December 01, 2006

How can banks achieve growth and customer-retention goals when the products and services they offer are highly commoditized? And, in an increasingly commoditized financial services environment, how can banks differentiate themselves from other institutions? BAI has endeavored to answer these questions in its "Relationship Experience" research project, the results of which were presented at its Retail Delivery conference in Las Vegas in November.

BAI found that -- more than long-standing benchmarks of service, convenience, pricing or product creation -- it's the experiences that customers have with their banks (especially in branches) that contribute to loyalty, retention and increasingly profitable relationships. Not surprisingly, according to BAI, there is a significant gap between what customers want from their banks and what they will settle for, especially when it comes to their interactions with branch personnel.

Customers want more when it comes to branch staff knowledge, including knowledge of the customers' needs and goals. Furthermore, these customers -- characterized by BAI as "relationship seekers" who tend to be under 40 years of age, brand conscious and receptive to rewards programs -- welcome innovative branch experiences, such as educational seminars, Internet access at the branch, coffee and beverages, lounges, and TVs and financial news.

The study's conclusions about the importance of experience no doubt resonated for those Retail Delivery attendees who stood in the taxi line at Las Vegas McCarran Airport for an hour or more waiting for a five-minute, $20 ride to their hotels. Bankers surely understand how tenuous customer relationships are, and that often it is the intangibles -- confidence that your financial institution cares about your account, no matter how puny -- that matter the most.

But there also could be risks associated with a focus on experience. Serving coffee or offering a lounge isn't distinctive when lots of banks are providing these amenities. And the amenities don't matter if customers don't believe their funds are secure.

Without a business case based on customer analytics and market forecasts, and without the ability not only to develop profitable, targeted products, but to price them appropriately, a focus on experience literally could be no more than window dressing.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & ...