South African financial institutions are falling through the delivery gap with only one out of two customers perceiving positive value from these providers, a survey conducted by Markinor has found.
The study, Markinor’s first annual Financial Services Loyalty Benchmarking Report, which was conducted telephonically among a random sample of 1 332 customers of financial-services companies, provides critical information analysis in the four areas of retail banking, short-term insurance, long-term insurance and health-care insurance.
Heidi Brauer, marketing director at Markinor, says that in an environment of consolidation, acquisitions and mergers, it is critical for businesses — especially those delivering financial services to consumers — to understand the changing and increasing expectations of their customers in these fast-paced industries.
“The report, among others, identifies which companies are the stars of their sector and some unexpected loyalty variations,” she says.
“When assessing customers’ loyalty profiles, one in three customers will continue using their providers reluctantly and have negative perceptions of and attitudes to their providers. As many as one in five already have one foot out the door.
“Trapped and at-risk customers do not want to use the services of their provider and, if the exit barriers were reduced, a large proportion would be at risk of defection, creating significant churn in the industry,” she points out.
According to Markinor, the most significant factors — which lead to both positive sentiment and business-enhancing behaviour from customers — include the ease of doing business with the provider, quality of products and services, and brand.
In a market where consumers complain of “commoditisation”, the “differentiators” are increasingly service- and identity-related. The value offered by short-term and long-term insurers and medical aids for their customers’ money is an additional driver of loyalty in these sectors.
Of the four sectors included in the survey, retail banks have the highest level of truly loyal customers, albeit only half of their customers really want to continue doing business with their bank. Brauer says loyalty in this sector tends to decrease as personal income increases.
“For higher-income earners the barriers to exit are less daunting,” Brauer adds.
Long-term insurance providers are in a similar position. They can count on the loyalty of about half their customers but the higher-income earners are looking around.
Medical aids and short-term insurers can count on only two in five truly loyal customers and the phenomenon of potential churn is particularly pronounced in these sectors. This is indicative of the “grudge purchase” nature of buying behaviour among consumers.
Relationships that companies in these two sectors have with their customers are especially exposed to attrition, as one in five customers does not want to and does not intend to continue a relationship with his or her provider.
Another area that impacts customers’ loyalty across the board is brand — particularly in the retail-banking and long-term insurance sectors. An additional challenge for banks is to combine product innovation with highly ethical behaviour. The message is clear — as custodians of customers’ financial well-being, banks should clearly not place profits ahead of ethics.
For long-term insurers the challenge is to couple innovation with strong leadership. Reliability is a broad driver of loyalty among medical-aid customers, whereas an important branding ingredient for short-terms insurers is being seen as financially sound.
The study also found that despite the fact that modern financial service customers expect high-tech solutions, they still want high-touch service based on a return to relationship-driven business practices.
The face of a retail bank is its front-line staff. Teller staff, along with products, have a significant effect on customers’ loyalty in this sector. Expectations are clearly not met as only 57% rated their bank’s teller staff as excellent or very good.
For medical aids, the claims and payment procedure is the strongest driver of loyalty, followed by call centres, billing and statements. This is the only sector where products do not have a significant effect on loyalty.
Much the same holds true for long-term insurance companies. Interfaces between consultants and call centres influence customers’ loyalty. However, in this sector products do play a key role on the back of a very powerful demand for innovation.
The reality is that long-term insurers are not cutting it. Where two-thirds of customers rate the consultants as excellent or very good (a feather in this sector’s cap), just less than one in two think the products of these companies are adequate and only half believe the call centres are up to scratch.
The one sector where the product drive plays a dominant role is short-term insurance. This is no surprise, as anyone who has ever shopped for car or household insurance will tell you. Products in the form of a host of cost-cutting variants on established structures are punted aggressively.
Yet, companies in this sector get a positive vote from only half of their customers and less than half will vouch for the value they get for their money. — I-Net Bridge