 50% 60% 70% 80% 90% 100% Commitment You‟ll have to take my word for it that I can explain the outlying among the smaller banks. The difference shown between the big and smaller banks is interesting, however. Big banks seem to score less well on the NPS than measured by commitment. I think there are a couple of reasons:  First, the smaller banks tend to have come from a background of personal banking (mainly home loans) and are growing into their business banking footprints attracting initially firms that are especially attracted to their business models. I suspect that these firms tend to have a something of an evangelical relationship with their banks;  Secondly, the smaller banks tend to have a larger proportion of customers outside the main cities of Sydney and Melbourne in smaller towns and rural areas where there is greater community spirit and supportiveness;  Thirdly, the smaller banks tend to have stayed closer to businesses managed-at- the-branch model which means that there is a greater sense of community in dealing with the bank. 21 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 To the extent that these things are true, the NPS does pick up on intention to promote as opposed to being merely an expression of extreme customer alignment with the bank. This may support my view that the NPS is more useful as a measure of word of mouth than it is of satisfaction per se. Customer Value Analysis™ (CVA) Ray Kordupleski, author of Mastering Customer Value Management: The Art and Science of Creating Competitive Advantage introduced CVA and, among clients I know, it achieved nearly the same popularity as NPS. One bank I have dealt with, Suncorp is one of the main examples given in Kordulpleski‟s book. CVA is based on the idea that satisfaction should be related closely to perceptions of value for money. With candour (almost defying belief), Kordulpleaski states in the introduction to his book CVA satisfaction that he chose the name CVA because it resonated with the Stern, question Stewart term Economic Value Added (EVA), which lent it credence as a Taking everything into consideration - business. Actually, customer value measurement is vital and I shall turn the products, the service you receive to it in the next section in this series of papers. CVA has nothing to do and the fees and charges that you have to pay - how with this and is simply another way of adjusting the basic satisfaction would you rate [main bank] overall for the question to get a supposedly better result. The basic thought is value they offer your business? Would you say they give you customers can be satisfied with a product or service but don‟t think its excellent value for money…? value for money. This assumes that when asked about satisfaction they BFM Q11-2 won‟t, in their assessment, take account of what it costs them. It also directs attention towards cost away from the other three elements recognised by Croxford et al, in the work I cite in Section 1 of this series of papers and adapt in the exhibit below. 22 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 + Perception of price Customer perceptions + Perception of specification fit to needs + + Perceptions of service experience Perceptions of brand It is quite difficult to get survey respondents to think about all four elements at once. As with all surveys the part of the totality that their mind snaps to in the instant they have to respond will depend on factors including:  the sort of person they are (refer back to Section 2, where I introduce segmentation by attitudes to finances);  their situation at the time they respond (for example people‟s first reactions can change depending on whether they are at home or a work);  their most recent salient experience with the product / service;  the positioning of the question in the survey questionnaire. As far as possible I prefer the question to be as simple as possible to avoid any leading of the respondent. 23 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Correlation of Commitment with CVA 80% S 70% S 60% S CVA score 50% S S S S 40% S B B 30% B B 20% 40% 50% 60% 70% 80% 90% 100% Commitment The exhibit above shows a rather similar position to what we saw for the comparison between the Conversion Model and the NPS but for different reasons I believe. I believe it is indeed more likely that the customers of larger banks are more fully priced. Larger banks tend to be more attuned to shareholder expectations of return. Moreover, they can rely less on a growth premium in their share price than can smaller banks. In addition to this their greater share of customers in urban centres may indicate a greater focus by these customers on the cost of banking. How the Conversion Model works I have already introduced the Conversion Model in Section 3 of this series of papers. It is a psychological measure developed by Jan Hofmeyr that segments customers into eight groups as illustrated below. 24 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Total market Customers Non- customers Committed Uncommitted Open Unavailable Entrenched Average Weakly Strongly Shallow Convertible Available Ambivalent committed committed unavailable unavailable I have only worked with a slightly older version of the Conversion Model than the one currently used. This is the one I discuss here. I understand that the version to which TNS has proprietary rights has been simplified somewhat in application without any loss of information content. I also understand that Jan Hofmeyr has developed a similar model to which Synovate, a market research company, has a proprietary right. I have no knowledge of this model. The central satisfaction measure in the BFM is commitment derived from the Conversion Model. In the version with which i am familiar it derives from four elements:  Satisfaction / needs fit;  Importance of the purchase decision to the customer;  Perception of alternatives;  Ambivalence. It is a key feature of the Conversion Model that all studies which use it enter data into a central database from which norms are generated that place the results within the context of the country and industry. There are approximately 7,000 such studies at present. Satisfaction / needs fit The Conversion Model does not abolish satisfaction. In fact satisfaction is the „active ingredient in commitment. The other factors in commitment are primarily influenced by satisfaction but also to some extent by intrinsic factors. I shall explain this below. The exhibit here emphasises the dynamic nature of the development of commitment of which the Conversion Model takes a snapshot in time. 25 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Conversion Model satisfaction question Overall, on a scale from 1 to 10, where 10 Leads to means 'perfect in every way' and 1 means 'completely unsatisfactory', how Need for new would you rate your experience with [name product / service of provider] for business banking? Loss of business Leads to Leads to Enhanced perception of BFM Q 10-2 alternatives More negative ambivalence Leads to Leads to Leads to Increased Leads to importance of choice of bank dissatisfaction Leads to Leads to Adverse experiences Importance The Conversion Model view of the world is that customers cannot be committed to a product or service that is unimportant to them. Choosing a bank is more important than choosing the office cleaners. To which a sceptic might respond – but for any category the importance of the buying decision is of much the importance across all users. However, this is not the case. In my research, among Australian SMEs with turnover up to AUD 5 million, two thirds of them rated importance in the top two categories in a 5 point scale and one third in the bottom 3 categories. This confirms what many bankers believe about the market. There are two fairly distinct groups. In the words of Alan xii Price „the customer you win on price today you’ll lose on price tomorrow’. In Conversion Model terms the transition paths of ‘low importance’ customers are indicated by the red arrows and those of „high importance’ customer by the blue arrows. 26 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Customers Non- customers Committed Uncommitted Open Unavailable Entrenched Average Weakly Strongly Shallow Convertible Available Ambivalent committed committed unavailable unavailable When we talk of satisfied customers who still defect, it seems likely to me that some of them do so simply because a relationship with any bank is simply not that important to them. They can be tempted on price or relaxed lending conditions. Leads to Need for new product / service Loss of business Leads to Leads to Search for alternatives More negative ambivalence Leads to Leads to Can lead to Changes in intrinsic Leads to customer Increased management beliefs Leads to importance of choice of bank dissatisfaction Leads to Leads to Deterioration of economic Leads to conditions Adverse experiences Perception of alternatives 27 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 The Conversion Model also takes into account customer‟s perception of alternatives. A satisfied customer may defect simply because they might be even more satisfied with a rival bank. This process is illustrated below. Leads to Need for new product / service Loss of business Leads to Leads to Enhanced perception of alternatives More negative ambivalence Leads to Leads to Leads to Increased Leads to importance of choice of bank dissatisfaction Leads to Leads to Adverse experiences Ambivalence The Conversion Model‟s variable it describes as „ambivalence‟ is very like an intention to switch question common in many surveys. In a sense a poor rating on this measure is a culmination of a series of events adverse to the bank. Dissatisfaction leads to an intensified search for alternatives weakening the position of the incumbent bank as shown in the exhibit below. 28 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Leads to Need for new product / service Loss of business Leads to Leads to Enhanced perception of alternatives More negative ambivalence Leads to Leads to Leads to Increased Leads to importance of choice of bank dissatisfaction Leads to Leads to Adverse experiences Dissecting the Conversion Model None of the questions that constitute the Conversion Model are unusual. Each for them could easily appear in any survey questionnaire. For example, the ambivalence question is just a version of an „intention to switch‟ question. What is special about the Conversion Model is the way in which it brings the four elements together into commitment, based on statistically derived norms. The following exhibits are taken from a study I did of the Australian farm sector some years ago. From the exhibit below you can see that among farmers, frequently reported in the Australian media as hating their banks, few fall into the South West quadrant of the matrix. That is the quadrant where respondents don‟t like their bank but there is inertia because they think that all banks are the same. The majority are in the quadrant where they quite like their bank but are also open to at least one other bank. 29 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Satisfaction / Needs fit 1 2 3 4 5 6 7 8 9 10 Attitude towards alternatives 7 6 5% 62% 5 29% 4 3 2 1% 3% 1 Looking more closely, I next introduce the ambivalence question. Of the 5% of the market less satisfied with their bank there are still relatively few (37%) who say they believe there are few good reasons to stay and many to change. This is where we see the inertia in the market. It is not caused by the „all banks are bastards‟ mindset. Satisfaction / Needs fit 1 2 3 4 5 6 7 8 9 10 Attitude towards alternatives 7 20% 5 74% 62 6 43% 23% 5 37% 3% 4 3 0% 1 77% 3 2 43% 19% 1 57% 4% I offer this glimpse to make the point that the dynamics of the commitment over time should be understood to see how the situation is unfurling. As a group, these farmers have reached the point where they are open to alternatives but see no compelling reason to change at this point. 