The Relationship-Centric Bank. Detailed breakdown

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Author:Michael Ruckman

The Relationship-Centric Bank:

Learning what your customers really want just might be the key to creating a relationship-centric bank

According to a Gallup survey in 2009, only about half of customers surveyed could strongly agree that their banks performed the sorts of actions that likely would keep customers coming back, such as “making me proud of where I bank”, or “keeping me informed of new opportunities”, or even “understanding my financial goals” .

And a desire for repeated contact with a provider is just the beginning of a healthy relationship. Another survey conducted by Forrester in 2010 asked respondents if they agree with the statement, “my financial services provider does what is best for me not just its own bottom line”. Results showed that a majority of respondents simply don’t trust their banks.

Gallup has done extensive research on customer engagement (how and why customers have a strong emotional tie to products and brands). According to Gallup’s methodology, described in the article “Bankers, Meet Your Customers” (published in 2009), “the baseline requirement for customer engagement is rational satisfaction, which comes from meeting a customer’s needs, such as price, speed and efficiency.”

Companies that fulfill these needs are more likely to have loyal clients who renew and refer business. However, the “real difference in customer behavior and profitability comes from going beyond rational satisfaction to emotionally engaging customers with your products and services” . I would venture further to say that every customer contact that is positive, fulfilling, and emotionally engaging contributes to the health of the relationship, and, thus, the loyalty that a person feels toward the other party in that relationship.

“I would venture further to say that every customer contact that is positive, fulfilling, and emotionally engaging contributes to the health of the relationship, and, thus, the loyalty that a person feels toward the other party in that relationship”.

The Value of a Healthy Relationship

Why is a healthy, loyal customer relationship valuable for banks? Few would dispute the benefits, and many different studies show that loyal customers are less price sensitive , hold higher deposit balances , use more credit products , and also are better at credit repayment with the banks that have won their loyalty.

Gallup has proven that customers who are fully engaged in their relationships “delivered a 23% premium over average customers in share of wallet, profitability, revenue, and relationship growth, while actively disengaged customers represented a 13% discount on the same measures” .

Most bankers will rate loyalty and development of customer relationships fairly high on their list of priorities, yet customers seem to be unhappy with the quality of those relationships. Somewhere there is a serious disconnect, and the seriousness is reflected in a 2009 survey by Deloitte entitled, “Rebuilding the Relationship Bank”. For example, the study concluded that only 36% of the consumers surveyed were very satisfied that their primary bank understood their needs. And, when related to a major life event, such as getting married, having a child, nearing retirement, or moving to a new home, only 18% of the consumers surveyed reported that their primary bank had contacted them to suggest appropriate products. Shouldn’t understanding customer needs and helping them through major life events be some of the primary activities for a bank?

Why Banking Relationships are Different

Customers have regular contacts with many businesses that intersect with their lifestyle, yet banking relationships are a bit different. Signing for almost any banking product will commit the customer to ongoing contact with the bank for months, years, possibly even decades, so the psychology of the purchase must be different from that of other service industries – restaurants, hotels, airlines – that do not require such a long-term commitment. In fact, if we map different industries based on the level of difficulty of changing providers and the level of contractual commitment to providers, banks are clearly in an advantageous position.

Purchasing a bank product is inherently an act of attachment, and banks fall into the group of business that we refer to as “Join” businesses. In “Join” businesses, the products are similar to those of a membership in that their purchase will initiate ongoing or semi-ongoing contact with the provider. In this sense, an inherent relationship begins with the sale.

Many banks understand this concept, and some even refer to their customers as members, which is a huge step in the right direction. Understanding that healthy relationships with customers must include benefits outside of the minimum contractual obligation is the beginning of understanding how to build loyalty. We often draw inspiration from Maslow’s Hierarchy of Needs (originally articulated by Dr. Abraham Maslow in a paper that was published back in 1943) to better understand the building blocks of a healthy relationship. However, considering that the banking relationship is an ongoing collection of contacts and interactions between the bank and the customer, we would build the bank relationship hierarchy of needs with a slightly different twist, as follows:

Why Banking Relationships are Different

These five elements represent levels of a relationship with a bank that illustrate a hierarchy growing to a more fulfilling relationship with the bank as you move through each stage. Moving through these stages would indicate that the relationship would become more fulfilling to the customer and would create the desire for closer contact.

