One of the most valuable assets any bank can have is loyalty - loyalty of customers and loyalty of employees.
Loyal customers will hang in there even if you cut some corners. They will remain, as a losing Yale football coach said of the alumni half a century ago, "sullen but not mutinous."
The reason you want your customers to use more than one of your services is to foster loyalty. The web of relationships makes it hard to leave.
I recently reviewed a tape I made several years ago with Fenwick Garvey, then the CEO of Ryan Beck & Co., about selling branches. I was amazed to be reminded that of the hundreds Ryan Beck sold for its clients, in almost all cases the seller paid the buyer a cash premium, rather than the opposite.
Why? Customers' loyalty to their branch and its employees. Convenience of location, familiar faces, and pure habit hold such sway that most of the deposits generally stay with a branch after it is sold. The seller pays the buyer because the deposit liabilities exceed the loans and fixed assets.
The loyalty of borrowers is also worth having.
Valley National Bank in New Jersey recently had an ad saying: "If you get your mortgage from us, we will handle that mortgage for the lifetime of the loan. We will not turn your business over to someone you don't know."
The bank realizes that borrowers want the certainty of familiar people to contact in case of need, and don't want the second-class feeling of learning their mortgage has been sold off.
(Valley also demonstrates loyalty to employees - by guaranteeing a job offer, with no pay cut, to everyone who works for a bank it acquires. "We are glad you are here," CEO Gerry Lipkin tells them when he visits the day after a sale. "We want you to stay.")
Why do I happen to be thinking about loyalty?
I have been using a Citibank Visa card for 13 years. For the past several years Citi has been trying to get me, through repeated cold calls, to switch to a MasterCard.
It is all part of a grand strategy - but what's in it for me? The terms I am being offered are the same.
Last week I got a letter telling me that unless I got in touch to opt out, my account would be switched automatically. And my new card would have a new account number.
Look, if I had wanted to switch, I would have done so. I have been loyal because I use automatic billing to pay two phone companies, two newspapers, my snow shoveler, and EZ Pass with this Visa card. My loyalty has not been based on sentiment; I have been locked in.
With a new card I would have to inform the phone companies, the newspapers, the snow guys, and EZ Pass that the old card had been canceled. And unless I made seamless new arrangements, their automatic invoices would bounce and I would become a deadbeat.
True, I could opt out; in fact, I did. I called in, was passed along five times, and gave my mother's maiden name correctly. But lots of cardholders who never got around to making a noise will learn they've been switched when it's too late to do anything about it.
So Citibank, I am asking you (and other cardholders must also be wondering): Doesn't anyone in your marketing department know that loyalty should work both ways?
