22squared Igniting Advocacy In Retail Banking


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A thought paper from 22squared on brand advocacy in Retail Banking.

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22squared Igniting Advocacy In Retail Banking

  1. 1. igniting advocacy in retail banking How acting more like friends than foes is the key to growth.
  2. 2. table of contents 01 introduction: igniting advocacy in retail banking 02 about our research 03 brand advocacy is a predictor of business growth 05 the advocacy gap: retail banks have few friends 08 running with the wrong crowd 10 back to basics 12 retail banking trends are eroding friendships 19 benefits of friendship: top-line growth 23 breaking the codes of traditional retail banking 24 conclusion: three ways to improve the customer experience 25 about 22squared
  3. 3. introduction: igniting advocacy in retail banking “I would rather keep This is an all-too-familiar sentiment in the world of retail banking. my money under the And while we chose to keep the name of the bank anonymous, mattress than bank the comment is indicative of the state of relationships between customers and their banks. In fact, retail banks have some of with these thieves! the worst and most contentious relationships with their I have been with Bank customers among the 35 categories and over 180 brands we’ve X for 6 months and studied in the past two years. Now that consumers have they have used every platforms to instantaneously share and rate their experiences way possible to collect on everything from eco-friendly cleaning products to vacation fees from us!” destinations, customer relationships are even more important. Source: Rate it all.com In the Web 2.0 world of social media networks and online communities, consumers join groups that identify with and advocate for the brands with which they hold close relationships. Likewise, critics who are extremely disappointed with brand experiences use these stages to warn others about entering into relationships that do not live up to their promises. These information-active consumers, whether they’re advocates or critics, hold some serious power. 01
  4. 4. about our research The 22squared Friendship Model Research is a tool that: 1) Measures advocacy levels and ratios within a brand’s customer base 2) Evaluates the health and nature of the brand’s customer relationships 3) Assesses brand performance on actions that drive advocacy 4) Predicts changes in advocacy levels in accordance with changes in performance We measure advocacy in a unique way that takes into account both the customer’s behavior (recommendations or critiques) and the customer’s attitude (commitment to the brand’s success or failure). In partnership with Karl Schmidt, founder of the research firm Consumer Insights Inc., we’ve studied more than 180 brands in 35 categories with over 20,000 customers. The research has helped us identify a set of brand behaviors that are shown to drive advocacy across categories. These behaviors are rooted in social psychology and the behaviors people exhibit in developing meaningful friendships. We interview only customers and recent customers of the brand, via an online methodology. For retail banks, we interviewed those who are current customers or were customers within the past two years. There are no in-category comparisons across attributes; instead the research provides a detailed assessment of the relationship between the customer and the brand, and the customer’s influence on others. We then compare brands within their own categories, along with analyzing the data within the context of our normative database. Brands and categories researched included durable goods, packaged goods, retailers, and service providers. Our research on retail banks was conducted in March of 2008 and included Bank of America, Citibank, Wachovia, Washington Mutual, Umpqua, and ING Direct. 02
  5. 5. brand advocacy is a predictor of positive business growth The Breck shampoo advertising of the 1970s touted the power of advocacy with the “She Told Two Friends Who Told Two Friends” advertisement. Online or offline, savvy consumers enter into new brand relationships after first seeking the opinions— negative or positive — of those who have experience with those brands. Insights from 22squared’s quantitative study on brand advocacy, 2008 Friendship Model Research, reveal that brands perceived to act on their customer’s behalf have 32% more Brands perceived advocates.1 The study’s overall True Advocacy™ scores — the to act on their metric that predicts the number of consumers actively endorsing customer’s behalf have the brand in the marketplace —demonstrate a positive correlation 32% more advocates. between business growth and customer advocacy. true advocacy = % advocates - % critics Each customer is classified into an advocacy segment based on relationship and level of commitment to advocating the brand to others. The critics are subtracted from the advocates, while the ambivalent buyers are left out of the calculation, to reveal the true number of advocates effectively sharing the brand with others. SHAREHOLDER EVANGELIST RECOMMENDER REPEAT SATISFIED ADVOCATE BUYER CRITIC MARGINAL BUYER DISSATISFIED BUYER ACTIVELY AGAINST 03
