You already know what your vocal customers think. Those who love you tell their friends about you. Those who are frustrated with you tell you so, giving you the chance to fix the problem. The customers you should be concerned about are the silent majority. They are the most vulnerable to the marketing messages of your competitors. So, how can you change the narrative and turn those customers into raving fans? Customers switch financial institutions for a variety of reasons; some we can control, others we cannot. As bankers, we often do not see things through the lens of the customer, a thing we can control. When you are closing more accounts than you are opening or are at net zero, it is time to reevaluate three key areas: fees, culture and service. Numbers That Matter First, move beyond a narrow focus on fees themselves. The metric we need to drive is total profitability. The profitability formula is simple: Total Profitability = Average Profits per Household × Number of Households. When it comes to maximizing a bank’s overall profitability, the focus is often on profits per household alone. The problem with this approach is that averages only tell you so much. What banks should focus on is the other half of the equation: the number of households. Rather than expecting customers to understand our banker ways, let’s view the world through their eyes. Rather than charging current customers more, you should increase the number of households. In doing so, your total profitability will soar. Most FIs can handle many more customers with little impact on operating costs. With a strategic approach to growth, community banks can double their number of new-customer acquisitions and sustain that growth for as long as they like. Consumer-Friendly Approach to NII For almost a decade, “free” accounts were almost universal. Fast-forward to today, and banks have reversed course by implementing a wide range of fees. What we have found is that not all fees are created equal. In fact, fees rank as one of the most common reasons people switch financial institutions. We are all familiar with the fees that anger customers, from monthly service charges to minimum balance fees. These you can and should avoid. Instead, focus on fees that drive profitability. The three big fees in retail banking are overdrafts, interchange and value-added products. While some uncertainty remains over the future of overdraft fees, too many institutions simply stopped providing this valuable service rather than implementing customer-friendly practices. Over the last three years, interchange income has outpaced overdraft income and will continue to be a significant profit driver. Interchange is not directly paid by customers, so there isn’t the sensitivity about it. Banks 23 NEBRASKA BANKER
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