30 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Conversion model weaknesses The primary problem clients seem to have with the Conversion Model is its black box effect. Four questions are asked xiii and these are brought together in a proprietary algorithm into a classification in to one of eight commitment segments. This has the beneficial effect of maintain some central control over the use of the Conversion Model that I don‟t think applies to the same extent to NPS and CVA where researchers can just incorporate the question into a survey. They do not necessarily have a comparative database to work with. This is obviously an advantage for the Conversion model in normalising outputs by industry and country. But it does have a serious downside. A great issue that client side market researchers have is this. Consider when they are being questioned by segment managers as to why, say, the commitment measure (on which their performances might be measured) has fallen. How well does it go down, do you think, when they have to say they don‟t know what happens when the responses to the four questions goes into the black box? Now this doesn‟t much worry me. I don‟t see why, for performance measurement, banks don‟t just use the satisfaction / needs fit part of the Conversion model measure. Nothing is lost from what they would have anyway. The reply then seems to be, “ah but people might measure me by commitment anyway. It is part of a wider problem in using research data. It is one I shall return to after a brief discussion of some related issues. General issues with measuring satisfaction Statistical validity 31 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Users of satisfaction scores no matter how they are derived seem to spend a lot of time considering the „statistical validity‟ of the results. Well I can sort this out for everyone straight away. There is none: well, none worth speaking of – not in a scientific sense.. The first rule of sampling is that every member of the population has an equal chance of being selected. With customers, this never happens, ever. It doesn‟t even happen with a staff survey over which you have more control. I‟ve never seen good evidence about who responds to surveys but, like pretty much everyone else, my experience suggests to me that it is people towards the high end of satisfaction and the dissatisfied. Mind you, I haven‟t really seen the twin peaked distributions that you‟d expect if this were true. With panels you get people who want to be on panels. With incentives you get people for whom the incentive means something. But whatever you get is not going to be statistically valid. Let me offer two anecdotes and you can make a judgement about how rare you think these instances might be. An elderly woman I know took pity on a cold wet door-to-door research woman one Yorkshire Sunday. She answered some door step questions and accepted £5 to fill out a „phone directory sized questionnaire. But as she was frail and tired my partner and I took on the task of completing the questionnaire on her behalf. Much of it didn‟t apply, for example cosmetics, overseas travel and theatre going. It still took us, taking turns, on and off the best part of a week. We did do our best though to reflect what we thought he lady‟s thoughts would be. I once had dinner with a half a dozen Barossa Valley winemakers and their accountant – himself a winemaker. They were all customers of my bank. When I asked about the client survey I had used recently, the accountant told me that all the others gave him the questionnaire to complete for them. He told me he did try to reflect the individual experiences of each of them. 32 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Well, did you expect every bit of market research to come to you in dust free laboratory condition? Sample sizes Sample sizes are rarely what we should like them to be. In my experience we sometimes say that around thirtyish is enough. It is, sometimes. But that is in limited circumstances where the dimensions we are sampling for are few (well one actually). So in predicting the proportion of red billiard balls in a bag of red and white ones it might be ok. But in ascertaining the loan balances of a sample of customers it is less so. I expect it‟s always hard to satisfy statistical standards. In my practical experience it‟s best to be nervous with any sample shy of 100 or so. Incomplete population data What actually is the population that is being sampled? This is not as straightforward as it sounds. Take the segment, often used in Australia of SMEs with turnover less than AUD 5 million. From memory there are an very large uncounted number not captured by government Goods and Services Tax returns alone. These returns are the main basis for keeping count od Australian businesses. What is being measured, actually? In my experience this is often a poorly understood issue, even among market research specialists. In banking what to you want to measure? Is it something about the customers themselves or something about their value to shareholders? For example, supposing you discover that the proportion of customers with turnover < AUD 5 million committed to their bank is 50% by number. It could easily be the proportion of their (say) loans from the bank held by committed customers is 70% a big difference. So what do you want to measure? In most cases i would want to know the characteristics of my balance sheet rather than of my customers. But most bank research doesn‟t tell you that. 33 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Measurement scales A variety of scales are used. Sometimes people get very hung up on this. I tend to use 1 -10 because respondents are most used to it and it presents as little barrier as possible between them and the script. But even discrete data can be deceptive. The gap between 1 and two rating, for example is 100%. The gap between 9 and 10 is 10%. Valid responses Having met the cost of getting through to a valid respondent, naturally you want to ask as much as you can. My best information is that there is deterioration in response and an increase in the dropout rate if an interview goes much longer than 20 minutes. Telephone seems to work best as far as I can see but is expensive and increasingly will run counter to privacy regulation. Panels will become important but while a panel can tell you a lot about the voice of the market it is less useful for the voice of the customer. It is hard to find a panel that can be made representative of a defined customer base. The auto pilot response to ratings My experience of people answering any form of satisfaction question on the telephone is that they immediately get what the questioner is on about and translate that in their minds directly to he / she wants to know how much I like it. This actually mostly gives you the right answer but doesn‟t add much for the case for subtly worded questions. Respondents screen out the subtlety because they get what you mean almost before you say it. Also, people have some tendency to get into a rut when answering a series of questions.  ‘How responsive are they?.... 6  How consistent are they? ....6  How well do they support the community?...6  What’s your favourite colour?...6’ 34 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Questionnaire design issues There is never a perfect design but be aware of this. Introducing a satisfaction question in the wake of a series of questions about face to face service will almost certainly condition the respondent to answering about their satisfaction with face to face service. If you wanted to know about their satisfaction with the bank as a whole, including, products and other distribution channels, you are not likely to get it. So what is the big problem I was talking about earlier? All these little problems come together as one very big problem when mixed with one important fact of banking. Some people have a vested interest in looking hard for and imperfections in the data. As we have seen these are inevitable so a hard look need not take that long. These people are really anyone in a management position who is being measured by satisfaction scores and for whom the numbers come up wrong. I am reasonably certain that I know of specific cases where senior management have adopted market research policies designed to disguise their failure. This is a really big problem with using satisfaction research for measuring performance as opposed for to taking marketing decisions. And some clients, perhaps most clients see performance measurement as the main or sole purpose of satisfaction surveys. In these circumstances there will also be a tendency for clients to try to discredit the research. Market research is always a bit like holding an X-ray up to the light and wondering if the patient really did swallow a hammer. If it suits a senior manager to render the research process toothless is usually possible to do so. But it isn‟t something that can be turned on and off. There are banks that are opportunistic and banks aren‟t. I‟m going to hold off for a bit before I decide on the right work for them. But in the meantime I will say that a bank can‟t have it both ways. Or at least they can only fool some of the people some of the time. Handling market research well is a demanding organisational skill. It takes a certain kind of maturity. This must be based on a realistic understanding of what research can achieve coupled with profound understanding of the industry context. The relationship between quantitative and qualitative research 35 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Qualitative research never measures anything. This shouldn‟t need saying but I‟ve heard clients drawing conclusions about what the market thinks from a couple of focus groups too often to know that it does. Qualitative research Interpret Design Quantitative research „We’ll run it past a couple of focus groups’ is one of those marketing phases that give a pretty good clue that not a lot of thinking is going on. Qualitative research can be very useful indentifying things like:  The way customers related to the product or service;  The language and terminology they use to talk about it;  How they use it;  What they see as benefits;  How they compare providers;  How central it is to their lives. But it tells you next to nothing about how much the respondent‟s views are shared by others. These things though do help in formulating quantitative surveys and interpreting results. But is only the quantitative survey that is in any way helpful to the measurement of brand. 36 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Why the obsession with asking just one question? Would CEOs be happy if the CFO said he or she could tell them all they needed to know about the business with just one line of the profit and loss statement? Too much emphasis gets put on the focal satisfaction question. It is never the only question you need to ask. It is next to useless if you can‟t go backwards from it to comprehend the underlying reasons. Also you need to be able to identify the characteristics of respondents in terms of their underlying characteristics and their banking behaviour. Without this, measuring satisfaction no matter what question you prefer is unattainable. It is just keeping score. The exhibit below outlines the overall research framework that needs to be established. I have heard managers saying that their approach, say, CVA is best and then go on to describe the framework of questions and analyses that interprets the CVA question in terms of the framework below and predictions of its outcome. They believe that all of this is integral to CVA. It is important to realise that these are common to all focal satisfaction questions. The overall framework is the same whatever the focal question. The framework can vary a lot depending on the industry and sometimes the individual organisation. These difference must not be attributed, however to the satisfaction question being used be it CVA, NPS, Conversion Model or anything else. 37 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Affluence Age Facts about the respondent Attitude to finances Products held, which bank(s)? Facts about the respondent‟s banking Distribution channels behaviour used, frequency Predictions about the respondent‟s behaviour Satisfaction with bank A Facts about the Customer defined respondent‟s perception criteria perceptions of specific Perception of brand A banks Alternatives Customer defined switching, seeping criteria Action threshhold Projected stimuli Some concluding thoughts on measuring satisfaction I have tried to outline the satisfaction measurement approaches with which i am familiar. There are surely others of which I am unaware. Those i have described, however, are all used extensively in banking and other industries. I hope they are at least representativexiv. Here is my verdict. I would prefer, given a blank sheet, to use the Conversion Model rather than any other approach I know of. I like it because while it contains a simple unadorned and uncontaminated satisfaction it has, in the concept of commitment, more predictive power. It is a segmentation tool that is calibrated to a large number of studies even though the mechanism by which this is achieved is opaque. 