Sunday, 24 June 2018

Information and commentary for the small business banking industry

Is customer satisfaction a good measure of small business banking success?

16 Feb

M&T Bank recently won 14 excellence awards and was recognized as one of the best small business banks in the US, in the Greenwich Associates 2011 Small Business Banking Awards.

Three of these awards were based on satisfaction measures – personal banking satisfaction, treasury management satisfaction, and overall satisfaction – and this got me thinking about other measures of success and whether there were better or more appropriate small business banking success metrics.

In my experience, quite a few banks, in the US and internationally, use some sort of customer satisfaction measure as an indication of how well they’re doing. To be fair, they probably do have some sophisticated and complex algorithm that is used to evaluate what each point of satisfaction is worth in dollar-based revenue, but it strikes me as a very vague way to measure success.

What’s wrong with satisfaction surveys?

Essentially, I am not convinced that people answer honestly and accurately when asked about their level of satisfaction. Using customer satisfaction as a measure reminds me of seminar or workshop assessments where presenters are rated on a scale of 1 to 10. I guess 8 and above is good. Or is it? Who knows?

I don’t really believe that this sort of satisfaction rating tells the presenter whether the people attending implemented the ideas successfully, or used the information learnt. It’s an arbitrary measure to keep the course going. Not many people give a low score of 1 because they may need to justify their reasons; it’s easier to give an arbitrary score of around 7 – not that good, nor that bad….

Using satisfaction as your measure of success can help marketing departments prove that their budgets are justified. It can be hard to prove that sponsoring an event, advertising in the media, signage, branding and social media activities actually makes any money. It is easier to conduct a survey of customers and ask them if they are satisfied. (Of course I would be asking the dissatisfied customers why they left… but that is another story.)

So how would I measure success?

I would measure:

  • Increases in website traffic
  • Increases in small businesses signing up to e-newsletters
  • Improvements in small business client retention
  • Reductions in the number of declined small business loans
  • Increases in the number of new small business clients

To me, these seem to be more practical ways to measure the performance of small business banking – although they are the result of happy and satisfied customers. This is what I would report on.

Interestingly, smaller banks also tend to score better on customer satisfaction surveys than the larger banks. This suggests that mimicking the smaller banks will help to improve all the measures: Thinking globally but acting locally. Actively running workshops for small businesses, getting managers to volunteer in schools, and providing free advice in enterprise centers are all ways to increase customer satisfaction and the more practical measures outlined above.

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