I get a lot
of phones calls these days from community banks asking for help building core
deposits. The next sentence usually
goes something like this… “Our profits are down because we’ve had to bump up our
loan loss reserve, so we have to cut expenses.” Seems reasonable, right?
Cutting expenses certainly is reasonable providing it does not have a negative impact on customer satisfaction!
There was recently a discussion in the American Bankers Association (ABA) Group on LinkedIn about a case study entitled “In Touch Economic Times, Does Customer Satisfaction Matter?” done by J.D. Power and Associates in collaboration with Novantas.
Click here to
access the press release and a copy of the report on the Navantas website.
The
purpose of the study was to determine how customer satisfaction affects retail
bank growth and profitability.
A preliminary conclusion of the study is “that Customer Satisfaction is a significant and measureable contributor to retail bank financial performance.”
They went on to say:
·Customer Satisfaction alone appears to drive 15-20% of growth performance for bank branches.
·Within a single institution, in a single market, branches with above average satisfaction realize 2 to 5 percentage point additional growth over those with below average satisfaction.
·This growth differential is worth $50,000 to $90,000 of additional earnings per branch for above average satisfaction
How does this relate to building core deposits? “In fact, holding all else equal, we estimated that those branches with above average satisfaction scores grew deposits on average 3 to 4 percentage points more than those with below average scores.”
What does this mean to your bottom line? “With an average of $90+ million of consumer deposits each, the better branches would bring in $3.5 million of additional deposits per year per branch. At an average of 200-300 basis points of net deposit spread and longer duration, the bank would realize $150 to $200 thousand annually in additional pretax income per branch.
J.D. Power and Associates’ concludes that “Satisfaction matters, and is a significant factor in performance.” “…customer satisfaction factors influence about 15% of overall growth. The economic impact of satisfaction appears to be approximately 3.5 percentage points of deposit growth per year, translating into $90,000 in pretax income per branch.”
I highly
recommend downloading a copy of this report.
In part II we will
discuss beneficial ways you can use this information. Part II will be
published on Friday, April 10, 2009. Use "Subscribe to this blog's feed"
to be automatically notifed of new posts.
Jeff Simpkins, Book Yourself Solid Certified Coach
Community
Bank Consulting, Inc.
www.CommunityBankConsulting.
Twitter: http://twitter.com/
Free Webinar Wednesdays: http://www.
We help community banks:
• Reach prospects, customers
and clients using low-cost and no-cost marketing tools
• Deliver world class
customer service by choosing and using the right
technology