38 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 However, I do understand that it hard for bank to move away from an existing approach. The break has to be for a significant and demonstrable improvement. Otherwise the disruption to management thinking and the loss of historic data is hard to justify. For these reasons, approaches such as CVA and NPS are not far inferior (though they are not, in my view in any sense, superior) to the Conversion Model PROVIDING: All respondent ratings of other institutions that they deal with or know of are maintained AT THE RSPONDENT RECORD LEVEL. That is to say that an approach that gives, say, a CVA score of 40% to one bank and 55% to another based on their customers is inferior if we do not know how each is rated by each respondent. This is possible with the Conversion Model but not intrinsically, unless specified, with any other methodology. Three academic studies in personal finance I want to turn to exploring some of the drivers of customer satisfaction in personal banking. Fiordelisi and Molyneux (op. cit.) refer to three academic studies of customer satisfaction in relevant fields. Not being an academic and not have access to the necessary search tools, I don‟t know if these are comprehensive. I expect that they might be, Fiordelisi and Molyneux are thorough, I‟d say, and know their way round academic research. But even if they are not, they are, in my experience, representative. In any event, these studies are a good starting point. The exhibit below shows indicates where we are in analysis of satisfaction. We are attempting to uncover the descriptive criteria attributes in which customers think about what makes them satisfied by a bank‟s services. 39 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Affluence Age Facts about the respondent Attitude to finances Products held, which bank(s)? Facts about the respondent‟s banking Distribution channels behaviour used, frequency Predictions about the respondent‟s behaviour Satisfaction with bank A Facts about the Customer defined respondent‟s perception criteria perceptions of specific Perception of brand A banks Alternatives Customer defined switching, seeping criteria Action threshhold Projected stimuli My purpose here is to begin to work towards a useful taxonomy of perceived benefits that is valid across all banking markets and across all brand audiences. This might not equate exactly to the design of a survey questionnaire but at some level of aggregation it is desirable to express a total brand view. An element, say „responsiveness‟ may require different wording in the personal banking market than for rating agencies. But the broad concept should remain the same. In this case, that concept is the banks willingness to interact with an external group with a willingness to interact and respond to their needs. In my experience of deterioration of bank brands a failing in this area at the branch level is mirrored in a failing at the top floor of the head office. Conceptual Model of Service Quality (Parasuraman et alxv) This study focused on service firms in general. They identified ten dimensions of customer satisfaction. These were reduced to five as the elements shown below showed a high rate of correlation. They were brought together under the term „empathy‟. 40 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 access courtesy communication empathy credibility security understanding / knowing the customer I‟m wary of this. I am indeed wary of letting statistical analysis over-ride business judgement rather than acting as a pointer to something interesting. The above elements may all correlate but that doesn‟t make them much the same from a customer‟s perspective. Moreover, I doubt if a high level of correlation would be found in personal banking. Access would not be seen as much the same as understanding / knowing the customer, for example. It is quite easy to experience courtesy from a banker who quite evidently has no understanding of your financial situation. In business banking, where I have deeper experience, „understanding my business‟ is a key discriminator between banks from a customer‟s experience. In general, however, I don‟t doubt that empathy does matter. Key elements, I believe, include:  Knowing me and my situation;  Knowing how I like to communicate and deal with people; and  Engaging with my values and aspirations. However, to go along with Parasuruman et al, the dimensions we are left with are now:  Reliability (the consistency of performance and dependability eg the company performs the service right first time and honours any promises);  Responsiveness (the willingness or readiness of employees to provide services); 41 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0  Assurance (the knowledge and courtesy of employees and their ability to inspire trust and confidence);  Empathy (the care and individual attention that a company provides its customers);  Tangibles (the physical evidence of the service). These are close to my own understanding of what matters in the market. The determinants of Service Quality: Satisfiers and Dissatisfiers” R Johnstonxvi This study identifies these drivers of satisfaction.  reliability  commitment  ability to answer customer‟s need  flexibility  integrity  competence  functionality  access  aesthetics  courtesy  care / attention  friendliness  communication  tidiness  comfort  safety Johnson distinguishes between hygienic factors – those that do not create satisfaction if well managed but create dissatisfaction if poorly managed – and those that create satisfaction, more or less in proportion to how well they are managed. This is related to Kano Analysis, which is discussed in detail elsewhere in this series of papers. The elements in italic font above are seen as hygiene factors. 42 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Also Johnson contains elements that parallel some that Parusuraman groups under „empathy‟. I show the correspondences below. Parusuraman Johnston access access courtesy courtesy friendliness Care, attention communication communication ability to answer credibility competence integrity customers‟ needs security safety understanding / knowing the customer Not comparable aesthetics commitment functionality comfort reliability tidiness flexibilty Of these, it seems to me access matters too much to be grouped under empathy. Access is not easy to define. It is about providing customers with ease to access to the bank, in branches and offices, though Point of Sale machines and Automatic Teller Machines; through „phone and online. More importantly it is about integrating these. Most of the studies I discuss here were made at a time when this integration was not so important. Courtesy, friendliness are certainly important. They matter because much of banking is a commodity so a smile does make a difference. They also matter because banking of anything is a a little stressful for customers. They could come under the heading empathy but I wonder if perhaps they should be there in their own right and, in the questionnaire at least not masked by an abstract term. 43 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Communication is another masking abstraction. Also it covers many media, face to face, „phone, letter. Is it communication by the bank or the customer? It should be kept in mind but expressed in another way. Credibility is a rather complicated. It is in a slightly different category to, say, responsiveness. Credibility is a customer‟s belief about future bank actions. It is somewhat akin to trust or brand in that regard. Security means different things in different circumstances. To take two polar extremes, on the one we have „all customers have the right to feel safe on our premises’. Which is true but which is a bit specific to events that are fairly rare and sometimes trivial. They are not my „top of mind‟, for a satisfaction survey. Security from fraud and identify theft are another matter. How banks react to this sort of thing is a subject of much concern to customers. Expectations that a bank would aggressively try to prove the breach was the fault of the customer and there for no liability to the bank can be a major source of customer concern. Understanding / knowing the customer can have a different emphasis in different markets. Demographic Discriminators of Service Quality in the Banking Industry –MR Stafford MR Stafford Demographic Discriminators of Service Quality in the banking Industry (1996) identifies these drivers of satisfaction.  reliability and fairness  tellers  ATMs  availability and convenience  relationship with customers  rates and costs  branch atmosphere 44 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 It should be noted here that, in the minds of many people, retail banking is mass consumer banking. Various forms of private banking and business banking tend not to be “top of mind” for people without experience of retail banking. Reliability and fairness is a double barrelled criteria that, in market research, we are enjoined to never to use. The reason is that respondents may have a bank that is one or the other. Customers are thought to be unable to weigh up a score for both together. I‟m more easy going than most on this but I‟d say that reliability and fairness are a bit of a squeeze in one line. The word tellers is too vague. Tellers do matter lot but they can be a problem in satisfaction in several ways including: being insufficient in number. Being poorly trained; being unfriendly; not spending enough time customers facing. It is hard to be specific about what are teller issues, teller supervision issues; policy issues; equipment issues and so forth. On a somewhat narrower range of things ATMs present much the same problem. Relationship with customers is just too broad to be useful. Rates and fees. This is the only element in these three surveys to cover this one of Croxford et al‟s four drivers of customer satisfaction. Bank marketers make much effort in deciding on the ideal branch configuration (within the constraints of the buildings they inherit. I guess branch atmosphere is important to satisfaction. Summary of the three academic studies As you might expect there is not a lot of conflict in the three studies. 