  6. 6. True Advocacy is a predictor of customer endorsement beyond repeat buyers or satisfied customers. It is a measure of the commitment level of high-involvement customer types—shareholders, evangelists, and recommenders— and is, therefore, a good forecaster of annual sales growth. Those brands with stronger customer relationships receive higher True Advocacy scores and reap the rewards of positive business growth. true advocacy and financial growth 50% ING Direct 40% 30% deposit growth 7 = .62 nt 20% Bank of cie America effi co Umpqua ion 10% e lat Wachovia rr CitiBank co s on ar 0% pe Bubble size = Q208 -10% WaMu 210,719 interest bearing deposits, in millions -20% -30% -20% -10% -10% 0% 10% 20% 30% 40% 50% 60% true advocacy Growth in deposits from Q107 to Q208. *ING Direct reports changes in number of clients for the US market instead of deposit growth (a reasonable comparison). 04
  7. 7. the advocacy gap: retail banks have few friends For retail banks — a category2 bubbling over with negative sentiment associated with a witches’ brew of consumer complaints, including a perception that banks’ actions are irresponsible and self-serving—recovery requires taking action to heal damaged consumer relationships. The Friendship Model Research reveals that the average True Advocacy score [True Advocacy = % advocates - % critics] for the retail bank category is 9%, significantly lower than the multi-category norm of 21%.1 With the overwhelmingly negative reverberations from industry consolidation, a weak residential housing market, and predatory creditors, consumers have grown mistrustful and weary of their retail bank relationships. A recent study by IBM found that “Fifty percent of customers harbor an adversarial relationship with their retail banking brand.” 3 Contrary to the passionate evangelists of the Apple, JetBlue, and Target brands who proclaim their brand relationship at the most aspirational of levels — “soulmate” and “close friend”— consumers’ endorsements of retail banks overall are weak, and they are even weaker for the larger traditional banks. Indeed, rather than endorsing these brands, consumers are more likely to be passionate about their dislike for their traditional retail bank. retail banks have the most critics advocate 34% bank mean The average True cross category mean 36% Advocacy score for the retail bank category is 41% buyer 9 percent, significantly 49% lower than the multi- category norm of 21%.1 25% critic 15% While retail banks have an average number of advocates compared with our cross-category mean, they have the highest number of critics of any category measured. 05
  8. 8. In the Friendship Model Research, Bank of America and Citibank received negative True Advocacy scores, -12% and -9%, respectively, representative of their weak customer relationships. Although the smaller, regional banks, Wachovia and Washington Mutual (WaMu), have shifted from product-focused to customer- focused strategies, inconsistent practices toward customers have led to comparatively low advocacy scores, 5% and 9%, respectively. Detracting from top-line growth, their negative momentum scores indicate that a higher percentage of current customers are moving away from the brand than toward it. With advocates barely outweighing critics, there is little reason to “whoo hoo.” advocacy rates true [true advocacy = % advocates - % critics] advocacy ING 58% 31% 10% 48% Umpqua 39% 33% 28% 11% Washington Mutual 31% 48% 22% 9% Wachovia 30% 45% 25% 5% Bank of America 24% 40% 36% -12% Citibank 22% 47% 31% -9% advocate buyer crItIc 06
  9. 9. In contrast, a new style of banking, responsive to consumer preferences, is wooing customers. Taking the True Advocacy and True Momentum [True Momentum = % moving toward - % moving away] scores together, ING is the only bank in the study claiming both positive True Advocacy and positive True Momentum. ING may be sluggish in Europe, but in the U.S. it is the category exception, claiming the highest True Advocacy score in the category, 48%. Not surprisingly, ING also has the highest annual growth, 39%. Also staying ahead of the curve, Umpqua is generating buzz with its lifestyle approach to retail banking. While lagging behind ING, Umpqua, a small community-focused bank, stands out, claiming the second highest True Advocacy score of 11% but fails to create positive True Momentum, 2%. Despite the millions of dollars in fees Bank of America collects from overdraft and ATM usage, it hasn’t been able to propel positive annual growth. In contrast to ING, Bank of America received a negative True Advocacy score, -12%, and a negative True Momentum score, -31%, explaining its negative annual growth of -0.7%. true momentum true [true momentum = % moving toward - % moving away] momeNtum ING 39% 48% 13% 26% Umpqua 26% 46% 28% -2% Washington Mutual 22% 50% 28% -6% Wachovia 15% 53% 32% -17% Bank of America 12% 45% 43% -31% Citibank 11% 52% 37% -26% movING toward stable movING away 07
