subject: Customer Loyalty In Australian Financial Services - Market Research Reports On Aarkstore Enterprise [print this page] Introduction Introduction
Customer loyalty is set to become more important as competition returns to the Australian financial services market. The global financial crisis allowed the major domestic banks to capture much of new banking business, but with new entrants set to enter the market, customer loyalty is expected to gain in importance. This report analyzes a broad spectrum of topics associated with customer loyalty.
Scope
*Looks at the key drivers of customer loyalty and its state across different product categories.
*Analyzes which factors are most important to customers when considering staying with or switching providers.
*Provides analysis of best practice for financial services providers.
*Analyzes upcoming developments in customer loyalty.
Highlights
There are relatively few opportunities for financial institutions to acquire transaction account customers, with most opportunities closely tied to consumers' life events. An obvious opportunity is providing young people with their first transaction account. Customers can also be acquired when they move location or change jobs.
Besides their effect on customer loyalty and satisfaction, many loyalty schemes derive their value from the information that is gathered about customers during its implementation. This dimension is even more important in other industries, such as the retail industry.
As with the relationship between customer loyalty and profitability, customer loyalty and satisfaction are positively, but not perfectly, correlated metrics. As a result, an effective loyalty scheme does not necessarily have to drive customer satisfaction.
Reasons to Purchase
*Gain a thorough understanding of the customer loyalty issues Australian financial services providers are facing and what they are doing about it.
*Identify and evaluate the most successful strategies in customer retention and acquisition in different product categories.
*Understand upcoming developments in customer loyalty and where the opportunities will be.
Table of Contents :
"Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Background of 'Customer Loyalty in Australian Financial Services' 2
Customer loyalty can be caused either by satisfaction or apathy 2
Western European countries have a high level of customer loyalty in financial services 2
Transaction accounts are key products for engendering customer loyalty 2
Additional product holdings are not necessarily correlated with higher satisfaction 3
Opportunities to reach customers are often tied to customer life events 3
Competitive dynamics 4
Mutual society MFI customers are polarized about rates and convenience 4
The major banks have different strategies, strengths and weaknesses across product types 5
First-time accountholders are a key customer group 5
Savings account loyalty has eroded due to the rise in online savings accounts 5
Mortgage customer loyalty has leveled off as the market has matured 5
Credit card rewards programs have diminished in importance over the last several years 6
Loyalty: insights and recommendations 7
Devising the optimal loyalty scheme should focus on long-term profitability 7
Loyalty schemes can be characterized according to five features 7
Financial services share loyalty drivers with other industries 8
Set-and-forget industries share the same drivers of customer loyalty and churn 8
Churn management is an important operational challenge in the telecommunications industry 8
Hybrid products will make deposit products even more important for customer loyalty 8
Transaction accounts and savings accounts will merge into a single product 8
The merged deposit product will change the rules of customer loyalty 9
Recommendations for financial services providers 9
Pre-emptive measures toward switching are the most effective 9
Deposit account loyalty should be a key focus for financial services providers 10
Credit card reward schemes should offer more options 11
Risk-based pricing schemes should be considered by Australian mortgage lenders 11
Table of Contents 12
Table of figures 13
Table of tables 14
Background of 'Customer Loyalty in Australian Financial Services' 15
Customer loyalty is not always linked with satisfaction 15
Customer loyalty can be caused either by satisfaction or apathy 15
29% of transaction accountholders keep their provider for reasons other than satisfaction 17
Customer loyalty in financial services has decreased, partly due to the increasing number of market participants and products 18
Customer loyalty has decreased over the last two decades but has recently increased 19
From an international perspective, Western European countries have a high level of customer loyalty 19
Transaction accounts are key products for engendering customer loyalty 24
Transaction account stickiness may be challenged by expanded regulation 25
Propensity for switching is much higher for savings accountholders 25
Additional product holdings are not necessarily correlated with higher satisfaction 27
Opportunities to reach customers are often tied to customer key events 29
Global utility companies attempt to retain moving customers 30
Competitive Dynamics 32
Mutual society MFI customers are polarized about rates and convenience 32
Mutual society MFI customers are more likely to value the convenience of a single institution 32
Mutual society MFI customers are more polarized regarding the trade-off between rates and convenience 34
The major banks have different strategies, strengths and weaknesses across product types 37
Transaction account holding strongly influences take-up of other products 37
The proportion of long-time transaction accountholders varies between the major banks 37
First time accountholders are a key customer group 38
Dissatisfaction with a previous provider is a relatively common reason for switching account provider 40
Account switching propensity varies between institutions 41
Savings account loyalty has eroded due to the rise in online savings accounts 43
The major banks were slow to respond to online savings accounts 43
Online savings accounts have driven a convergence of rates 43
Online savings accounts have led to increased fee aversion across product types 44
Switching savings accounts is seldom planned and often rate driven 45
Cross-selling savings accounts to transaction accountholders is a classic bank strategy 47
Mortgage customer loyalty is relatively often built around disincentives 48
Refinancing has leveled off as the market has matured 49
Deposit products have a surprisingly high impact on mortgage provider 50
Credit card rewards programs have diminished in importance over the last several years 52
Each driver of card provider choice has been targeted by a different major bank 52
Cardholder loyalty varies by institution 53
Loyalty: Insights and Recommendations 56
Devising the optimal loyalty scheme should focus on long-term profitability 56
The optimal loyalty scheme engenders loyalty and satisfaction in profitable customers while collecting data 56
Evaluating the long-term profitability of loyalty schemes is a challenge 57
Customer satisfaction is a possible but not necessary effect of an effective loyalty scheme 58
Gathering information is a characteristic of many loyalty schemes 59
Loyalty schemes can be characterized according to five features 59
Loyalty schemes offered exclusively to new customers are in most cases a mistake 60
Disincentives can be a way to deliberately lose customers 61
Unprompted rewards can delight the customer if appropriately structured 61
Australian banks can draw insights from five-stage development model for card loyalty 61
Stage one: non-credit card loyalty schemes 61
Stage two: loyalty as a means of customer acquisition 61
Stage three: loyalty penetration declines as some issuers begin to withdraw their schemes 62
Stage four: move the program on or focus on price 62
Stage five: market maturity and co-brand settlement 62
Financial services share loyalty drivers with other industries 63
Set-and-forget industries share the same drivers of customer loyalty and churn 63
Churn management is an important operational challenge in the telecommunications industry 63
In the utility sector there are nine main steps toward true understanding of the customer 64
In Canada, banks have partnered with supermarkets to offer convenient interaction and drive loyalty 66
Hybrid products will make deposit products even more important for customer loyalty 67
Transaction accounts and savings accounts will merge into a single product 67
The merged deposit product will change the rules of customer loyalty 68
Recommendations for financial services providers 68
Pre-emptive measures toward switching are the most effective 68
Deposit account loyalty should be a key focus for financial services providers 69
Credit card reward schemes should offer more options 70
Risk-based pricing schemes should be considered by Australian mortgage lenders 71
NAB has recently introduced risk-based pricing for broker mediated mortgages 72
