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Can&#39t get no satisfaction?

In a one-to-one environment, we seek a solution for every type of consumer and market it exhaustively – and we have never had it so tough.

It has been a year of bad publicity, the stockmarket is weak and we are challenged by people changing their entire investment strategy. With the poor performance of Isas, investors are seeking someone to blame. Technology creates new demands and customer attitudes are transformed.

Where does all this lead the financial adviser? To a re-examination of profit drivers with an intensity never before seen.

Consider the facts. A 5 per cent increase in customer retention for a brokerage will give a 50 per cent increase in lifetime profits from a typical customer. For auto or home insurance, the average is 84 per cent while for life insurance it is 90 per cent. This is from probably the most comprehensive study conducted into profitability and growth by Bain & Co.

Customer retention now extends far beyond a commitment to service. Where there have traditionally been a small number of defined customer contact processes, many more are now necessary to maintain customer relationships. A prime example is active customer satisfaction management.

The forces influencing customer satisfaction are many. Competition nurtures expectation, styles and preferences change and mere customer satisfaction is no longer enough – only delighted customers are considered safe.

Rather than taking a snapshot of customer temperature, the provider or IFA can continually track – and manage – satisfaction using carefully honed parameters that probe for the underlying attitudes driving purchase behaviour. This can help to tease out those characteristics of products or service that have a deeper impact on propensity to repurchase. This forces attention on process improvement activities where they are most needed rather than spreading resources over issues which appeared significant but which actually have little customer effect.

Programmes begin with a pilot study, typically around three months. This might involve 10 to 20 per cent of customers across a range of segments plus control groups.

This process starts with segmentation. For an IFA group, this might mean multi-portfolio clients, business clients, wealthy investors and single-product clients. For the provider, this might mean similar groupings and/or IFA groups. Some notable satisfaction programmes are run by providers specifically to uplift intermediary business. Often incentivised, such initiatives are evaluated by the impact on profits of all parties.

Further segmentation is then advised, for example, based on recency and frequency of purchase. These additional groupings allow assessment of the variations of impact. One of the most crucial factors of the programme&#39s success is the questionnaire.

It is not simply a case of deciding which questions to ask (itself managed over time through significance and other analyses). Subtle changes in nuance or the order of the questions can have an important impact on outcomes and need to be tested continuously. Dialogue should be highly interactive without eroding the validity of the quantitative measurements.

The questions themselves are rarely spectacular. It is the analysis that sits behind which is important. Example questions might be: “On a scale of one to five, how well do you feel your adviser keeps you informed on X, Y and Z?” or “Do you feel this policy has retained the competitive edge you mentioned this time last year?”

More traditional paper-based surveys are arguably outdated. Inherently self-selecting samples, they reveal a significant dissatisfaction bias which distorts the picture.

While identifying concerns is extremely positive, the largely unavoidable lag in postal surveys (in both their completion and subsequent action) coupled with the awkwardness of tailoring questions acc-ording to previous answ-ers render this a crude approach.

Any perceived reluctance of customers to complete telephone surveys is, in our experience, a myth. We are seeing completion levels of around 75 per cent for intermediaries and customers of mortgages and multi-product portfolios. The cost per completion is also lower as can be seen in the table below,an aggregate of several programmes.

The proactive approach is welcomed. On average, 90 per cent of financial services interviewees say the interaction is “very beneficial”. Furthermore, contacted customers rate their satisfaction higher. One large intermediary, for example, witnessed 11 per cent more “very satisfied with the company” and 46 per cent fewer “very dissatisfied with that company”.

Contact also stimulates the customer to return soon afterwards. In one study, this topped a 41 per cent increase.

What should such a programme achieve? Measurements should be based on the validated identification of:

•Key drivers of satisfaction and customer retention.

•Operational standards requiring additional focus.

•Issues that the customer wants to discuss.

The customer must be left with no outstanding irritations and a strong feeling that their opinions have been sought and that they matter. Next week, I will explore customer churn management programmes.

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