  10. 10. running with the wrong crowd Smart brands befriend consumers and enter into relationships representative of those between friends, such as “acquaintance” or “close friend.” Reaching the status of close friend means a consumer identifies with your brand and is willing to endorse it. Such a relationship requires maintenance, however. relationship types soul mate unique connection, can’t live without close frIeNd inner-circle, depend on, always there NIche frIeNd familiar in a narrow context New frIeNd on the road to becoming closer acquaINtaNce ambivalent, no expectations famIly frIeNd by association or inheritance default lack of options, proximity, avoidance flING short-time experiment forced no choice, feel trapped, wish to escape 08
  11. 11. Five of the six retail banks in our Friendship Model Research have fostered few or no close friends, preferring to cultivate low-involvement, low-commitment relationships.1 These weak friendships —“forced,” “default,” and “fling”— are not the advocate-building types, such as “soulmate” or “close friend,” Five of the six retail that Apple, JetBlue, and Verizon have successfully fostered. banks in our Friendship In the case of Verizon, it has carved out an exception for itself by successfully fostering strong relationships within a category Model Research have in which many of the relationships are perceived as forced. fostered few or no close Banks that engage their customers in “forced” friendships are friends, preferring to maintaining stagnant customer relationships, ones that are cultivate low-involve- teetering precariously close to the stage at which change is ment, low-commitment sought by the customer, ending the relationship. After all, relationships.1 close friends take care of each other. types of friendships being forced cultivated by retail banks relationship family relationship close friend default relationship new friend fling niche friend soul mate acquaintance graph explains 59% of variance seen across brands 09
  12. 12. back to basics All I need to know I learned in kindergarten is the quintessential how-to guide on respecting and befriending others. In order to turn around fledgling operations, banks need to reevaluate how they perform and interact with consumers at the most rudimentary of levels. Every point of contact a brand has with a customer is an opportunity to deepen or ruin the relationship. The Friendship Model Research assesses brand performance across ten actions (tenets of friendship), quantifying their impact on creating positive customer experiences and driving advocacy. The higher the scores, the more likely a consumer is to recommend a brand to someone else. These 10 actions together transform the role a brand plays in a customer’s life, providing the customer with more than a mere product or service. What is evident across the multiple verticals included in the survey— wireless, airlines, retailers, electronics, personal care, and retail banks— is that four of the tenets represent the most basic of consumer expectations: Honest and True | Authentic | Supports Me | Understands Me They are the foundation on which to build advocacy, to create brand momentum, and ultimately to propel business growth. actions that drive advocacy: the 10 tenets of friendship be autheNtIc | original, real, and distinctly meaningful be hoNest | transparent, make intentions clear be empathetIc | understand their needs, desires, and lives support them | be helpful; act on their behalf speNd qt | provide positive, immersive experiences share a pov | common lifestyle, belief system, or attitude be excItING | create a visceral spark or gut reaction GIve more | provide value beyond the purchase stay IN touch | build anticipation, add value, communicate keep It fresh | surprise and delight 10