45 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 In the exhibit which follows, I have tried to line up the drivers of satisfaction identified in the academic research into similar categories and also group them against the headings I have taken from Croxford et al. Customer service = customer experience Bank costs = Brand = trust Customer price to the comfort satisfaction customer Source: Adapted from The Art of Better Retail Products / Banking, Hugh Croxford, Frank Abramson, Alex Jabonowski John Wiley & Sons Ltd 2005 Endogenous drivers services (fitness to the purpose) = what I want Controllable at business unit level Optimise Endogenous customer goal Final Goal satisfaction Improve the relationship Shareholder between Optimise bank Value creation shareholders efficiency and other stakeholders Controllable at corporate level Optimise bank’s Adapted from Shareholder Value financial in Banking, Franco Fiordelisi , structure Philip Molyneux 2006 Optimise the mix of business activities Perception of Customer price perceptions Perception of Bank Business unit specification efficiency performance fit to needs Shareholder value Perceptions Bank Corporate of service financial centre experience structure performance Mix of Perceptions businesses of brand 46 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 A diagrammatic summary of correspondences Brand, trust Croxford integrity Parusuraman availability and Product, services access convenience Johston specifiaction Stafford functionality tellers ATMs reliability reliability reliability and fairness Service customer experience responsiveness flexibilty commitment communication ability to answer assurance customers‟ needs competence empathy courtesy Care attention relationship with friendliness safety customers aesthetics tidiness branch tangibles comfort atmosphere charges, Fees, rates Rates and costs Commentary Service quality / customer experience + Perception of price Customer perceptions + Perception of specification fit to needs + + Perceptions of service experience Perceptions of brand 47 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 The four elements identified by Parusuraman et al seem to be fairly well confirmed by Johnson and Stafford. Courtesy, friendliness, care / attention and communication, identified by Johnson seem to correspond to the several factors grouped by Parusuraman et al under the umbrella of empathy. Some confirmation is offered by Stafford. My interpretation is that at the heart of customer experience are two things:  Stability, consistency, reliability; and  Adaptability, flexibility, responsiveness. There are a couple of things to be said about these as satisfaction criteria. First they can be contradictory: „I want a bank that is consistent and reliable so i understand the ground rules and can predict their behaviour BUT when I want them to i want them to bend the rules specially for me’. This means that banks have a bit of a juggling act to perform. Customers are quite capable of changing their attitudes overnight as their interests change. Secondly, from the customer‟s perspective stability and adaptability relate both to the bank itself and a business organisation and to the bank as it is part of the system of which they are the centre. A bank that cannot both adapt and stabilise is not strong enough to help them. Thirdly, the qualities of adaptability and stability are familiar ones. We find that they are goals of all open systems that desire viability. This of course is not evidence that these criteria are the right ones. But is does give some confidence that we are on the right track. Can we integrate into this though pattern the two other elements that came from Parusuraman. The other elements (putting aside tangibles) are:  Empathy (something of a ragbag that I want to strip of some of its elements); and 48 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0  Assurance, (by which as i take it Parusuraman something more like perceived competence than trust in the meaning of Croxford.). Stated by Fiordelisi & Molyneux as: ‘the knowledge and courtesy of employees and their ability to inspire trust and confidence’. It actually goes a bit beyond objective competence to highlight the customer‟s perception of competence. Let‟s summarise a favourable customer perception.  My bank is consistent so I know where I am with them;  I have a relationship with them, they understand me, and we get on; so  they are flexible in managing my accounts. and  they have the competence to create solutions for me. Internal within Brought to my the bank service stability reliability empathy adaptation competence responsiveness Compare this to the stories that customers tell themselves in their heads that i described in Section 3 – How customer perceptions develop. 49 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Primary causality Positive feedback Responsive and flexible They value me Helpful and as a business supportive customer Helps Understands my businesses business achieve their business goals We can begin to see how satisfaction research can begin to evaluate and measure the power of these stories. Internal within Brought to my the bank service stability reliability empathy adaptation competence responsiveness Reaches back to Reaches forward towards organisational or personal customer needs skills and resources Within the framework of the four key customer experience / service attributes we can cover most of the related attributes. For example and bank being classed as proactive in its customer service has really taken responsiveness one step forward away from a reactive stance. Product / service fit to needs 50 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 These are the elements of the three academic studies that seem most closely related to product / service needs fit. availability and Product, services access convenience specifiaction functionality tellers ATMs It doesn‟t really seem to cover the field. Let‟s look at some of the elements. These are the product features that the bank has designed to respond to customer perceived benefits. The Croxford approach separates these features from the actual service delivery of them. + Perception of price Customer perceptions + Perception of specification fit to needs + + Perceptions of service experience Perceptions of brand In terms of the Gaps model I have referred to earlier, and illustrated in the exhibit below, we are trying here to distinguish between the effects of two separate failings. The first is the design of the product service offering in response to indentified customer needs (Gap 2). The second is the failure to deliver that offering through service. Ideally, these two separate performance gaps should be distinguished as a guide to management action. 51 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Shareholder value Gap 7 Executing the solution Gap 6 Gap 5 Creating the solution Communicating the product service offering Gap 3 Gap 8 Design of product service offering range 4 Gap Gap 2 Comprehension of customer beliefs, needs, values and behaviour Gap 1 Selecting / specifying the market Price + Perception of price Customer perceptions + Perception of specification fit to needs + + Perceptions of service experience Perceptions of brand Bank pricing involves, interest rates, fees and charges is relatively complex. The academic studies under review have only one reference to it. They are, of course, 52 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 focussed on service but service I believe can only be interpreted in the light of functionality and price. Brand, trust Croxford integrity Parusuraman availability and Product, services access convenience Johston specifiaction Stafford functionality tellers ATMs reliability reliability reliability and fairness Service customer experience responsiveness flexibilty commitment communication ability to answer assurance customers‟ needs competence empathy courtesy Care attention relationship with friendliness safety customers aesthetics tidiness branch tangibles comfort atmosphere charges, Fees, rates Rates and costs I shall return to the issue price in my discussion of measuring business banking customer satisfaction below. 53 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Shareholder value Gap 7 Executing the solution Gap 6 Gap 5 Creating the solution Communicating the product service offering Gap 3 Gap 8 Design of product service offering range 4 Gap Gap 2 Comprehension of customer beliefs, needs, values and behaviour Gap 1 Selecting / specifying the market Brand + Perception of price Customer perceptions + Perception of specification fit to needs + + Perceptions of service experience Perceptions of brand 54 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Brand, trust Croxford integrity Parusuraman availability and Product, services access convenience Johston specifiaction Stafford functionality tellers ATMs reliability reliability reliability and fairness Service customer experience responsiveness flexibilty commitment communication ability to answer assurance customers‟ needs competence empathy courtesy Care attention relationship with friendliness safety customers aesthetics tidiness branch tangibles comfort atmosphere charges, Fees, rates Rates and costs In much the same way as I believe service cannot be divorced from functionality and price, I also believe that it must be seen against the backdrop of brand. Business banking case study Having covered some of the academic studies around satisfaction in personal banking markets, I want to turn to the business market. I see this as covering all businesses from the smallest up to low range corporate. The latter I define broadly as ones more likely to turn to banks for finance than securitised debt. However, the evidence I shall use is based on the part of the TNS Business Finance monitor that deals with businesses with up to AUD 5 million annual turnover. First, some background. TNS At the time of writing, TNS is the second largest market research company in the world and the largest in custom research. The finance sector is one of its main areas of 55 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 industry expertise. In Australia the TNS Finance and Business Services team and I developed and worked on the BFM. The Business Finance Monitor (BFM) The BFM surveys the banking behaviour and attitudes of 2,000 agricultural businesses and 10,000 non-agricultural businesses with turnover up to $300 million each year, and has collected data from over 79,000 businesses since its inception. Prior to October 2002, the BFM interviewed businesses with annual turnover up to $40 million. Sample quotas align businesses to the market by activity, size and location. The data is also weighted to Australian Bureau of Statistics information to ensure the results are representative of Australian businesses. The Business Finance Monitor is conducted by TNS using computer assisted telephone interviewing (CATI). The BFM interviews the key financial decision maker in the business, whether this is the owner or an employee of the business. Interviewing is conducted continuously on weekdays during business hours 50 weeks of the year. Continuous quality control (monitoring and call backs) is administered to ensure data accuracy. The Conversion Model™ The Conversion Model is a TNS proprietary methodology, which I have fully described in this and other papers in this series. The imagery component of the BFM The imagery component of the BFM was introduced by Gary Lembit. I wasn‟t wholly behind the idea at the time but I have through experience learned to appreciate the depth it adds to analysis. It allowed the collection of the data I am going to refer to here. In another part of the BFM, respondents are asked to rate their main bank (only) against performance attributes on a 1-5 scale. Imagery is dealt with differently. Respondents are read a series of statements and are asked what banks they associate with those statements whether they deal with them or not. We record the incidence of nominations for each bank against each statement. The list of statements that we offer respondents is shown below listed alphabetically. In the actual interviews the order they are asked in is rotated by the CATI system to help eliminate order bias. 56 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0  Best Bank for Women in Business  Clear, simple and consistent processes  Competitive rates and fees  Convenient  Helpful and supportive  Helps businesses achieve their business goals  Honest and trustworthy  Innovative products and services  Investment expertise  Offer a full range of products and services  Proactive service  Responsive and flexible  Reputation as a business bank  Responsive and flexible  Support the broader community  They value me as a business customer  Understands my business  Very professional The list was established at the outset of the BFM. As I said above it was partially the result of a process of negotiation between banks and TNS Australia. However, as the imagery component was new to business banking tracking, there was less need to replicate what had been done in the past. Some elements such „Best bank for women in business‟, Support the broader community‟ and ‘Investment expertise’ which may appear to stand out a bit were in response to the strategies at the time of one or more of the participating banks. As a first step to coming to grips with this I have analysed the imagery attributes according to the main drivers of customer perceptions that I took from Croxford et al. They don‟t exactly dovetail to each other but all bases are covered in one way or another. 