The Difference Between Product and Relationship Benefits

Throughout the course of the relationship, the customer may purchase and use many different bank products, and there is a distinct difference between the benefit that a customer receives from each individual bank product and the value and benefit of the ongoing relationship. Therefore, we must view the ongoing relationship with different characteristics and assess the health of the overall relationship separately from the quality of product usage. Our Banking Hierarchy of Needs shows the progression of the relationship in terms of the value that it can bring to the customer.


Is there a relevant reason for contact with the bank outside of purchasing and/or using a bank product? If not, then the relationship will simply remain that of user/provider. If banks wish to develop deeper relationships with customers, especially with the hyper-connected, self-serving customers today, then they will need to find relevant reasons for contact outside of sales activities and servicing products that they already sold. Contacts related to planning, budgeting, advice, education, special events, etc. would help to create relevant reasons for contact outside of sales and service.

Trust & Security

Is the bank a trustworthy and reliable source for these types of contacts and can the bank be trusted to be impartial and act in the best interest of the customer? Many banks offer some kind of advice, but it is usually very strongly tied to the sale of a particular product that they are pushing. In fact, most advice that we come across when visiting different banks is designed to highlight a particular product that the bank is selling rather than identify and act on the true needs and goals of the individual. Some advice is given before even asking questions about the individual’s needs and goals. This will surely generate some level of distrust and create a barrier for the customer to pass this stage in the hierarchy.


Does the customer feel that they belong in the relationship with the bank? This has a few different implications:

  1. Understanding different customer groups and personality types so that the bank can interact with them appropriately;
  2. Ensuring that customers feel welcomed at any point of contact and that the staff is genuinely interested in creating a positive and fulfilling contact for the customer;
  3. Creating aspects of a club-like atmosphere where customers can participate in events or activities with people that are in the same customer group or share the same interests.


How does the customer feel about the relationship with the bank when they are not interacting with the bank? Are they proud of their relationship? Do they talk about benefits that the relationship brings? Do they feel increased status when using the bank card or talking about the relationship? Banks will need to focus more on how customers feel about the relationship. If customers are unable to feel good about themselves when thinking about the relationship, then the relationship will always be at risk.

Growth & Transformation

How does the bank relationship help the customer to achieve their dreams, goals, and aspirations? People do not dream of a relationship with their bank, or a mortgage, or a car loan. They do, however, wish they could have a better day-to-day quality of life, help solving a problem, and help realizing goals and dreams. If a bank can play a role in helping with these items, with the growth and transformation in a person’s life, then the true meaning of Maslow’s self actualization can be achieved. If not, then the relationship will be unfulfilling for the long-term. In other words, the bank customer may be satisfied with the quality of usage of the product that they purchased, but the relationship will not fulfill one of the key components of the hierarchy of needs.

If banks begin to view their relationships with customers with the possibility of helping their customers achieve their dreams, goals, and aspirations, this is a much more appropriate use of Maslow’s Hierarchy of Needs. As it applies to the banking relationship, we could almost view it as a marriage of sorts. And to extend this idea even further, it is possible that customers, happy and fulfilled with the relationship, might choose to consolidate their financial activities in one place – in effect transitioning simple loyalty (which allows a customer to be loyal to more than one provider) to monogamy (loyal to and consolidated into one relationship).

This marriage would be nirvana for bankers – lower operating/infrastructure costs, lower risk, lower cost of acquisition per customer, lower customer attrition, higher profit per customer, higher deposit balances, and higher number of products per customer. What banker would argue with these benefits?

The Relationship-Centric Bank:

“People do not dream of a relationship with their bank, or a mortgage, or a car loan. They do, however, wish they could have a better day-to-day quality of life, help solving a problem, and help realizing goals and dreams”.

What Customers Really Want?

A while back, a friend told me that he would move back to cash and completely avoid banks if he could survive without owning bank products. His exact words, “My bank provides no significant value for what I pay, and usually, they make my life more difficult.” I started asking other friends, co-workers, aquaintances if they felt the same way about their banking relationship, and my search revealed similar feelings. When I asked people why they hadn’t already left their bank for another, the answer staggered me: “The others will probably be just as bad.” This answer had multiple variations, but the basic result is that people’s banks are satisfying only the most basic, rational requirements to retain their business, and it seems that people have simply learned not to expect much from their banks.

With this in mind, we started speaking with our clients and bankers at conferences and asked if they surveyed their customers to see what they really wanted from their bank. The result was that customers want good quality service at a low price, preferably free. Big surprise! Is it simply that customers cannot articulate what they would like to get out of a banking relationship, or is it that they just cannot imagine that it is possible (i.e. they expect so little that they wouldn’t possibly say something bold like, “I want my bank to be there for me when I have a problem and to help me to achieve my goals in life.”)?

