Bouncing Back

Look out credit unions and second tier banks; the big end of town is muscling in on your turf, and consumers are starting to buy it.

Australia’s Big Four banks have spent millions of dollars over recent months competing for social utility in the mind of the consumer, and the latest data shows it’s paying off.

CoreData’s latest Net Promoter Tracking report in the retail banking space reveals that while the major banks continue to underperform their smaller rivals in both absolute and relative terms from an NPS point of view, the variance across the industry when split by provider has narrowed considerably.

NPS aims to identify customer intent from a behavioural perspective, and assesses whether individuals are net promoters of a given institution, or are passives or detractors.

Promoters (those who score their primary banking institution 9 or 10) are loyal enthusiasts who keep buying from a company and urge their friends to do the same.

Passives (those who score their primary banking institution 7 or 8 ) are satisfied but unenthusiastic customers who may be easily wooed by the competition, while detractors (those who answer 0 through 6) are likely to be unhappy customers trapped in a bad relationship.

With the exception of Westpac, the number of ‘detractors’ within the major banks (ANZ, CBA, NAB and St George) has declined in the first half of 2010.

However the number of promoters varies. ANZ (‘we live in your world’) has seen no change in the number of promoters within its customer base, while the number of CBA (‘determined to be different’) promoters has jumped from 13.5%  in the second half of last year to 17.2% in the first half of 2010.

Interestingly NAB (‘more give, less take’), which has been heavily pushing its ‘no fees’ banking, has seen its share of promoters fall to 15.3% from 22.4% last year, as has Westpac (‘the bank you can bank on’) from 24.2% to 11.3%, most likely due to mortgage customer frustration over interest rate pressure after the bank famously raised rates by more than double the increase in the official cash rate in December last year.

While damaging for Westpac, the backlash might have benefited St George (‘big enough. Small enough’), with one third of customers now seen as promoters (33.3%), compared to only 21.1% last year.

Bigger is not necessarily better. But clearly the proposition of bigger, cheaper and focused on your needs – while they might not buy all three of these claims – is beginning to resonate with customers.

Recognising the need to offer customers social utility as well as economic utility (value), the big banks have changed tack and managed to narrow the gap between consumers’ perception of them versus their traditionally friendly, feel-good peers – the credit unions.

However the number of promoters within the ‘other’ institutions collectively – including credit unions and second tier banks – has likewise increased to 46.8% from 39.3%.

While it might be a necessary development in the evolution of the big four banks post-GFC, friendliness and likeability are largely irrelevant unless that sentiment can be converted into market share.

This is where the credit unions are failing.

Data taken from CoreData’s latest NPS Retail Banking Tracker Report.