57 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Brand, trust Reputation as a Honest and Support the broader Best Bank for business bank trustworthy community Women in Business Product, services Offer a full range of specifiaction products and services Investment expertise Service customer experience Innovative products Helpful and and services Understands my They value me as a supportive business business customer Helps businesses Convenient achieve their Responsive and business goals Very professional flexible Clear, simple and consistent processes Proactive service charges, Fees, rates Provides value for Competitive rates money and fees I shall now compare the BFM imagery questions with the framework developed by Parasuraman et al having eliminated the attributes that are outside Parasuraman‟s scope – shown in orange below. Brand, trust Reputation as a Honest and Support the broader Best Bank for business bank trustworthy community Women in Business Product, services Offer a full range of specifiaction products and services Investment expertise Service customer experience Innovative products Helpful and and services Understands my They value me as a supportive business business customer Helps businesses Convenient achieve their Responsive and business goals Very professional flexible Clear, simple and consistent processes Proactive service charges, Fees, rates Provides value for Competitive rates money and fees The comparison with Parasuraman then looks like this. 58 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Reliability Clear, simple and consistent processes Helpful and Convenient Responsiveness supportive Responsive and flexible Proactive service Very professional Innovative products Assurance and services Understands my business They value me as a business customer Empathy Helps businesses achieve their business goals Bear in mind that a full comparison would also take into account the BFM‟s performance attributes which comprise:  Offering flexibility;  Pricing competitively;  Responding to your needs quickly;  Offering sound business banking advice;  Recognition for the business you do with them;  Providing the latest in electronic and internet banking services;  Understanding your business and its history;  Providing a comprehensive product range;  Providing access to specialists;  The knowledge and expertise of the bank‟s representatives;  Service provided by senior bank representatives you deal with. In particular the attributes above cover the two things important to customers that are not present among the imagery attributes – quick response and access to specialists. 59 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 With the wisdom of hindsight I should like to see more on reliability and something more direct on competence (covered by Parasuraman under „Assurance’ ). I want now to understand better what customers see as the main differentiators among banks. The sample size used in this analysis The sample for this analysis is taken from the BFM for the three years to March 2007. This gives a large sample to work with. I believe that how people form impressions of banks to which they are committed or otherwise changes little over a three year span. By working with such a large sample it becomes possible in subsequent analysis to break down the data in a number of different ways that clients may require. It should be noted that the observations are based on all respondents irrespective to who they bank with. Therefore a respondent may be committed to more than one bank and may be open to several banks. The exhibit below summarises the overall results. This part of analysis is concerned with the perceptions that shift respondents from ambivalence to availability as indicated by the red arrow. I have omitted weakly and strongly unavailable respondents from this chart as they are large in number so they distort the picture and are irrelevant to the analysis. Broadly we can think of ambivalent non-customers of a bank as being ones that don‟t have any particular aversion to it and don‟t have a strong connection to their existing bank(s). On the other hand available non-customers of a bank are somewhat well disposed towards that bank (although they may be well disposed towards other banks too). 60 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Sample size by category 50,000 45,140 45,000 40,000 35,000 Observations 30,000 25,000 20,000 15,842 13,643 14,975 15,000 9,955 10,000 5,014 5,000 0 Entrenched Average Shallow Convertible Available Ambivalent Category Total market Customers Non- customers Committed Uncommitted Open Unavailable Entrenched Average Weakly Strongly Shallow Convertible Available Ambivalent committed committed unavailable unavailable Contextualising the results Using a shorter form of the attribute descriptions for ease of graphical presentation, we looked at the relationship between the attributes that were:  most often nominated by respondents; and  showed most differentiation between ambivalence and availability. 61 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Discrimination v difficulty 5.0 4.5 value me available / ambivalent nominations 4.0 value for money supportive 3.5 women responsive understands clear processes 3.0 rates and fees helps goals proactive innovative 2.5 community trustworthy professional investment 2.0 convenient reputation 1.5 full range 1.0 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Incidence of nominations by available customers Our first conclusion is that there is a tendency for that factors that best discriminate between availability and ambivalence to be the hardest to achieve. The line of least squares shown on the chart above has a somewhat downward slope. I interpret this to mean than there is a tendency for the most important discriminators between available and ambivalent customers to be difficult to achieve in the perceptions of non-customers. In any event the incidence of any nominations among non customers is harder to achieve than among customers, which have experience of a bank. For example the percentage of entrenched committed customers nominating ‘They value me as a business customer’ is 79%. We are interested in the joint effect of the two measures on the axis of the graph because the more nominations an attribute has which associate it with bank the more likely it is that the bank can project this attribute to the market. So, for example, the most nominated attribute above is ‘Offer a full range of products and services‟. This is relatively easy for non- customers to observe by the presence of branches and volume of advertising. But is does little to make an ambivalent customer available. The rate of nominations among 62 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 available customers is about 50% higher than for ambivalent ones. On the other hand the attribute - Understands my business is a better discriminator. For every nomination by an ambivalent customer it gets more than three from an available one. The problem here is it doesn‟t get many nominations at all – a bit more than a third of those for ‘Offer a full range of products and services‟. This means that a bank will find it hard to convey to non- customers. So if a bank has to focus its brand message to win business from non-customer businesses the „sweet spot‟ is where there are a number of nominations and powerful discrimination. I shall look more closely at those but first at the individual attributes. Detailed commentary They value me as a business customer This factor is the most significant discriminator but is rarely nominated. It is perhaps difficult to understand how business people can feel valued by a bank they don‟t use. Nonetheless nearly thirteen hundred respondents in our sample nominated a bank they did not use. The statements specifically refers to business bank so it is unlikely they the response is based on a personal banking relationship. Nor does they question in which banks that are used refer to a bank the respondent has dealt with in the past. The most likely explanation is that the respondents feel that this bank would value them. A feeling of being valued is an important part of the story that customers frame in their minds about the relationship they have with their bank. ‘Because my bank values my business they are responsive and flexible in their dealings with me.’ Understanding how these stories develop is an important element in designing marketing communications. Provides value for money 63 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Along with Helpful and supportive, this is the second most important discriminator. At least part of the way a business bank prices its services is opaque, even to customer. This is another general impression that has formed in some peoples‟ minds. It is a significantly stronger discriminator than Competitive rates and fees. This suggests that respondents‟ minds are more on the „value‟ part of the equation than the „money‟. It seems likely that value for money becomes a strong discriminator when a business respondent feels they are not getting it from their present bank(s) Helpful and supportive Businesses that value a relationship with a bank are likely to do so because they are looking for a bank that would be supportive in times of difficulty. Two-thirds of all respondents rate the importance of who they bank with as extremely important or very important. This indicates that they want a mutual relationship with their bank. Responsive and flexible Responsiveness and flexibility are to a large extent about the customer‟s perception that they somehow get special or individual treatment. At one level it can be judged by how a bank deals with a problem it has caused by making a mistake. At a completely different level it can be judged by how the bank responds when it is the customer that has made the mistake. In particular, business customers prefer a bank‟s credit standards to be tempered with an understanding of their business. Best Bank for Women in Business Best bank for women is a significant discriminator with a low incidence of nominations. I expect that this is because a large majority of nomination are made by women. I have not been able to measure this but, if true, it is an important piece of information. Understands my business This factor normally rates highly as a driver of customer satisfaction. However, it is often seen as something that business people do not really expect a bank to be able to do. It is important to customers because they often believe it underpins a bank‟s ability 64 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 to offer responsiveness and flexibility. Because a banker understands their business, the banker is able to be more flexible. For example, they might understand the demands place on credit by seasonality. In this analysis, however, understanding of the business in not frequently nominated and is not a high discriminator. Clear, simple and consistent processes I believe this to be connected to reliability. As such it tends to be expected of a bank rather than being a motivator in itself. It is likely to be associated with a bank that a business does not deal with when the business‟s present bank or banks are perceived to be deficient. Competitive rates and fees As I say above, rates and fees tend to be opaque even to businesses that deal with the bank. Nominations for this are, therefore