Banking Industry and Customer Research Given the Case Study

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Banking Industry and Customer Research

Given the competitive atmosphere in banking and the need to interest and retain clients, banks rely strongly on client's satisfaction and customer loyalty. This is particularly so given today's slowing industry growth and tremendous pressure to maintain and hold onto one's business. Traditional banks also today face competition from online banks that can afford to offer customers attractive deposit products at low rates and that provide attractive interest rates. Aside from that, traditional banks face competition, too, from non-banks, such as a Wal-Mart, that open banks within their stores. For all these reasons and more, the reputation and success of traditional banks directly hinges on the extent to which they manage to retain their client's services and please him to the extent that he will refer others to the bank. The better then that the bank knows their individual clients and factors that they seek from the bank, the better then will the bank succeed in pleasing these clients and attracting others. Customer research, ipso facto, is a significant part of marketing in terms of enabling the bank to maintain and enhance its portfolio.

Customer research is all the more effective when it characterizes an open door policy with the bank and when it uses inbound marketing to reach customers outside the bank. In fact, given that banks have a tough time to differentiate themselves from one another, they rely heavily on consumer's feedback since they are constantly looking for ways to set themselves apart from the competition and to improve their bottom line. One way that they seek to do so it to optimize their customer service and here's where the research comes in handy.

That consumer research is specially valuable for banks in helping them optimize customer service was discovered by a study of 19 major retail banks conducted by Deloitte & Touche and the Consumer Bankers Association as well as by an independent survey operated by Genesys Telecommunications which indicated that 48% of customers revealed that the level of customers service was their reason of inducing them to stay with the bank (Genesys).

Industries generally have some sort of instruments to gauge their success and outcomes of work performance. The consumer survey is the metric that the bank can use to gauge its success (Bahia & Nantel, 2000).

An example of just such a bank that uses customer research to its optimum and enjoys correspondingly successful results is the Hong Kong and Shanghai Banking Corporation (HSBC) which, operating out of the Hong Kong Special Administrative Region (SAR), remains one of the world's largest banking and financial services organisations. In fact, Forbes magazine rates it as the world's second-largest banking and financial services group and second-largest public company (Forbes, 2000). HSBC is the largest bank in Hong Kong. As of December 2011 it had a market capitalisation of £87.4 billion, and was the third largest company listed on the London Stock Exchange (FTSE, 2011). Its endeavours to research consumer interests and please its customers are pointed out by one of its many content customers on his blog who noted that "as far as I know, there are no banks do better than HSBC (the Hong Kong and Shanghai Banking Corporation), the world's local bank, in terms of international banking business"(Sheng, n.d.). He attributed that observation to the fact that HSBC goes out of its way, and succeeds, in pleasing its clients. Many banks have suffered from the recession, but HSBC seems to have pulled through. This is because clients have come to see its business as reliable, because its services are tailor-made to suit individual clients, and because they are careful to accord dignity and respect to each and every client. Sheng (n.d.), for instance, one of the many clients of HSBC notes that "the lady in HSBC" always folds up his statement and places it in an envelope before cordially wishing him good day. The bank is cordial to complaints and listens emphatically to each and every one of its clients.

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Never condescending or indulgent with its success, the Bank is consistently interested in the opinions of each and every one of its clients and strives its utmost to please them. The Bank has 41 million people worldwide as clients (HSBC). Yet with painstaking consumer research that is conducted on both a macro and micro scale, the Bank ascertains that it goes out of its way to please not only major business corporations and governments but also the child from the street who has opened his first bank account merely the day before. It is not wonder that Sheng (n.d.) exclaims that if HSBC ever "goes bust," then the world has really come to an end.

Recommendations

Customer research is important and there is no doubt that banks benefit from employing such a tool, but equally important is the way that it is operated. That this is so can be seen from a study conducted by Xerox that showed that Europe's top 25 banks and Financial Services companies spend an approximate $9.2bn on sending financial information and customer surveys to their clients every year unaware of the fact that their doing so aggravates and annoys consumers who feel flooded with the information. Consumers also feel that much of it is irrelevant. A mere customer research would have unearthed this point with dual purpose gained: (a) better pleasing customers by reducing paper flow, (b) saving themselves more money by directing it at better communication.

Banks try targeted communication and all sorts of ways to effectively reach their customers through consumer research but consumer research is an art in itself and the response is that banks are still fumbling to find the right approach: being trustworthy yet personable (Xerox). Surveys formatted to be more sensitive to customers by showcasing fewer questions and possessing more comprehensible language as well as being less frequent may evoke more honest and direct response.

The other problem is that for research to be effective, it has to be done well and sometimes, differences in cultural patterns and preferences, as for instance, in ways of living, or geographical differences can render the project of applying ideas from one bank to another counterproductive however effective these ideas look. The ideas may or may not be helpful to a particular bank -- this is where customer research comes in handy too (Breakwell et al., 2007).

Finally, various models for consumer surveys that banks can use are in circulation. The most popular seems to be that called SERVQUAL, which can be used in both original and adapted versions and has been done so by a variety of banks (Bahia & Nantel, 2000). An effective consumer survey according to Parasuraman et al. (1980) should measure five qualities. These are: 1. Tangibles, 2. Reliability of bank, 3. Responsiveness of the bank to consumer's needs, 4. Assurance that client is helped, and 5. Empathy. (A cursory glance at HSNBC shows us that all these characteristics are more than adequately met). Each of these five dimensions are measured by SERVQUAL, and any other effective consumer survey that banks decide to use should - Parasuraman et al. (1980) recommend -- be constructed along the same lines. In 1985, Parasuraman et al. added 5 additional characteristics of competence; courtesy; understanding; access; and security.

Conclusion

In order to gain and sustain competitive advantages in the fast changing banking industry, customer research is an important and crucial tool for bank managers to help them identify needs and desires of their clients as well as to single out prospective trends. This is particular important given today's slowing industry market and intensity of competition that the undifferentiated banking sector faces from both online banks and from non-banks within corporations.

Customer research needs to be conducted with the client in mind so that just….....

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