Skip to content

4 Pitfalls of Customer Loyalty Measurement

July 6th, 2012

As technology empowers customers to do more of their routine banking at home or on the go,  interpersonal banking encounters are simlutaneously becoming less frequent and more important in the hierarchy of loyalty building experiences.  Even smaller community banks and credit unions are finding it necessary to differentiate themselves more distinctly by providing superior “memorable” experiences for their customers.

Measuring how well these experiences are received by customers is key to successful differentiation, but too often some key elements of the measurement effort are overlooked, resulting in average instead of exceptional results.  The basics of asking  the right questions, getting  the right sampling and comparing  yourself to the industry are good, but there are more nuances to a successful effort.  The real elements of success are too often learned the hard way resulting in either expensive resolutions or creating cynicism about the process that ultimately leads to its demise.

Here are a few pitfalls we have identified after working for over 20 years with financial institutions to track and improve their customer experience:

Pitfall #1: Research spend isn’t leveraged for its full value

Although it’s becoming less expensive to measure service, it can still be a significant line item that needs to be justified.  While providing timely and actionable feedback to the front line is typically the central purpose of tracking data, using it for segmentation analysis, problem resolution and enhancement of reputational strength will add considerable bang to your research buck.


Typical tracking studies look at results from a geography or institutional hierarchy point of view (as they should) in order to provide accountability and motivation for service improvement.  However, looking at results from the standpoint of customer segmentation can provide significant insights into how different sets of customers feel about how they are being treated.  In the age of big data and customized banking services, this knowledge is extremely valuable for financial institutions who want to train their front line staff to identify and meet individual customer needs.

Problem Resolution Tracking

Knowing a customer is not happy and not doing anything about it is like throwing money out the window.  Tracking studies often identify at-risk customers at an aggregate level but nothing is done to reach out to individual customers and resolve their issues.  The data shows that 16% of the most memorable positive experiences people have with their banks are when someone helped them resolve an issue.  Tracking surveys identify these customers one by one, giving you the opportunity to turn a potential defection into a significantly more loyal customer.   Banks who get the most out of their customer satisfaction tracking make sure they have a system in place to follow up with at-risk customers in a timely manner.  Additionally, keeping track of problem resolution trends allows for strategic interventions that minimize these negative experiences.

Reputational Presence

A customer who says they have recommended or would recommend your financial institution to a friend is a great resource for expanding your reputational presence.  A post on Facebook or Twitter has 5 times the impact of traditional word of mouth and as many as 23% of banking customers are willing to share their positive experiences on social media sites.  Financial institutions who make the most of their tracking studies invite customers who have had a positive experience to share their comments in a social media setting and make it technologically simple for them to do so.

Pitfall #2: Employees perceive feedback as less than fair

Customer feedback was originally conceived as a less subjective alternative to mystery shops.  Employees often find it easy to discredit shopper opinions but  customer feedback is more difficult to argue with and is also more closely linked to bottom-line results than third-party evaluations.

Nevertheless, staff can be disenfranchised by customer feedback studies if they feel they are held accountable for aspects of the customer experience they think they don’t have direct control over.  Especially when scores fluctuate in a way that seems erratic, employees can feel no matter what they do they can’t make a difference, and the effort will quickly lose momentum.  Some countermeasures are as follows:

1)      Ask for staff feedback on which questions should be measured and how to calculate the key statistic.  Most often they will make suggestions that weigh heavily in their favor, but the empowerment and energy derived from incorporating at least a few of their ideas will often have a much stronger impact on service levels than implementing a conceptually perfect program that the front line disagrees with.

2)      Provide lots of education.  Make sure staff understands how the data is being collected and even let them experience it themselves.  Provide explanations for how the scoring works and clearly explain its connection to the overall service strategy.  Give them training  on how to impact customer perceptions of service for each of the attributes or behaviors they are being held accountable.  Better yet, enable them to easily share their own ideas on how to impact customer perceptions organically with other front-line staff.

3)      Make sure everyone in the organization is accountable.  Customer facing staff feel more empowered when they know their managers and the internal support partners they work with are also being held accountable for the service they provide to the front line.

4)      Eliminate some of the fluctuation in team/branch scores by instituting a 3-month or 6-month rolling average.  This will increase the number of surveys in the score and decrease the hills and valleys.

Pitfall #3: “Satisfaction” is the goal instead of loyalty

While customer satisfaction is important, it is only the first step toward the type of customer behavior that creates institutional growth.  In the banking industry, 60-80% of customers who defect to competitors report having been “satisfied” with the service.  Organizations that center their tracking efforts on behaviors that meet expectations or “satisfy” their customers will not differentiate themselves as service leaders. Helping the customer feel valued by the bank, customizing experiences according to their individual customer needs and circumstances, and proactively helping customers to have better experiences with the bank are all things that front-line staff can do to engender loyalty beyond satisfaction.  Incorporating these aspects of service into the tracking tool will ensure a greater return on the tracking spend.

Pitfall #4: Focus is on the metric instead of the customer

Timely and actionable reporting is key to empowering staff to improve service, but more frequent and more detailed feedback isn’t always the most efficient way to do this.  Many organizations have spent a lot of money on reporting systems that allow employees to see every cut of every conceivable subset of data, and have provided real time updates to boot.  While this may be the right approach for some organizations, for others the effect has been that staff are more concerned about checking their latest score than they are about seeing what they can do for their next customer.  Identifying the right frequency for updates and the right statistics for the front-line will ensure focus remains on the customer and on action plans, and will also reduce the amount of money you have to spend on reporting.

Image by originallittlehellraiser