likely to be impressions and related to perceptions of inability of a businesses‟ present bank or banks to deliver on this criteria. Proactive service / Innovative products and services These rate less well; than impressions of supportiveness and responsiveness as a discriminator. Helps businesses achieve their business goals This has relatively few nominations and is not a particularly strong discriminator. I suspect that this is something business customers do not really expect from a bank. However, it may delight them when they experience it. Support the broader community This factor gets a relatively large number of nominations and is also quite an important discriminator. It would be interesting to see how it rated for individual banks (e.g. Bendigo) which emphasise this aspect. Honest and trustworthy 65 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 By contrast to some of the other elements this is one that is expected by customers and is most valued only in its absence. This may be one of the factors that comes to the fore when a respondent perceives that their present bank lacks it. Very professional Possibly this factor may be one that can be readily influenced by a bank‟s marketing communications. People do have a clear idea of what „professional’ looks like. Sometime it might be difficult to elicit it from them but not impossible. Certainly it‟s worth a try as it is one of the higher nominations attributes if not a particularly good discriminator. The fact that it may be relatively easy to communicate and may be one of the more easily recognised factors comes together fortuitously. Investment expertise This appears to be a weak discriminator with few nominations. More detailed analysis may interest banks with a strong interest in cross-selling investment products. Certainly, this is a key factor in achieving economies of scope as I shall discuss in a later section in this series of papers. Convenient / Reputation as a business bank / Offer a full range of products and services These are all factors that are relatively easy to observe for non-customers. They get a large number of observations but are weak discriminators. Interpretation I suggest that the criteria circled in red below are those that a bank should first examine in deciding the messages it should send to the market in order to convert ambivalent non-customers to available ones. However, for each individual bank this generalised comment should be modified in the light of its unique commitment profile. The factors circled in blue are less strong as discriminators but may well be necessary to instil in the minds of ambivalent non-customers before they consider the elements that will truly attract them towards availability. 66 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Discrimination v difficulty 5.0 4.5 value me available / ambivalent nominations 4.0 value for money supportive 3.5 women responsive understands clear processes 3.0 rates and fees helps goals proactive innovative 2.5 community trustworthy professional investment 2.0 convenient reputation 1.5 full range 1.0 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Incidence of nominations by available customers To summarise, the top three things to communicate for acquisition in the Australian less than AUD 5 million turnover business segment are being:  helpful and supportive;  responsive and flexible; and  value for money. 67 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Retention discrimination v difficulty 5 value me 4.5 understands responsive supportive Shallow / convertible nominations 4 helps goals value for money 3.5 trustworthy rates and fees women proactive 3 processes professional innovative reputation 2.5 investment community convenient 2 full range 1.5 1 9% 14% 19% 24% 29% 34% 39% 44% 49% Incidence of shallow nominations The point I wanted to make here is that it is possible to get a good measure for the attributes to Measuring brand among stakeholder audiences In Section 5, I argue that one of the challenges facing banks in branding is that these brands have multiple audiences. Correspondingly we need to measure brand perceptions in each of these audiences. Ideally, also we need a way to integrate the pictures we derive of each brand audience‟s reaction to the brand. Hitherto, in this section, I have spoken only if customers (shown in orange in the exhibit below). 68 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Credit ratings Instituti onal agencies Institutions Corpora Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates M a ss m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Politicians There are several categories within the aggregate of customers representing different markets in which the bank can participate. Each of these segments has different needs – or why segment them? The survey instrument that the bank uses for each will be at least slightly different in each case. However there should be an overarching framework that supports bringing together a bank-wide view. At this point I have to confess, in the two senior bank marketing roles I have held I would have been mad as hell to be told I had to conform to the overall design of a another division of the bank. In fact in one bank I decided to ignore the fact that I was supposed to use the market research department of the personal banking division. I mention that just so no one underestimates the difficulty of the achieving the cross corporate, integrated view that I am speaking about. And is this is difficult across customer segments, it is harder still among non-customer brand audiences. I shall talk about the organisational problems more in Section 9 – Bank structure and brand control. The exhibit below shows some of the key satisfaction criteria for the customer brand audience. I have attempted to group these by the four main groupings of customer perceptions that I have identified in this section: 69 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0  Reliability;  Responsiveness;  Capability; and  Empathy. It is these that I propose to use as the key unifiers of the data to be collected across all customer segments and brand audiences. I have also tried to align the perceived attributes against the three Kano Analysis groupings of attributes:  Dissatisfies;  Satisfiers; and  Delighters. I want to do this because, I believe that they offer thresholds that once crossed can take brands into new dimensions. By using the categories I define above, there thresholds can be delineated. 70 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Customer perceptions of primary service attributes Kano dissatisfiers Kano satisfiers Kano delighters Innovative Consistent Integrity products / Reliability processes Open / Accurate transparent Convenient Responsiveness Access to Access how I Tailored experts want solutions Timely Communicates Flexible Proactive what I need to know Good network CVapability Innovative Professional Capable solutions Knows / Empathy Helpful Shares my goals understands me Values me Supportive In addition to the four attributes above I have done a similar exercise for the other three elements that I have identified as determinants of customer perceptions. (Note that as I work through the key brand audiences below, I shall only show the non-service classification where is relevant. Perception of specification fit to needs Customer perceptions Perception of price Business unit Capability performance Bank Perception of Reliability efficiency event Shareholder value Perception of Flexibility service experience Empathy Perception of Bank financial brand structure Corporate centre performance Mix of businesss 71 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Customer perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters Clear Product specific Product specifications / expertise Product / service specification capability documentation support A range that Good range Innovative meets my needs integration solutions Accurate / Easy to track / Tailored timely reporting integrate with solutions for me my records Right mix of Access / distribution Change flexibilty transact how I channels for me want Competitive Innovative Tailored pricing Rates, fees Value for money pricing pricing to my needs charges Tax effective Fair pricing Integrated with Supportive of The bank for A bank that Prestigious society the community people like me moves things forward for the Brand better Staff Staff should be surveyed in conjunction with customer surveys although survey frequency need not be the same. The exhibit below tells part of the story. There may, however need to be greater granularity in practice. In practice I have in the past conducted staff surveys in parallel with customer surveys. However, I lacked at that time the prescience to develop questionnaire surveys instruments capable of integration. The staff surveys, at a time of rapid organisation change were half-yearly and the customer surveys were annual, supplemented by quarterly syndicated studies. 72 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Credit ratings Institutio nal agencies Institutions Corpora Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates Mass m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Politicians Staff perceptions of primary service attributes Kano dissatisfiers Kano satisfiers Kano delighters Consistent Financially treatment of Integrity succesful bank Reliability staff Good growth Open / Fairness prospects transparent Good working standards and Flexible working policies condtions Responsiveness Clear personal Timely, open and team goals Training based staff on my needs communication Access to Good colleagues as counselling and needed feed back Capable Professional management Exposure to Capability leading edge work Par of a winning team Access to external experts in my field Knows / understands me I can realise my Empathy goals here They value me Friendly and supportive 73 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Staff perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters Product / service specification Clear job Clear objectives Role specification description Clear Objectives well directions / integrated with delegations those of others Clear hierarchy and reporting lines Clear rewards Good rewards Clear incentives relative to the system Rates, fees industry Rewards charges Fair pay Integrated with Supportive of A bank I can be A bank that Prestigious moves things society the community proud of forward for the Brand The employer better for people like me Providers of capital and commentators The third key stakeholder group are the providers of capital. My preference is to group those media commentators directly concerned with the share price with providers of capital and those concerned with other aspects of a bank‟s performance and role in the community with regulators. However this is largely a matter of choice. 