Monday, 20 August 2012 16:40

Zimbabwe Banking Sector Customer Engagement Report Featured

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Zimbabwean banking is entering a new era of serious competition. A number of new, more customer-centric brands are either entering the retail banking market or seeking to grow their presence in it. However, the Zimbabwean banking market is proving not to be as easy as many players would have envisaged. Peculiar challenges, amongst them, the generally low liquidity conditions prevailing in the local economy, limited access to offshore lines of credit and the prevalence of cash based transactions present competitive hurdles. Further, arguments have often arisen on whether or not Zimbabwe is overbanked. Currently there are 24 registered banks in Zimbabwe (excluding Genesis Investment Bank and Royal Bank Zimbabwe Limited) battling for meager total deposits of just over US$ 4.00 billion (including interbank deposits).

Zimbabwean confidence in the banking sector remains largely on the low side. The period 2004 – 2008 was a nightmare period for Zimbabwe’s banking public. From cash shortages to withdrawal limits, incessant queues and bank closures, Zimbabweans confidence in the banking sector was shattered. In 2004, nine banking institutions, namely, Barbican Bank Limited, CFX Bank Limited, CFX Merchant Bank, Intermarket Banking Corporation Limited, Intermarket Building Society, Intermarket Discount House, Royal Bank of Zimbabwe Limited, Time Bank Zimbabwe Limited and Trust Bank Corporation Limited were placed under recuperative curatorship[1].

The introduction of the multi-currency regime has done little to restore public confidence in the banking sector. Deep seated structural and operational deficiencies continue to threaten the viability of many banks. Coupled with high percentage of non-performing loans and income generation challenges, a number of banks continue to be exposed to dire liquidity and solvency challenges. Indeed we are in an unprecedented period of increasing regulation and continuing pressures for banks.

Compounded by increased media coverage on bank industry challenges, the net result has been a more aware and selective banking customer. Banks have therefore found themselves in a reinvent (do) or die situation. Banks that will succeed in this economy will be those that are able to attract and retain customers on the basis of a sustainable blend of superior customer service, price-led competitive initiatives and relevant and diversified product offerings.

Our observation in undertaking this research has been that banks are also increasingly being expected to make full use of new and emerging technologies to improve the customer experience and differentiate themselves in customers’ eyes. At the same time the proliferation of available communication channels, and the rapid adoption of social media, online and mobile technologies by consumers, means that customer expectations of how they should be able to interact with their bank are changing dramatically.

Above all, this research has revealed that the buzz word amongst customers is convenience. Customers are looking for convenience from their banks. Many banks have often used control and security as reasons for their remarkably slow and impersonal services – yet the customer now speaks with one voice, “no more”. This research suggests that customers (41.56% of bank customers surveyed) are very agitated by their banks prolonged turnaround be it in simply being served in the banking halls or in responding to general queries or in processing transactions. Moving forward, the preferred banks are those that are able to deliver superior and reliable service in the shortest time possible. The research also reveals that critical to convenience is accessibility. Customers want their banks to be accessible – accessible either through the internet, wide branch network, ATMs’ or customer hotlines that work.

This report reveals that though many of the expectations that customers have of their banks are really realistic and achievable, very few banks are living up to them. There report also suggests the consequences for those banks that that continue to ignore customer needs will be disastrous. 75.30% of the research participants said they want to move away from their current bank. The era of traditional banking has passed. Traditional banking players have an urgent need to overhaul their current approaches to customer engagement. Customer engagement interventions need to be immediately implemented or risk a mass exodus of your banks’ clientele.

We believe that to survive in this new environment, banking sector players will have to fundamentally restructure the way that they engage with their customers. Those banks which are able to create and deliver a flawless customer experience, which allows customers to interact via the channel that suits their particular needs and comfort zone, wherever they are, and at whatever time of day will succeed in this environment.

To ensure that they can deliver a superior customer experience, which drives loyalty and revenue growth whilst also controlling operational costs, banks will need to ensure that they strike the correct balance between ‘high-tech’ channels (including online and mobile) and the ‘high-touch’ channels (such as branch banking and call centers). Banks will also have to make serious commitments to reducing lead time and providing tailored offerings as these are critical components in meeting the expected experience.