  13. 13. Absent from or weak within retail customer relationship are the above-mentioned four core tenets. In the latest wave of “I can’t say enough about Friendship Model Research, we asked more than 10,000 how much I enjoy banking consumers about 52 brands across six categories. Retail banks with ING Direct. Their call scored below average, 100 being the average, on performing center is always open and basic behaviors. This score narrowly surpasses the expected you speak with a person weak performance of brands within the wireless category. For in a matter of seconds. the most part, consumers rated retail banks below average on each of the four tenets — Honest and True (88), Authentic (88), The products they offer are Supports Me (97), and Understands Me (91). great and are very easy to manage, either over the phone or online. I wish all banks were like ING. They are great!” Source: Reviewcenter.com Honest and True Authentic Supports Me Understands Me Overall, the absence of these attributes presents an opportunity for retail banks to recalibrate their customers’ experiences. The one dramatic exception is ING, perceived as the gold standard within the category for the best customer experience practices across vital touchpoints. ING’s advocates value their relationships. 11
  14. 14. retail banking trends are eroding friendships For better or worse, the following trends influence consumer perceptions, behaviors, and expectations of retail banks. Reevaluating these approaches may provide insight into how banks can demonstrate their friendship potential to consumers. treNd 1: web 2.0 INNovatIoNs dIstaNce the customer relatIoNshIp While the banks’ recent The manner in which traditional banks are innovating is not shift to digital customer building positive relationships with customers, but may be distancing their relationships with customers. While the banks’ interactions allows for recent shift to digital customer interactions allows for self-service self-service and ease of and ease of use for even complex transactions, it further use for even complex distances customers from the banks by degrading their already transactions, it further weak “forced” relationships. Further contributing to the demise distances customers from of the customer relationship is the subpar customer support the banks by degrading provided by the bigger banks, calls that are often answered by their already weak an offshore call center representative, most likely unfamiliar with and insensitive to home market conditions. “forced” relationships. Over 50% of internet users, approximately 97.5 million, now engage in online banking, coupling an on-demand culture with the convergence of technology.4 Retail banks’ new product and service extensions that enable online and mobile banking reflect this lifestyle change. Bank of America leads the way with online chat and e-alert initiatives that increase functionality and enable real-time communication with customers. Historically, many banking customers have reported that they are unable to complete their business with a single phone call, so diversifying communications channels is certainly a move in the right direction, but not enough to cultivate advocates. Citi MobileSM supports the now indispensable mobile banking service, but falls short of garnering positive momentum for the company. 12
  15. 15. In 2000, ING pioneered direct online banking; the other banks Supports Me: have followed suit, contributing to the internet’s emergence as This brand is the primary distribution channel. Even though ING has focused helpful to me and on making banking simple and achieved operational efficiency acts on my behalf. with a business model that services customers online, the company is also responding to what customers want from their banking relationship — an easy, straightforward, and transparent 122 ING banking experience, combined with low cost and excellent service. This finely tuned model has proven a compelling combination and a clear differentiator for ING. It is not surprising then, that ING leads the category in the area of support with a Supports Me score of 122, far exceeding the retail banking 106 Umpqua category mean. The only brands within our study that rival ING’s score are Apple (140) and Sony (124). In contrast, although 101 WaMu Bank of America and Citibank provide leading online banking 100 Cross-category mean applications, they received the lowest Supports Me scores, 97 Retail bank average 76 and 87, respectively, falling well below the category mean. This suggests a lack of the requisite service and support 92 Wachovia expected at every customer touchpoint. 87 Citibank Indeed, ING’s case highlights that the successful rollout of new products and services is contingent upon the existence of core advocacy tenets. Without these, consumers will hesitate to explore deeper relationships or move toward the higher echelons 76 Bank of America of the information-active “recommenders” or “evangelists.” 13