74 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Credit ratings Institutio nal agencies Institutions Corpora Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates Mass m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Financial media Politicians Providers of capital perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters They mean what they Investment in Reliability say key resources Adequate statutory Ownership of financial statements strategic assets Responsiveness Timely, open Clear relevant communication to strategy market Well defined position in industry Effective Capable CFO Capable CEO response to unexpected Capability events Professional Capable Board Capable management Management understand Empathy the needs of the finance market 75 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Intermediaries Intermediaries‟ needs are broadly a cut down version of customers‟ needs. My qualitative research into intermediaries of various kinds, including mortgage brokers and financial planners strongly suggests to me that they greatly value consistency, predictability and reliability. They tend to value these things more highly than what banks think of as the more value added aspects of service. Intermediaries I have found often judge their own performance by throughput of deals. Moreover, they tend mentally to discount things that might strengthen the banks‟ relationship with the end client at the expense of their own. In many ways intermediaries are similar in their perceptions of banks to affiliates and suppliers. They are most distinguished by being smaller organisations, sometimes one- person businesses. Under some circumstances they could be more susefully grouped together. Credit ratings Institutio nal agencies Institutions Corpora Suppliers of te Stock analysts capital Accountants Medium Mortgage brokers Independent Other intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates Mass m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Politicians 76 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Intermediary perceptions of primary service attributes Kano dissatisfiers Kano satisfiers Kano delighters Consistent Integrity Reliability Open / Accurate transparent Convenient Responsiveness Access to Access how I experts want Timely Communicates Flexible what I need to know Assurance Professional Capable Empathy Helpful Intermediary perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters Product / service specification Clear Clear job Clear joint Role specification relationship description objectives agreement Alignment with co related organisations Clear rewards Fair division of system jointly created Rates, fees Rewards value charges Integrated the Integrated into A bank that Known in with Supportive of Prestigious to be Prestigious The best partner society the communities the community connected to moves things industry to be among all those in which they do forward for the Brand solid performers available to us business better 77 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Affiliates and suppliers It has been said that a key determinant of success in banking is to be linked into the best networks. Card schemes are of course important. But as a more general point it is the placement of a bank within the networks of suppliers of technology that matters most. I have discussed earlier how the primacy of banks in the development of their own technology has been somewhat eroded over time. A large part of the institutional skill associated with technology is dispersed and possibly mercenary. Given that ICT is such a large part of the future (quite possibly fronted at the customer interface by intermediaries) this needs some thought. The patterns of institutional relationships that banks construct around themselves now will involve some big decisions that may be hard to reverse. And brand is a large part of this. Brands that are enviable, brands are compatible, brands with a future will all matter a lot. Credit ratings Institutio nal agencies Institutions Corpora Suppliers of te Stock analysts capital Accountants Medium Mortgage brokers Independent Other intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates Mass m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions Outsource providers ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Politicians 78 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Affiliates and supplier‟s perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters Open / Financially transparent succesful bank Reliability Good growth Integrity Sound operating prospects procedures Good feed back Responsiveness Timely, open on our communication contribution Capable management They give us exposure Professional to leading edge work Capability They have a thorough understanding of the They have world class sector in which we expertise in key areas cooperate that affect us jointly The relationship helps They value the They knows and us realise our own relationship with understand our goals Empathy us organisation They are friendly and supportive to deal with Affiliates and suppliers perceptions of primary service attributes 79 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Kano dissatisfiers Kano satisfiers Kano delighters Product / service specification Clear Clear job Clear joint Role specification relationship description objectives agreement Alignment with co related organisations Clear rewards Fair division of system jointly created Rates, fees Rewards value charges Integrated the Integrated into A bank that Known in with Supportive of Prestigious to be Prestigious The best partner society the communities the community connected to moves things industry to be among all those in which they do forward for the Brand solid performers available to us business better Commentators and regulators I group commentators and regulators together just for convenience and sample size. Regulators clearly have more „skin in the game‟ when things go wrong. I suggest taking out those media commentators whose field is valuing securities. They are more usefully grouped with the suppliers of capital. 80 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Credit ratings Instituti onal agencies Institutions Corpora Suppliers of te Stock analysts capital Accountants Medium Mortgage brokers Independent Other intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates M a ss m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions Outsource providers ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups consumer Commentators Media general Politicians household money 81 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Commentators and regulators‟ perceptions of non service satisfaction attributes Kano dissatisfiers Kano satisfiers Kano delighters They mean what they Reliability say Adequate statutory financial statements Rapid and effective response to queries Responsiveness Timely, open Clear relevant communication to strategy market Well defined position in industry Capable CFO Capable CEO Effective Capability response to unexpected Professional Capable Board events Capable Capable Board management Risk Rommittee Management Empathy Strong sense of corporate understand the needs responsibility of regulators Some concluding comments My main purpose in this subsection has been to try to show that there are strong commonalities among the research attributes for each brand audiences and that these can be brought together into a common framework to allow a stakeholder wide perception of brand. The actual wording I have used may not be exactly what I would use in a real survey. That are certainly indicative, however, of the main things I should want to test. I offer them in some detail in this paper so that if you wish to pursue this line of thought, you will at least not be starting with a blank sheet of paper. It is a difficult task and one that I have not been able to achieve more than cursorily. I wish, however, that I had. 82 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Grouping attributes by Kano Analysis categories should of course be done through surveys of the market. However, I attach as an Appendix an instrument I used once for an internal rating when I was trying to get some feel for it with no funds for proper research. The exhibit below suggests the direction in which a bank should be attempting to take its brand. Delighters Satisfiers Dissatisfiers Competence Reliability Responsiveness Empathy Capability underpins Responsiveness Capability means Empathy relates everything. Without channels little if the capability to it a brand doesn't capability to the customer can‟t customer needs get to first base customer rely on it The way forward in measuring bank brands It is a theme of this series of papers that being serious about branding is a choice each bank has to make. Being serious about branding is difficult, expensive and making certain decisions about the sort of organisation you want to be. These choices are defining ones not easy to reverse although much easier to lapse from. I shall discuss this in more depth in later sections. However, as I say elsewhere deciding not to brand in any serious way is certainly an option for a bank. Branding, of course, to some extent happens anyway, well or ill. Purposeful, favourable branding does not just require time, effort and money. It also more that you might think defines the sort of organisation a bank will be and will become. I believe a bank can be successful without good branding. 83 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 I will explain how in the papers of this series in which I deal with implementation. Such banks, however, are not the ones that I would wish to work in. I‟m not arguing that to measure its brand successfully a bank must do everything that I say in this section. Much of what I say here is to offer bank marketers starting points in deciding what is best in their circumstances. I think, however, there are some key points. 1. Measurements are necessary if progress is to be managed. 2. Satisfaction is an important starting point but it is not the whole story of brand measurement. 3. There are several approaches to selecting a focal satisfaction question. I would choose the Conversion Model, given a blank sheet of paper to start with. 4. However, there are other approaches that would probably work just as well providing:  each respondent‟s satisfaction data with all providers is maintained at the respondent record level; and  the framework of explanatory attributes is well designed. 5. It is not enough to measure customer segment satisfaction. There must be measures for all key brand audiences. 6. There must be a viable framework of attributes to allow the integration of responses. 7. Ideally, these should include something like the service classification that I have adopted above of: a. capability; b. reliability; c. responsiveness; and d. empathy. 8. Kano analysis should also be supported. In this way thresholds are created that allow the progress of brand development to be better measured. 9. There needs to be corporate skill in understanding market research and interpreting its findings. This skill must be based on a certain management maturity in working with the limitations of research. 10. None of this can be achieved unless designed into management structures and processes. 84 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 In the next section I shall turn to valuing customer relationships. 85 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Appendix 1 – An instrument I used to be able to experiment with Kano Analysis without the expense of surveying clients Background to the survey I foreshadowed this survey at the TNS Business Finance Monitor Advisory Council meeting on 20 April. I emphasise that I'm asking for your input as part of my private research into using customer satisfaction (or commitment) to improve shareholder value. At some point this information may be of use to TNS and its clients but right now it is only a priority for me. You are under no obligation to respond but, of course, I hope you do. Purpose The end purpose of this survey is to help TNS and its clients to be better able to use understanding of the drivers of customer commitment in the BFM to design organisational responses that create shareholder value. Your response I am seeking the response of individuals with some experience and an involvement in the industry. You were selected because you attended the Advisory Council meeting. I am not seeking a bank response. If you believe that other people in your organisation should also respond who meet the criteria of having and interest in and knowledge of the subject, I should be delighted to include their response separately. Please note I have not asked you to rate the relative importance of the attributes. This is because these can be derived from the BFM and a separate study is dealing with this aspect. How the research will be used I shall report the results to all respondents with my commentary. If, as a result of that report, respondents wish to change their assessments, they are welcome to do so. I shall report to BFM subscribers further on my findings of how investment in customer satisfaction can create shareholder value. Any BFM subscriber who wishes to use the classification of BFM attributes in the reports they