East & Partners

Referral culture key to banking engagement

(10 August 2004 – Australia) It’s a well established fact that regardless of how much advertising and marketing a business does, the most effective way of reaching prospective customers is through referrals and advocacy from existing customers.

East & Partners recently asked corporate CFOs which information sources they relied on when choosing whether or not to engage a certain service provider. More than 70 percent said colleague and peer "word of mouth" was a key determinant in making decisions.

One high profile bank chief executive recently highlighted the strong correlation between strength of relationship and customer retention/acquisition. He said the strength of relationship score indicated the degree to which a customer would become an advocate of the bank based on the service they were receiving.

To test the level of feeling displayed towards their banks by CFOs, East added the following questions to the most recent round of SME, Commercial and Top 500 Corporate banking research releases: Have you ever recommended your primary bank to business associates/colleagues? Do you and your bank enjoy an empathetic or antagonistic relationship? Did you "inherit" your primary bank or did you choose to engage the relationship?

Of the three market segments, the SME sector had the most jaundiced view towards its banking service providers with 62.4 percent of interviewees saying they never recommended their bank to colleagues and 70.9 percent saying they had an antagonistic relationship with their bank. Some 44 percent of Commercial enterprises said they never recommended their banks, while 54.4 percent said their relationship with their banks could be both empathetic and antagonistic.

Corporate companies are demonstrably more positive about their bankers with 38.6 percent indicating they regularly recommend their banks to peers and associates and 37.1 percent saying they enjoy an empathetic relationship with their bank. However, 52.6 percent said the relationship they had with their primary bank was tempestuous.

Responses to the final question posed to CFOs offer much food for thought for banks looking to retain and engage customers. The vast majority of Commercial and Corporate CFOs inherited their banking service providers when they took over the financial reins. But almost one fifth of Commercial CFOs and 44.3 percent of Corporate CFOs said they chose their current service providers, suggesting that as CFOs move and change, so also are large portions of their corporate employers’ banking relationships.

CFO ADVOCACY OF THEIR BANKERS TO COLLEAGUES

Have you ever recommended your primary bank to business associates / colleagues?
		% of Enterprises
	SME	Commercial	Corporate
	N: 1,297	N: 803	N: 456
Yes, regularly	16.9	26.3	38.6
Yes, occasionally	20.7	29.3	13.3
No, never	62.4	44.4	48.1

Do you and your bank enjoy an empathetic or antagonistic relationship?
		% of Enterprises
	SME	Commercial	Corporate
	N: 1,297	N: 803	N: 456
Empathetic	16.2	30.0	37.1
Antagonistic	70.9	18.6	10.3
Both over time	12.9	51.4	52.6

Did you "inherit" your primary bank or did you choose to engage the relationship?
		% of Enterprises
	SME	Commercial	Corporate
	N: 1,297	N: 803	N: 456
Inherited	43.9	76.7	80.9
Chose	44.3	19.6	14.5
Reviewed and kept	11.8	3.7	4.6