  16. 16. treNd 2: qualIty over quaNtIty The rise of online banking provides fewer reasons to walk into a retail branch, yet over the past decade the total number of retail bank branches has increased nationally by 29%.5 Additionally, banks are extending service hours into the weekend and offering supermarket and in-store locations. There is a negative Bank of America and Wachovia continue to grow their retail correlation between footprints, providing consumers with increased convenience, strength of customer a leading reason for switching banks.6 However, our findings relationship and the suggest that there is a negative correlation between strength size of the bank.4 of customer relationship and the size of the bank. 60% the bigger the bank the more critics 50% 4 40% 79 =. |R ient 30% true advocacy score ef fic co n tio rela cor 20% on a rs pe 10% 0% -10% -20% 6000 5000 4000 3000 2000 1000 0 physical retail outlets Source: Annual Reports and Web Sites 14
  17. 17. In other words, the larger the bank, the lower its advocacy score and the lower its rate of business growth. Indeed, the largest banks in our study, Bank of America and Citibank, have annual growth By creating a service- rates that are low to negative, at -0.7 % and -6.38%, respectively. Not surprisingly, our study found that Bank of America has oriented culture, versus negative momentum, indicative of an unstable relationship, one a sales-oriented culture, in which consumers are moving away from the brand. and integrating customer experience at Two banks are keeping retail banking relevant and fresh, taking such a vital touchpoint innovation beyond products, services, and digital interactions, as the local branch, it is and giving the larger traditional banks a run for their money. not surprising that both ING and Umpqua are challenging the codes of retail banking and the customer experience through branch innovation. ING and Umpqua are ING Cafés create an atmosphere of friendship and partnership, befriending consumers. providing education on products and services through financial literacy workshops. The company’s customer experience strategy is more closely aligned with the hip, educational environment of Apple stores and the café experience of Starbucks. Embedded within neighborhoods, Umpqua is part internet café and part community center. Its branches have even been compared to stylish hotel lobbies where customers are tempted to hang out. “Daily Specials” highlight neighborhood events and resources, as well as bank products and services. Umpqua’s Discover Local Music initiative supports community initiatives with an online music store, Umpquamusic.com, that features local indie artists.7 By creating a service-oriented culture, versus a sales-oriented culture, and integrating customer experience at such a vital touchpoint as the local branch, it is not surprising that both ING Café in Philadelphia ING and Umpqua are befriending consumers. 15
  18. 18. By consistently meeting and exceeding consumer expectations, ING is building trust and nurturing relationships and is in a position to deepen customer relationships by introducing and converting customers to new products and services. As a result, both ING and Umpqua banks are experiencing positive True Advocacy and positive annual growth of 39% and 6.9%, “Umpqua is an amazing respectively. Wachovia is responding by updating the older place. I have rarely teller counters with concierge-style kiosks, and WaMu is focusing on experience versus product, evidenced by their gone to a fund-raiser current “Whoo Hoo” advertising campaign that attempts to that didn’t have invigorate their banking experience. In the wake of negative Umpqua Bank there, sentiment over the mortgage crisis, both these banks are helping and serving treading water, exhibiting virtually no positive momentum every community they along with flat advocacy scores. exist within.” Source: InsiderPages.com ING and Umpqua, the two nontraditional players, interact with consumers in a truly authentic manner. As a result, both banks scored high on acting with Authenticity, ING at 111 and Umpqua barely below average at 98. Umpqua has embraced its role as a community-focused bank. This is best expressed by an advocate posting on Insiderpages.com: “Umpqua is an amazing place. I have rarely gone to a fund-raiser that didn’t have Umpqua Bank there, helping and serving every community they exist within.” The Friendship Model Research points out that the traditional branch model is not driving customer advocacy. By breaking the codes of traditional retail banking and deploying an integrated customer experience strategy, ING and Umpqua are propelling positive growth. 16
