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Relationships critical, but easy to misunderstand

Conventional wisdom says that banking is a business based on relationships. This is underscored in annual reports, speeches, press releases and other materials generated by bankers in describing business strategy.

In principle, the approach is pretty straightforward: bankers build relationships with customers by selling them more products and services, garnering a greater share of their financial business, thus increasing the loyalty and hopefully, the profitability of those customers over time.

But what’s a banker to do with those consumers who specifically nix the idea of a banking “relationship?”
While it sounds unusual, recent research from the Bank Administration Institute (BAI) reveals just that.

Specifically, BAI’s research called “The Frontline Experience” found that only 31% of retail banking consumers surveyed said that they were highly receptive to the idea of developing a relationship with their bank. While it’s hard to imagine in any service-related endeavor that consumers would dismiss the perceived benefits of a relationship, BAI unveiled some key findings related to credibility. Among those consumers that expressed indifference or skepticism about the notion of developing a relationship with a bank, the study found that perceptions of inefficient, unfriendly and poorly trained branch staff were key facilitators of dissatisfaction or mistrust.

The findings are a stark reminder of the gaps that may exist between strategy and execution, particularly when you consider other research that has been conducted by BAI. For example, a 2004 study of senior retail banking executives revealed that 90% of U.S. retail banking institutions stress relationship banking or service quality as their primary value proposition. But while banks tend to view “relationships” in terms of the number of accounts that a person has with the bank, a consumer views relationship banking in terms of trust and confidence that the institution is acting in the consumer’s best interest, according to BAI’s research.

When strategic delivery falters at the front line, opportunity and credibility are undermined, and the so-called relationship represents an uphill battle. And while many banks boast of outstanding product offerings, BAI’s research stresses that these offerings are not sufficient within themselves to move customers from what experts call a transaction-based relationship to an advice-based relationship.

While frontline contact personnel are critical in establishing relationships, BAI’s research reveals gaps there as well. Employee attitude surveys that accompanied the study indicate that a quarter of frontline branch employees surveyed said that they felt unprepared to handle the demands of relationship banking.

Many said that they were frustrated with components of the sales process, ranging from training to goal-setting to staffing and compensation. Indeed these comments underscore the fact that knowledgeable, well-trained staff do not emerge from one-shot training programs, but rather an ongoing educational commitment.

In conclusion, while bankers have stressed the importance of building relationships, BAI’s research shows that it’s critical to get beyond generalities.

As many banking organizations continue to expand in size, geographic scope and product/service offerings, it’s much more challenging — but not impossible — to delineate what the standard of service performance is at the front line. Simply stating that an organization is committed to building relationships is far different from executing strategies that result in relationships that are meaningful to customers.

Additionally, bankers must be willing to look at what constitutes a “relationship” from the consumer’s perspective, with “consumers” consisting of several different customer segments with varying priorities.

Assuming that a customer has a solid “relationship” based on the number of products or services tallied with the bank may prove to be a costly mistake in the long haul.

Tupelo-based freelance journalist and consultant Karen Kahler Holliday writes regularly for the Mississippi Business Journal. Her e-mail is mbj@msbusiness.com.

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