This report contributes to Industrial Psychology Consultants goal to help leaders understand the forces transforming the local and global economy, improve company performance, and work for better national policies. The report is in-line with our mission of maximizing returns on human capital. As with all Industrial Psychology Consultants research, this work is independent and has neither been commissioned nor sponsored in any way by any business, government, or other institution.

Driving Customer Value Through Engagement

Banking institutions operating in this harsh and competitive economic environment face a huge challenge: to acquire customers efficiently and to effectively retain them. This challenge can be addressed through a defined focus on customer engagement, defined as the strengthening of the customer relationship across touch points, including the internet, phone, in person, and through transactions.

Customer engagement has been thoroughly researched and explained by renowned global consulting groups, Gallup Consultancy International and McKinsey et al. Research has revealed that fully engaged customers spend more, stay with you longer, and are more profitable than average customers. It is not surprising to know that organisations that have placed customer engagement at the foundation of their marketing strategy tend to win in the marketplace. These organisations understand a simple fact: organizations that engage their customers outperform those that do not.

To achieve customer engagement, organizations need to align themselves around the idea of building a base of high-value, committed customers. Engaged customers are less likely to jump ship when a competing offer comes along. A recent Gallup survey found that only 3.8% of “fully engaged” customers closed their accounts compared with the average 6% departure rate for all customers, translating into a customer retention yield of 37% – and this is an important finding.

The profitable goal here (and the essence of engagement) is to acquire customers efficiently and to effectively retain. In this environment, banks may essentially not be able to compete based on price but they can differentiate themselves through building stronger relationships with their customers. Strengthening relationships with individual customers is an open avenue to business success, and has become a financial imperative for the industry. Stronger customer relationships can be used as the foundation for building lifetime customer value. Customers with a history of positive interactions are more likely to consider new products and services from their existing financial services providers. Knowing a customer’s transaction and service history, banks can better tailor their product and service offering to meet their exact customers’ needs.

Yet as this research will show, customer engagement is not only about strengthening of the customer relationship across touch points – this is not enough. Customer engagement is also not only about creating brand awareness and adopting an aggressive mass media approach – these are increasingly becoming irrelevant and really are far from what the Zimbabwean banking public expects. Those banks that are serious about making their competitors irrelevant must do more outside the confines of the traditional marketing organization. As the McKinsey group noted “at the end of the day, customers no longer separate marketing from the product—it is the product. They don’t separate marketing from their walk-in or online experience—it is the experience.” In the era of engagement, engagement will be driven by strengthen relationships with the customer at whatever point of contact with the company.

Who Is Doing What and Who Needs To Improve Where?

Very few Zimbabwean banks have successfully engaged their customers. To better understand customer engagement, we have used the engagement ratio as a measure of analysis. The engagement ratio is a macro-level indicator of an organization's health that allows executives to track the proportion of fully engaged to actively disengaged customers. In average organizations, the ratio of fully engaged customers to actively disengaged customers is 0.8:1 — meaning that these organizations have less than one fully engaged customer for every actively disengaged customer. Conversely, in world-class organizations — those organizations at or above Gallup’s 90th percentile — the engagement ratio is 8:1 – 10 times larger than the average organization's ratio.

Our findings suggest that engagement ratios amongst Zimbabwe’s banking are appallingly low. Of the 13 banks that qualified to participate in this survey, 7 banks were below our sample 50th percentile – the engagement ratio 3:1. When compared to the Gallup benchmark, only three banks were either at or above the envisaged engagement ratio of 8:1 – these were, MBCA Bank, Ecobank and CABS. This is not surprising. An assessment of findings in Table 1 (below) will show that the customers of these banks have unique commendations for their banks.

When you consider the return that fully engaged customers are worth to your organization, a focus on increasing this ratio is a critical part of any growth strategy. This report challenges our banking institutions to seriously consider what steps they have taken to engage the customers? And further, just as importantly, how do you know whether your efforts are paying off (can you confidently say you are getting a return on your current customer engagement interventions)? Gone are the days of simply implementing a haphazard approach to engaging customers. Banking institutions that will succeed in this era are those that unleash their potential for growth by establishing a program that answers both of those critical questions.

Last modified on Monday, 20 August 2012 17:43

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