  19. 19. treNd 3: keepING secrets aNd provIdING uNwaNted surprIses creates crItIcs With a total of 2,030 mergers among FDIC institutions, 2001 heralded an era of consolidation.5 This has provided both opportunities and challenges for large traditional banks. Bank of America, which is nearing the government-mandated limit of holding 10% of total outstanding deposits, is seeing its revenue growth limited by its inability to acquire new business. This pressure has led the bank to move toward alternative Today, over $20 billion, revenue streams that extract more money out of existing close to 50% of the customers. Today, over $20 billion, close to 50% of the industry’s industry’s annual annual revenue, is generated from “nuisance fees.”8 These revenue, is generated hidden fees are resulting in a backlash by consumers who are from “nuisance fees.” 8 migrating in droves to banks they consider more transparent. Bank of America is notorious for its lack of transparency for “Bank of America is the such things as overdrafts and late payment fees. These practices fall short of creating positive customer experiences. Rather, worst bank that I have they are deemed by consumers as self-serving, and as a result, had. I have never been consumers perceive Bank of America to be the least Honest so mistreated by any and True in the category based on their tenet index of 65, customer service as I 35 points below the category average and a whopping 43 have by them. They do points below ING. The advocates are outnumbered by the NOT work for the critics, whose harsh words depict their acrimonious relationships customer, they work for on Rateitall.com: “Bank of America is the worst bank that I have had. I have never been so mistreated by any customer themselves to put money service as I have by them. They do NOT work for the customer, in their own pockets.” they work for themselves to put money in their own pockets.” Source: Rate it all.com It leads us to believe that Bank of America is not following through on its branding campaign, “Bank of Opportunity.” Wachovia scores low, too, at 81. They engage in collecting nuisance fees, not to mention accepting fees based on trans- actions conducted by companies using the bank’s account to engage in fraudulent activities. These activities stole as much as $400 million from unsuspecting victims.9 Wachovia looked the other way while collecting fees on the fraudulent transactions that were conducted. 17
  20. 20. The perniciousness of Wachovia’s nuisance fees is illustrated by the comments of a Senior Attorney from the Consumers Union in San Francisco. “I have consumers tell me that they used their own debit card three times in one day and they got hit with three thirty dollar ($30) overdraft charges.”10 It’s no wonder that pursuing lower account fees is the third highest motivator for switching banks.6 Such hidden fees erode trust and detract from other customer-oriented initiatives such as the bank’s “Who Would You Thank Campaign?” which is meant to celebrate National Customer Service Week.11 Overall, these practices, common among the larger banks, are not befriending consumers nor setting the tone for future cross-sells or up-sells, but rather destabilizing their customer relationships. Indeed their negative True Momentum scores suggest that their customers are moving on: Bank of America, -31%; Citi, -26%; WaMu, -6%; and Wachovia, -17%. “I have consumers tell me that they used their own debit card three times in one day and they got hit with three thirty dollar ($30) overdraft charges.”10 18
  21. 21. ING was first to roll out an online, high-yield savings account with no minimum balance and no monthly fees. Their cash- based referral program generates customer leads and rewards loyal customers. With an absence of traditional branches and just six ING Cafés, the company’s operational savings are passed on to consumers in the form of more competitive interest rates— the number one reason consumers switch banks.6 118 ING Consumers banking with ING should feel safe and secure, since the bank takes security so seriously. A 2006 University of California at Berkeley study analyzed the estimated annual incidents of identity theft per $1 billion in deposits and found 100 Umpqua banking with ING is the safest (.085).12 Seeking better security to protect personal information and funds is the number four 91 WaMu reason consumers switch banks.6 It should come as no surprise that consumers perceive ING as performing above average in the area of honesty, with an Honest and True score of 118. 81 Wachovia 72 Citibank benefits of friendship: 65 Bank of America increasing true advocacy will impact top-line growth Honest and True: The brand exhibits Advocacy and its positive correlation to business growth transparency and underline the power of consumer relationships for the retail clear intentions. banking industry. The stronger the relationship, the more willing consumers are to embrace it and act on it. The following What if scenarios explore actions for increasing consumer advocacy. The increase in percentage of advocates is derived by increasing the index of the tenets to the multi-category average of 100. 19
