Despite headline-making mergers among megabanks, small and midsize institutions have nothing to fear if they stay focused on their strong suit: customer service.

That's one conclusion drawn from a survey we recently undertook measuring telephone courtesy and response time among Chicago's largest banks. And judging from the pervasiveness of sloppy telephone manner, customer service may be the Achilles' heel of big banks nationwide.

If the conclusions pan out in markets around the country, smaller institutions would be advised to underscore customer relations as the cornerstone of their marketing efforts.

As an agency that works with small and midsize banks, Tynan Marketing decided to investigate the widely held assumption that community banks provide better service than mega-financials. We called each of the 12 largest banks in Chicago three times and asked the same question: How much total interest would I pay on a mortgage at the current rate?

The response - or lack of response - was startling.

Of the 36 calls made, less than half produced answers. And many of those were incorrect. Furthermore, if you leave your big bank a voice message, forget it. More than 80% of the time you won't get a call back.

Wading through a big bank's telephone system is a daunting task often accompanied by mounting frustration.

While statistics show the average caller spent five minutes and 29 seconds on the telephone, they don't reveal the frustration and hostility that builds up as the customer is typically bounced to 4.2 bank employees - or telephone menus - before encountering the appropriate person's voice mail.

Voice mail should be a convenient message taker for customers who find staff members away from their desk. Instead it has become a tool to insulate employees from customer problems. Half of our inquiries ended up in someone's voice mail. Of 18 messages left, only three people - less than 20% - called back.

A response, however, is no guarantee that an answer is accurate. Although mortgage rate, principal, and term were identical for five banks, five loan officers responded with five different interest totals and a spread of more than $130,000. One large bank gave three different answers.

As a customer and vendor who has been telephoning smaller banks for more than 20 years, I experience a dramatic difference between calling large and smaller institutions. We find community banks tend to respond in a third of the time, transfer calls less than half as much, and generally dispense more reliable information.

And the reasons are readily apparent: At community banks there are fewer specialized departments, fewer levels of management, and a smaller volume of calls. Community banks are closer to the customer. Electronic menus are rare, because small bank personnel are required to listen.

All this makes it clear that small banks should tout their customer service superiority rather than compete on price, product, or proximity. Customers want service, service promotes loyalty, and loyalty means the opportunity for bigger profits.

However, the promise of responsive service isn't enough. Customers have been trained to be cynical. They need to see, feel, to touch a difference. Here are some ways smaller banks can capitalize on service superiority.

*Assess your own performance. Use a mystery shopper to make telephone calls and visits to ensure you do deliver superior service.

*Integrate quality control monitoring mechanisms in every aspect of the bank to measure performance and customer satisfaction.

*Underscore superior service in all advertising, brochures, statement stuffers, annual reports, and point of sale material.

*Use testimonials from satisfied customers in advertising. Conduct customer contests to document examples of outstanding service.

*Avoid diluting your ad message by constantly switching from service to product and price promotions. Include a promise of good service in all advertising.

*Demonstrate friendly service across all functions of the bank, from reception to maintenance.

*Be sure banking representatives carry the same message and maintain personal relationships with retailers. Avoid reassigning personnel too often.

*Use a live switchboard operator as much as possible. It's a constant reminder of personal service.

*If you must use electronic menus, make sure the customer always has the option to bail out and speak to a live operator.

Personal service had always been a hallmark of the community banker. Now it has become the key to growth and profitability in a highly competitive environment.

Mr. Tynan is president of Tynan Marketing, a Chicago-based financial consulting firm.

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