In November, 2005, the Bank Administration Institute (BAI) published a study that found that “nearly 70% of consumers are not interested in a deep, multi-product relationship with their primary financial institution…”
The newsletter continued, “…underscoring the bad news for retail bankers [was] BAI’s survey of 500 retail bankers last year…that found relationship banking is the most popular value proposition banks try to communicate to the marketplace, with service quality a close second. [The new] research…shows that only 31% are interested in relationship banking, 29% are essentially neutral and 40% actively skeptical.”
Another study (by Deloitte Consulting LLP with the Consumer Banking Association) “…revealed that two-thirds of the 19 banks studied averaged cross-sell rates of 1.5 to 1.7 products per household. Fifty percent of all households for this group of banks were found to be single product holders, despite the banks’ considerable investments in new products and technology aimed at fostering closer customer relationships.”
JPMorgan Chase notwithstanding, the right relationship apparently is not everything—in fact, it may not be much at all. What is to one conclude when two thirds of customers react to the preferred industry strategy with indifference at best, and with active hostility at worst?
My guess is the BAI study doesn’t mean that consumers aren’t interested in a banking relationship. Relationships make objective sense for many consumers. What the study probably tells us is that consumers don’t trust the people claiming to offer that relationship.
Customer Focus and Vultures
Much has been written about customer focus. We hear about sophisticated customers who will leave if we don’t focus on their needs. We hear about the virtues of customer loyalty, and the gospel of measurements like “return on customer.” The key to competitive success is to do a better job serving customers than the next guy. And so on.
But there’s a dark side to that theme. The reason to be so customer-focused is almost always phrased in terms of the benefits to the seller. And that changes everything.
Customer focus, as it is practiced in business today, is the focus of a vulture. It is all about the benefit to the seller. The customer is treated as an object, a means to the seller’s ends. Yes, we want to serve customers better—but for our sake, not theirs. Then somehow we are surprised when consumers see this as cynical. In our rush to dissect the consumer brain, we have forgotten that motives matter.
I’m not talking about ethics—I’m talking about the simple facts of trust. We trust those we believe to have our interests at heart, and we distrust those we believe to have their interests at heart. But we particularly distrust those who pretend to be the former, while behaving like the latter.
Consider another industry even harder hit by trust issues—pharmaceuticals. One of the drug manufacturers’ wounds is self-inflicted—the relationship between physicians and reps.
Doctors have long relied on reps to keep them up to date on new drugs—an important and valuable role. In recent years, the drug companies tried to increase the sales effectiveness of these reps. They did so by increasing the number of reps per doctor, focusing on hiring young and attractive people. They introduced complex measurement systems to evaluate rep performance, and purchased sophisticated statistical data to calibrate the impact of rep visits on physician prescriptive behavior.
Sensible steps all, at first blush; but they’ve produced negative results.
- Less than one rep visit in 10 now results in a conversation with a physician, and lasts on average only 90 seconds;
- Personal relationships have been reduced and curtailed; reps are valued only for the samples they leave, turning them into pill-pushers;
- The doctors have little respect for the reps, which in turn is debilitating for the reps.
How did this happen? Each change in the system was motivated largely, if not entirely, by a desire to increase physician prescription-writing for the drugs of the pharmaceutical company. That motivation was very clear to the doctors—and there was no benefit evident to them. Like most persons in such a situation, the doctors reacted negatively. A past trusted relationship was degraded in terms of trust because the seller was motivated only by the seller’s needs.
Relationships and Fake Trust
When customer focus becomes largely a tool for seller profit improvement, consumers notice and become cynical. Lately, the language of customer focus is adopting the language of relationships, fostering yet another layer of cynicism.
Think of “relationship,” “loyalty,” and “trust.” All once had significant emotional connotations—for “loyalty,” think “semper fi” or “’til death do us part.” For “trust,” think the bonds of a handshake, or of fiduciary responsibilities.
But loyalty today is often defined as repeat purchasing behavior, to be tweaked by price promotions and “loyalty programs.” Brokerage firms talk customer focus but aggressively drive disagreements into binding arbitration, usually favorable to the broker. “Customer relationship management” software is sold on the basis of its ability to create customer profitability analyses (profitability to the software owner, that is, not to the customer).
In the dating world, it’s considered forward to say you want a relationship on the first date—but in business, we’ve gone one better and made it a marketing slogan before we’ve even met the customer.
Relationship concepts have been hijacked in service to selfish motives. When a company’s ad copy says, “you care about your children; that’s why we here at XYZ corporation are doing blah blah blah” the company is not only lying, but lying baldly and shamelessly about their motives. What is at stake is no less than the meaning of words, and therefore the credibility and trust of the company saying them.
Successful Relationship Strategies
If a bank wants to implement a relationship strategy successfully, it needs to do two things.
1. Use Actions not Words. First, let your actions speak for you. Words aren’t just cheap—they’re destructive if they’re fake and you’re the one saying them. Trust is not an ad campaign. A person or company who says “trust me” is guaranteeing we won’t.
It’s great to have customers say they have a relationship with you, or that they feel loyal, or that they trust you. It’s fine to talk internally about how to achieve these things. But the relationship and the trust are cheapened and compromised when turned into ad copy for self-promotion.
The only valid relationship ad campaign worth doing is an internal one like “Just Do It.” Do cross-linked databases, enable cross-selling, help customers relate. Live the relationship; don’t brag about it. Consumers will get the point, and the best advertising is word of mouth.
2. Be Truly Customer-Focused. The most difficult thing to do in Trust-based Selling® is to stop viewing everything from our own perspective. The economics of trust-based selling rest on a paradox: if we do what is good for the consumer, we will gain more than our proportionate share of business. It may not come from this transaction, in this quarter—or even from this customer—but it will come. Nothing motivates repeat business or referrals better than a trust-based relationship with the provider.
“Best practices” and financial analyses are often used to assess the profitability of each product or service. In today’s world, such practices and analyses are defined in ever-smaller, ever-shorter, ever-narrower slices.
Such practices cause a problem, because they blind us to opportunities to serve our customers. In the perennial Christmas movie Miracle on 34th Street, Macy’s Santa Claus is nearly fired for recommending that a customer go to competitor Gimbel’s for a particular product. That is, until Macy’s Chairman realizes the profound increase in customer trust produced by Santa’s approach.
Being truly customer-focused means believing in the superiority of customer relationship strategies over competitor-focused strategies; the medium- and long-term over successive short-terms; and truth-telling over spinning.
The good news is the field is wide open for a bank that is willing to practice what everyone else only preaches—serving the customer, believing that to do so will ultimately return more than the self-serving narrowly calculating strategies of the vulture can ever hope to do.
A truly customer-focused relationship strategy built on trust is the best deal going. It is rare; most competitors are afraid to try it. It is powerful; ask any successful salesperson about the power of trust. And it is proven—just look at your own behavior as a buyer in relation to a seller you trust.
Trusting relationships have to start with the seller. Go ahead, take a risk. The ultimate paradox is, taking a risk ends up being the lowest risk. Being trusted is a very low-risk, high-return strategy.