Slow Your Customer Churn Rate

One of the top goals of your bank should be to try and reduce customer attrition. As your institution spends huge amounts of money to attract new customers, current ones are probably headed out the door to the competition down the block.

There are ways to reduce turnover, but understanding what triggers customer defections is as complex and varied as the patrons themselves. Here are six proactive steps your bank can take to slow customer attrition:

1. Engage the Frontline. Customers often vent their frustrations with frontline employees well before they decide to leave. They may hope that this will help your bank decide to revise a policy or grant a one-off exception in their favor. Encourage employees to track and report customer complaints. Consider conducting surveys. In addition, hold focus groups where existing customers can share observations about their overall service experience.

2. Empower Employees. Regardless of the size of your bank, it often takes several levels of approval to resolve a customer’s problem or wish. Allowing employees to make some decisions can help defuse situations before they take on a life of their own. Employee empowerment programs, if designed and monitored property, can be a cost-effective tool in retaining customers. But of course, there are risks. Make sure the program is monitored closely to avoid abuses by customers and employees, and discuss the potential for fraud with your bank’s accountant.

3. Talk to Your Ex-Customers. Once a customer has left, follow up promptly with a questionnaire aimed at determining what prompted the move. The response rate is typically low — former customers have little incentive to help your bank improve its service. But if you send the forms and former customers respond while the issues are still fresh in their minds, the answers can provide useful insight.

4. Watch Competitors. Several divisions within your institution may be tracking rival banks’ activities from a departmental or product-centric view. But it is just as important to view the competition from the perspective of customers. Assign an individual or department to gather intelligence about your competitors’ product and service offerings. You must understand the complete service picture of a rival before you can develop a competitive response. Intelligence gathering is especially important when competitors claim to offer “big bank” capabilities with local customer knowledge and focus.

5. Know your data. Customer attrition analysis can provide a baseline against which you can benchmark the success of your bank’s customer-retention program. Statisticians with experience in this type of analysis can help determine not only how many customers your bank loses each month, but they also predict the customers who are likely to defect. For example, a statistical analysis may uncover a pattern of checking account activity that customers exhibited before they left your bank. Comparing that activity with current account behavior can help identify “at risk” customers, giving your bank time to take steps to retain the business.

6. Know your customers. Ideally, your bank should consistently provide products and services that meet and even exceed customer expectations. To achieve this goal, you may need customer relationship management software that can provide valuable information about the people who use your bank. In their simplest forms, these programs can be used to store a customer’s basic information as well as data from interactions with the bank. For example, the software could store information related to a customer’s retirement plans after he or she has discussed them with one of your institution’s employees. If used appropriately, CRM software can offer competitive advantages. Knowing your customers and consistently meeting or exceeding their expectations can directly translate into customer loyalty.

In the end, these steps can help your banking institution start a multipronged effort to reduce customer attrition and boost its bottom line.

For more information on how we can help your community bank, please contact Sonny MacArthur at smacarthur@pkm.com or 404-420-5631.