Loyalty Decreases for Banks

By Kimberly Clay

Branding studies evaluate an institution’s brand awareness and market potential in a market by assessing the strengths, weaknesses, opportunities, and threats of the institution and its competitors, as well as the banking behaviors and preferences of consumers.  Bancography’s Brand Evaluator conducts telephone interviews with a random sample of households in a market.  The survey itself is masked, i.e., interviewers do not reveal the name of the sponsoring institution.

One of the survey questions asked the respondents if they would recommend their primary financial institution to friends and associates.  The chart below shows that, in the markets that Bancography studied in recent years, the likelihood to recommend decreased for banks over the last five years.


The decline in loyalty across the industry may reflect increased online bill pay and mobile-banking usage. 

While online and mobile customers are more likely to continue to use their primary financial institution, they may become less likely to recommend it because they have an electronic relationship with the institution rather than a personal one, and personal relationships lead to increased cross-sell and loyalty.

A secondary cause of waning loyalty is continued merger and acquisition activity.   

Conversions can bring product and service changes that impact customer loyalty, and require increased systems and sales training for financial-institution staff, which can shift their focus away from the customer experience.

The banking industry will continue to fluctuate due to the broadening array of alternative banking channels and the changing competitive landscape.  In this environment, management must keep sight of the importance of loyalty and how it contributes to customer retention and profitability.

Kimberly Clay is principal and director of marketing research at Bancography, based in Birmingham, Ala. Bancography provides consulting services, software tools, and marketing research to financial institutions.