The management of a major retail bank was concerned about statistics that suggested a gradual weakening of customers’ relationships with the bank. Over a six-month period, the percentage of customers who maintained 100% of the total value of their deposits with the bank decreased significantly, from 37% to 29%. The corresponding decrease for personal loans went from 43% to 39%. Recognizing that customer service is the key differentiator between competitors, the bank commissioned a study using a customer survey from the National Business Research Institute (NBRI) to identify aspects of the service culture that could be leveraged to address the problem at hand.
To address the needs of the bank, the NBRI research team conducted a service-profit-chain analysis. The study used Structural Equation Modeling and a time-lagged design where customer survey data for one time period was linked to employee survey data from the preceding period. This design facilitates a more causal interpretation of data than the more commonly used cross-sectional designs.
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The results of the customer survey study drew attention to specific aspects of the service climate and work environment that impact business outcomes. In general:
- Branches with superior performance in the area of customer deposits and loans were also branches where:
- Customers had more favorable reports about the courtesy extended to them. Customers at these branches generally reported that employees were more courteous, professional, and positive in their attitudes.
- Employees reported stronger working relationships within and across work groups.
- Branches with higher levels of performance with respect to customer loans were also branches where:
- Customers perceived employees as more competent, i.e., customers had more favorable reports about employees’ knowledge and their ability to solve problems and offer sound, unbiased financial advice.
- Employees reported higher levels of empowerment, i.e., they had more positive reports about their ability to meet the needs of their customers and their accessibility to training and resources.
Overall, the analysis of the customer surveys highlighted the importance of a service climate that emphasized courtesy and competence, and a work environment that promoted strong working relationships and empowerment. Based on these findings, the bank implemented the following:
- Training programs were revamped and new ones designed to emphasize relational components such as teamwork and intellectual components such as competence and problem resolution.
- A courtesy campaign was launched to promote courteous and professional behavior towards customers and colleagues.
These actions have begun to bear fruit. Results of employee engagement surveys and customer satisfaction surveys conducted a year later show that the biggest improvements in customer loans and deposits occurred in branches that had the strongest gains in the working relationships and empowerment categories.
Many companies, even traditional heavy manufacturing firms, have developed a services-focused business (maintenance contracts, for example) where the service profit chain holds true. Companies that identify the aspects of their service climate that impact performance by deploying an NBRI customer survey have created a market advantage that is not easily emulated by competitors.