  22. 22. buIldING trust throuGh traNspareNcy The greatest opportunity for improvement exists with the traditional banking behemoths, Bank of America and Citi, with which many consumers have “forced” relationships. Across the four tenets that measure performance of the basics, Honest and True, Authentic, Supports Me, and Understands Me, all scored significantly below each tenet’s average score specific to the category. These scores suggest an emptiness in Citi’s latest consumer-oriented “Let’s Get It Done” campaign. Demonstrating empathy toward consumers’ frustrations with nuisance fees and providing relief from them would be a trust- building initiative. Overall, listening and responding to consumers’ needs help shift their impersonal, fee-collecting persona to a more positive one. The power of reciprocity in this industry is not to be underestimated. In fact, it would help instill confidence in the relationship, one without surprises or self-serving practices. Elevating their customer experience by focusing on these four tenets would raise the percentage of Bank of America’s advocates by 6% and increase the percentage of Citibank’s advocates by 4%. Cross Category Average: Average performance of brands across durable goods, packaged goods, service, and retail brands bank of america and citibank cross category average closing the gap: 20
  23. 23. GIvING Is better thaN receIvING Wachovia, positioned as a community bank, communicates effectively and is perceived to support its customers well. Even so, it scores below average across most friendship tenets, particularly three of the four tenets essential to moving retail bank consumers toward the brand — Honest and True, Authentic, and Understands Me. These mediocre scores suggest that this smaller bank behaves more like the large, impersonal banks. Not surprisingly, it has no positive momentum. In order to befriend more consumers and increase momentum, we suggest that Wachovia refine their performance of the basics — the same remedy required by the traditional big banks. Providing value to customers without expecting anything in return will elevate their profile. We applaud Wachovia’s rollout of one of the more innovative products to date, Way2Save.10 This product is designed to deduct from checking the cost of the purchase plus a dollar. Presumably, the dollar goes to a savings account with a higher interest rate. Their referral program offers a $25 Visa gift card to customers who refer a friend who then enrolls — the friend receives a card, as well. We believe both of these initiatives provide incremental value and help Americans save, which is an ever-increasing need in our current economy. Closing the gaps on performing the basics well could impact their advocacy with a 3% increase. 130 120 110 100 cross category average 90 80 70 Honest and True Authentic Understands Me 21
  24. 24. keep the relatIoNshIp fresh Umpqua and WaMu, both regional banks, post respectable scores for performing the fundamentals of a service-based relationship. WaMu has long been known for its commitment to quality customer service, and certainly, both of these banks perform at a higher level than the bigger banks with whom they effectively compete. In 2007, BusinessWeek presented WaMu with “A Top 25 Service Champ” award, the only bank on the list. Regardless, WaMu, along with Umpqua, is losing ground in terms of being attractive and exciting and, consequently, momentum. We believe WaMu’s branding campaign takes a step in this direction by attempting to generate excitement while emphasizing the banking experience over products. Beyond trying to infuse excitement into the experience, providing products that meet consumers’ multiple life stage needs will, we believe, keep the relationship fresh. Their segmented product offers will rejuvenate and bring attraction and excitement to the offerings. By increasing performance on the basics and providing some unexpected value to the customer, WaMu and Umpqua could increase their advocates by 2%. Cross Category Average: Average performance of brands across washington mutual and umpqua durable goods, packaged goods, service and retail brands cross category average closing the gap: Quality time Something Attractive Keeps Get more in common and exciting relationship than I give fresh 22
  25. 25. breaking the codes of traditional retail banking Drawing on 22squared’s research, True Advocacy is a predictor of annual revenue growth. We believe the Friendship Model and the insight it provides allow retail banks to monitor the ten tenets of friendship for continual improvement in building advocacy. A break from the traditional codes of retail banking, the adoption of this model will facilitate the shift toward listening and responding to consumers’ needs and expectations, as well as the move away from forced relationships. The model allows for the continual optimization of the customer experience by identifying areas in need of improvement, increasing advocacy, and generating value. Monitoring the pulse of the customer experience will be essential if retail banks are to stay competitive as they improve their performance. Leveraging the power and value of an advocate, who may either tell a friend who tells a friend or be connected to hundreds of thousands of peers through online communities growing exponentially daily, should not be dismissed. 23