We started working with clients to ask the question a bit differently and asked bank customers to complete the following open-ended statement:

The Relationship-Centric Bank:

“As a result of my relationship with my bank, my life is ________.”

The answers usually come back heavily weighted to the negative side and with very logical and thoughtful explanations of why they answered in that manner. Customers feel that their banks are not doing what they should to help, and, in most cases, they are making life more difficult, rather than understanding their role as a helper, facilitator, enabler. It gets even worse if you ask customers to choose from a list of adjectives to describe how they feel about their current relationship with their bank and how they would like to feel about that relationship.

We then started using surveys with scales related to different aspects of the bank relationship and asking customers to rate what they are currently getting out of their bank relationship and what they think they should be getting out of the relationship both in rational and emotional terms. The results showed that there is clearly a gap between the benefits that people would like to have and what they are getting today. It also showed that there is a large segment of the population willing to pay more for those benefits.

Maybe there are customers out there who are just looking for good service at a low price, but we found, repeatedly, in several different countries, that there is a significant portion of the population that is seeking more from their banking relationship and are willing to pay for it. It seems there is a need for this relationship-centric approach that has not been covered by sales-force effectiveness, operational effectiveness, service quality, and all of the other methodologies that are designed to improve sales and service. It seems that a significant market exists for those banks that are structured to engage in meaningful relationships with customers. And these customers are seeking an easier time managing day-to-day finances, as well as help solving problems when they arise, reaching their goals, and achieving their dreams. They want to feel that they belong with their bank partner, they want to feel good about the relationship, and they seek the growth and transformation that a bank can offer. But they clearly are not finding it today.

Joe Pine and Jim Gillmore illustrate this for us once again in their recently updated version of “The Experience Economy” by showing the highest level in their Progression of Economic Value when organizations can use a series of positive and engaging customer experiences to guide a transformation in the life of the customer. We look at this as the goal of the ongoing relationship between customer and bank. The customer will purchase and use many different bank products throughout the course of the relationship. Those contacts (purchase-related and usage related contacts) can be engineered to be experiential in the sense that each individual contact can be positive and engaging, possibly even memorable. But the sum of those contacts, and the result for the customer in the ongoing relationship, must be that the customer is “better off” than they would have been without that relationship.

The Relationship-Centric Bank:

“As a result of my relationship with my bank, my life is better than it would have been without them.”

How many people can say that? We have found, again repeatedly, that there is a significant portion of people who believe that it is possible even though they cannot answer in this manner today.

As mentioned in the article “Management and Ops” the coming decade could be a period in which Russian retail bankers could pioneer new models of customer interaction and engagement. This new frontier of relationship-centricity surely represents an interesting territory for continued exploration and development. Which Russian bank will be the first to design a retail business that is capable of consistently developing healthy, mutually beneficial relationships with their customers?

Michael Ruckman is founder, president and CEO of Senteo. He has worked as a banker and consultant for retail banks in more than 30 countries around the world. He has delivered a variety of successful projects ranging from business strategy to the launch of fully transformed retail institutions.

[1] Douglas Berlon, “Bankers, Meet Your Customers”. The Gallup Management Journal (2009).
[2] Jennifer Saranow Shultz, “The Least-Trusted Banks in America”. The New York Times, February 3, 2010.
[3] Berlon, 2
[4] Berlon, 2
[5] “Customer Loyalty in Retail Banking: North America 2010”, Bain & Company report (October 6, 2010), 3-6
6 Paul McAdam, B. Joseph Pine, “Customer Experience Rules,” BAI Banking Strategies (November/December 2006): 50, Article published findings of BAI’s research project called “The Relationship Experience” conducted in collaboration with Strategic Horizons LLB, an innovation and experience consultancy.
[7] McAdam, Pine, 50
[8] Bain & Company, 3-6
[9] Berlon, 3
[10] “Rebuilding the Relationship Bank Delivering a Complete Customer Experience”, Deloitte Center of Banking Solutions report (May 2009), 2
[11] A. H. Maslow, “A Theory of Human Motivation”, Psychological Review, 50, 370-96 (1943)
[12] B. Joseph Pine, Jim Gilmore, The Experience Economy, Updated Edition (Harvard Business Press: July 5, 2011).

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