receive from TNS can do so by consulting their TNS relationship manager. Timing I shall begin my analysis of responses on June 1. The BFM imagery and performance attributes The imagery attributes can be associated by respondents with any bank, whether they deal with them or not. The performance attributes are rated by respondents for their main bank only. The Questionnaire About you 86 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Individual responses to this survey will be confidential. I will not reveal them to TNS. However, I do want to report accurately the names, titles and experience levels of the people who contributed. The classifications I shall use in reporting the results will not include the financial institution the respondents work for. Your name Job title Department / business unit The name of your financial institution or market research provider Which of the following statements best describes your background in relation to this survey? Please type X next to one only market researcher - client side market researcher -agency side marketing in a financial institution but not specifically market research a line management role in a financial institution Approximately how many years of work experience do you have that you think are in some way relevant to retail banking? How controllable are the attributes? I want to get your estimate of how easy it is for a bank to control this attribute from the corporate centre. Some performance attributes are relatively easy to control from the centre others are not. For example decisions about the terms and conditions of a banking product can be relatively easily made by the heads of business banking, credit, or products whereas changes to the way a field force of relationship managers deal with their customers day to day are harder. Please use your judgement to rate each of the attributes below on a scale of 1 to 10 where 10 means :highly controllable by the corporate centre and 1 means uncontrollable by the corporate centre. Remember, I am not asking what happens in your bank just for your opinion of what is likely for business banks in general. . Your rating Best Bank for Women in Business Clear, simple and consistent processes Competitive rates and fees Convenient Helpful and supportive Helps businesses achieve their business goals Honest and trustworthy Innovative products and services Investment expertise Offer a full range of products and services Proactive service Provides value for money Reputation as a business bank Responsive and flexible Support the broader community They value me as a business customer Understands my business Very professional 87 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Offering flexibility Offering sound business banking advice Pricing competitively Providing a comprehensive product range Providing access to specialists Providing the latest in electronic and internet banking services Recognition for the business you do with them Responding to your needs quickly Service provided by senior bank representatives you deal with The knowledge and expertise of the bank's representatives Understanding your business and its history How do the attributes affect customer perceptions? Some people use a classification of attributes based on Kano Analysis. In this, some attributes are considered to be dissatifiers. That is to say they are expected by customers. They do not especially satisfy the customer when they are done well but cause dissatisfaction when they are managed poorly. An example might be the accuracy of bank statements. Other attributes are satisfiers in that they engender customer satisfaction more or less in direct proportion to the customer’s perception of how well they are managed. An example might be bank representative’s responsiveness to expressed customer needs. Still other factors are sometimes called delighters. These are not usually expected by customers but, when managed well, can delight the customer beyond mere satisfaction. An example might be assisting the customer with a risk management problem that the customer did not know they had. Please use your own judgement to classify the attributes below by using the following numerals:Dissatifiers = 1; Satisfiers = 2; Delighters = 3. Your rating Best Bank for Women in Business Clear, simple and consistent processes Competitive rates and fees Convenient Helpful and supportive Helps businesses achieve their business goals Honest and trustworthy Innovative products and services Investment expertise Offer a full range of products and services Proactive service Provides value for money Reputation as a business bank Responsive and flexible Support the broader community They value me as a business customer Understands my business Very professional 88 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Offering flexibility Offering sound business banking advice Pricing competitively Providing a comprehensive product range Providing access to specialists Providing the latest in electronic and internet banking services Recognition for the business you do with them Responding to your needs quickly Service provided by senior bank representatives you deal with The knowledge and expertise of the bank's representatives Understanding your business and its history 89 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Note and comments to Section 6 i Among TNS people whose contributions I especially value are:  Gary Lembit;  Sharon Taggart;  Duncan Rusby;  Danny Meisels;  Tania Kullmann;  Jenny Powell. I am sure there are other names that I have inadvertently omitted. ii Possible in other sectors also, However, in this series of papers, where I can speak authoritively at all, it is only about banking and related financial services. iii As I have said before in this series, I am not a psychologist but that model has been useful to me over the years. iv Actually bank customers seen to rarely get cross with the bank staff that they actually deal with. They instinctively know that the people they deal with work within the constraints of the system. However, the head office designers of the system naturally prefer to measure satisfaction with the people at the customer interface. v TNS, which recently merged with Research International, is the world‟s largest custom research agency. TNS offers comprehensive industry knowledge within the Consumer, Technology, Finance, Automotive and Political & Social sectors, supported by a unique product offering that stretches across the entire range of marketing and business issues, specialising in product development & innovation, brand & communication, stakeholder management, retail & shopper, and qualitative research. Delivering best-in-class service across more than 70 countries, TNS is part of Kantar, the world‟s largest research, insight and consultancy network. 90 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 In Australia, the TNS Finance and Business Services team is a dedicated division with extensive experience and expertise in financial services. They conduct qualitative and quantitative research in both the B2B and B2C arena, on behalf of the leading players in Australia‟s finance and business sector. The team of consultants has expertise and qualifications in finance, management, human resources, psychology, statistics, commerce, business and marketing. www.tnsglobal.com. The Kantar Group is one of the world's largest research, insight and consultancy networks. By uniting the diverse talents of more than 20 specialist firms the group aims to become the pre-eminent provider of compelling and actionable insights for the global business community. It has 26,500 employees working across 80 countries. The group‟s services are employed by over half of the Fortune Top 500 companies. The Kantar Group is a wholly-owned subsidiary of WPP Group plc. www.kantargrouptns.com. The TNS Business Finance Monitor is the Australian Industry currency in measuring the attitudes and behaviour of Australian businesses towards their finances and financial institutions, and is subscribed to by Australia‟s leading banks. This report provides insights into business banking customer satisfaction trends in Australia. It tracks long-term trends since inception in June 2002 and more recent trends over the last two years. The BFM collects information on an extensive range of topics including: business characteristics, business health, banking profile, banks used, products used, transaction profile, satisfaction levels (the topic addressed in this report), commitment levels towards each bank (using the TNS Conversion Model™), relationship management, business needs, bank image, and external influences. This report is available to all current subscribers of the satisfaction data (which is collected as part of the TNS Business Finance Monitor) with the intention of providing a standard comparable measure across the industry. 91 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 Each year, the BFM surveys the banking behaviour and attitudes of 2,000 agricultural businesses and 10,000 non-agricultural businesses with an annual turnover up to $300 million. It has collected data from over 93,000 businesses since its inception. It is important to note that the data in this report is based on a rolling six-month sample and a rolling twelve-month sample; the latter is comprised of approximately 9,900 non-agri businesses with annual turnover up to $100 million. vi In fact for some clients this figure rises to AUD 300, 000 but the main part of the survey is up to AUD 100,000. vii These included at the time Gary Lembit, then of TNS now at Macquarie Bank, Catherine Paton for the Commonwealth Bank, Peter Harrington for Westpac, now Managing Director, Director at QAI Consulting, and John Marinopolous, then of NAB now Managing Director of the Strategic Intelligence Group. The latter two can be found on LinkedIn. viii Timothy L. Keiningham, Bruce Cooil, Tor Wallin Andreassen, & Lerzan Aksoy A Longitudinal Examination of Net Promoter and Firm Revenue Growth ix Which one of these statements best describes how you feel [MAIN BANK]? Do you? 92 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 [SINGLE response. Read out] Definitely make a point of speaking favourably about them 1 Mention them favourably if they came up in discussion 2 Mention them unfavourably if they came up in discussion 3 Definitely make a point of speaking unfavourably about them 4 Wouldn't talk about banks at all 5 Refused 8 Don't know 9 Actually, I like this question because it includes the option „wouldn‟t talk banks at all‟, I rather suspect there‟s a lot less talking about banks that bankers think.. x Which is not to imply thay these need to be asked as part of a tracking study along with satisfaction questions. 93 © Geoffrey Johns 25 July 2010

Branding Banks for shareholder value Discussion Draft Section 6.0 xi My first experience of this type of question actually came in around 1993 when Dr Robert Joss then CEO of Westpac introduced it into a staff questionnaire I had drafted as his only amendment – would you recommend Wespac to a family friend or relative as a place to work. So I think the basic idea has been around quite a while. xii At that time Chief Manager, Commercial banking at Westpac. xiii Three in the more recent version of the Conversion Model. xiv One TNS proprietary approach that i should know more about than I do is TRI*M™. I apologise to its adherents. xv Parusuraman, Zeitaml and Berry “A conceptual Model of Service Quality and its Implications for Future Research”, 1985 Journal of Bank Marketing 49, xvi “The determinants of Service Quality: Satisfiers and Dissatisfiers”, International Journal of Service Industry Management (1995), and “Identifying the Critical Determinants of Service Quality in Retail Banking: Importance and effect”, International Journal of Bank Marketing 1997 94 © Geoffrey Johns 25 July 2010

Branding Banks For Shareholder Value 6.0 Brand Measurement

by Geoffrey Johns on Jul 25, 2010

Accessibility

Tags

Upload Details

Usage Rights

1 Embed 12

Statistics

Branding Banks For Shareholder Value 6.0 Brand Measurement — Document Transcript