  26. 26. conclusion: three areas for improving customer experience Three areas to consider for immediate improvement are: providing transparency, providing value, and aligning with non-industry causes. Now is the time for banks to shift toward The changing demographics of the U.S. will require simplicity, the perception of giving whether from the young tech-savvy’s need for on-demand more than they receive, access to accounts or from the aging baby boomer’s changing to stop looking at their needs. Different segments will require and demand transparency; those banks that provide uncomplicated banking will gain the customers for their consumer’s trust. Oil prices continue to inflate the cost of worth, and start looking goods and services, forcing consumers to seek out products at them as their next that deliver higher value for the dollar. Now is the time for 10 customers. banks to shift toward the perception of giving more than they receive, to stop looking at their customers for their worth and start looking at them as their next 10 customers. Banks perceived to provide the most value to their customers will reap rewards through increased receptivity to cross-sells and through tapping into a network of advocates. Emergence of issues bigger than the individual and larger than the leading asset-rich organiza- tions will entail organizations adopting causes outside their core strengths. As climate change and the concerns surrounding it gain mainstream attention, the choices consumers make will further reflect their values, beliefs, and lifestyles. 24
  27. 27. 22squared, one of the largest independent advertising agencies (we use the term loosely) in the U.S., provides strategic and creative advertising services across multiple business verticals. It offers an empirical approach to building brand advocacy and specializes in communications that drive business growth by building strong relationships with customers. The number 222 represents the exponential power of brand advocacy as well as the average number of friends a person makes throughout his or her life. 22squared is located in Atlanta, GA and Tampa, FL. For more information, visit 22squared.com. about 22squared Consumer Insights Inc. is an independent research firm that specializes in custom quantitative consumer research. They have experience study- ing many types of industries, including automotive, package goods, financial services, government entities, health care, hospitality and tourism, retail, services and utilities. Research conducted by Consumer Insights Inc., Troy Michigan. Paper prepared by 22squared. Contributors to this paper include Brandon Murphy, Margery Nabors, and Carolyn Kopf. References: 1 Friendship Model Research: A Quantitative Study on Brand Advocacy, 22squared, March 2007 – March 2008. 2 The retail bank category defined by the 2007 Friendship Model Research includes the following banks: Citibank, Bank of America, Wachovia, Washington Mutual, Umpqua, and ING. 3 Heffernan, Robert and Scott Lieberman. “Unlocking customer advocacy in retail banking: The customer focused enterprise.” IBM Global Business Services. October 26, 2006. http://www935.ibm.com/services/us/index.wss/ibvstudy/gbs/a1025930?cntxt=a1005261 4 Mintel’s forecast of adults who use online banking services, reviewed in its Online Banking — U.S. Report, June 2006. 5 “Trends and factors driving retail banking.” Retail Banking U.S. October 2007. Mintel. www.Mintel.com 6 Online Survey: Preferences of large bank customers — switching behavior, Mintel/Greenfield, August 2007. 7 “New Marketing – Umpqua: the coolest bank just got cooler.” Bank Marketing International May 25, 2006: Pg. 6. 8 Estimated Fee Based Overdraft Loan Fees Paid By Consumers, 2004 and 2006. Center for Responsible Lending. “Trends and factors driving retail banking.” Retail Banking U.S. October 2007. Mintel. www.Mintel.com 9 Duhigg, Charles. “In telemarketing fraud case, papers show Wachovia knew of theft.” The International Herald Tribune February 7, 2008, Thursday Finance: Section; Pg. 19. 10 Kristof, Kathy M. “Wachovia’s savings program ups the ante; Enrolled customers automatically sock away $1 per debit. But there are pitfalls.” Los Angeles Times February 24, 2008, Sunday Home Edition: Part C; Pg. 3. 11 “Wachovia launches ‘Who would you thank?’ contest.” Wachovia Press Release September 17, 2007. www.wachovia.com http://www.wachovia.com/inside/page/0,,134_307%5E1656,00.html 12 Chris Hoofnagle, “Measuring Identity Theft at Top Banks (Version 1.0)” (February 26, 2008). Berkeley Center for Law and Technology. Law and Technology Scholarship (Selected by the Berkeley Center for Law & Technology). Paper 44. http://repositories.cdlib.org/bclt/lts/44 25