Industry Wins Higher Grades for Service

Amid all the bleak news about the banking industry, some bright spots appear in the 1991 American Banker consumer survey.

While consumers' concerns about the health of the banking system rose to new heights for the third year in a row, those suspicions apparently have had little effect on the public's generally positive feelings toward individual institutions.

Efforts Paying Off

Among the findings from this year's American Banker poll:

* Customer satisfaction took a sizable jump - an indication that financial institutions' efforts to improve service and responsiveness are paying off.

* Half or more of customers rated their institutions excellent on such attributes as staff courtesy and clarity of statements. Thrifts - despite their problems - and credit unions did better on these scores than banks.

* Half of the people said they are making an effort to save more - a clear opportunity for financial institutions seeking stable deposits.

* As institutions anticipate the freedom to provide brokerage, mutual fund, and insurance services, many people are is showing willingness to obtain those services where they bank.

Trust Defeats Doubt

Industry observers said a reservoir of trust in local institutions overcomes most of the public's misgivings about economic and financial instability. That trust may be behind the receptivity to innovations in banking - especially those that improve the return on savings.

For example, 70% of bank, thrift, and credit union customers said they would probably invest in a money market fund from their primary institution. Almost 60% would go for stock and bond mutual funds or annuities.

The response to insurance products was less enthusiastic, at 39%.

The eighth annual American Banker consumer poll was conducted by telephone in May by the Gallup Organization Inc. The 1,007 survey participants, randomly selected, were adult heads of households who did at least some business with a financial institution.

Though some critics of the proposed new powers warn that diversification would be dangerous for banks and other depository institutions, consumers seem ready. The survey respondents were open to new services and looked positively on their own institutions.

Open to New Products

Forty-six percent of those polled viewed the banking system as unhealthy, and 53% expressed some concern about the safety of their deposits. The 46% reading is 11 points higher than 1990's, which had been the peak. (The margin of error is plus or minus three percentage points.)

The "unhealthy" response was 23% in 1988, before the words "bailout" and "crisis" were regularly attached to "thrift" and "deposit insurance."

Yet many of the skeptics about the industry's condition were among the 66% of the respondents who said they were "very satisfied" with the institution they designated as their principal financial relastionship. And 29% were "somewhat satisfied."

Those who voiced complaints mentioned fees, interest rates, or poor service, not financial troubles.

A Familiar Paradox

"It is the same mechanism at work in the political arena," said Robert G. Stemper, a former Citicorp consumer bank executive who is now a consultant based in Sunnyside, N.Y. "Polls always show that people trust their congressman, but ask them if Congress can be trusted and they say no.

"Most bank customers seem to be saying, |In a sea of sinking ships, the one I am on is staying afloat,'" said Mr. Stemper, whose books include "Successful Branch Management" and "Service Selling."

"There is definitely a concern about the health of the industry, but it hasn't really hurt anyone's pocketbook," said L. Biff Motley, executive vice president at Premier Bancorp, Baton Rouge. "When people have those concerns, they fall back on their experience with their banks, which is based on good service, trust, and involvement in communities over a long period of time."

Though solicited by non-banks, "our customers . . . feel more comfortable being inside our bank and knowing it and its integrity are behind the transaction," said W. Brent Robinson, executive vice president of American Savings Bank, Stockton, Calif.

Examples of Resiliency

Premier Bancorp and American have both recovered from tough times and typify the stability and resiliency that consumers ascribe to their chosen financial institutions.

Premier's subsidiary, Premier Bank, was rocked by the decline in oil prices that sent the country's oil-producing states into recession before the rest of the nation. But the bank came through intact. It rebuilt its capital, negotiated a stakeout investment by Banc Corp. of Ohio, and symbolized its revitalization with a name change and creation of a unified product line throughout its network of 100 offices.

Flattering Comparisons

Mr. Motley said the image of a survivor like Premier is enhanced every time a sick thrift is closed. "The regulators are outstanding at getting money back to depositors," he said. "They typically make an announcement Friday and have checks in the mail Monday. The dollars flow into healthy institutions, and we have definitely been a beneficiary."

American Savings Bank, once the nation's largest thrift and now the eighth-largest, with $17 billion in assets and 170 branches, owes its survival to a government-assisted buyout in 1988 by the Robert M. Bass Group of Texas.

American turned the crisis into an opportunity, stepping up its training programs in sales and customer service. The thrift now claims to be a leader in customer satisfaction in its California markets.

"You have to remember, our retail franchise and branch network were attractive all along and a major reason why we were able to attract new capital," said Mr. Robinson, American's head of retail banking. "In terms of customer service and sales, we were every bit as good then [before the bailout] as we are today."

Less-Crowded Branches

Mr. Robinson pointed out that thrifts historically offered better service than commercial banks, in part because thrifts focus on a smaller set of products and their branches are less crowded. "We have a narrow target segment - our primary customer is age 55 and over - and we concentrate on giving them personal attention," he said. "We don't try to be all things to all people."

Service was a theme of American's 1991 television ads, with one commercial showing chairman Mario Antoci exhorting employees to take initiatives to satisfy customers.

Like virtually every bank and thrift in a competitive market, American Savings Bank conducts extensive research - including quantitative surveys and focus group interviews - to assess customer needs, the institution's success in meeting them, and how it measure up against the competition.

Research Program

Citibank in New York has been in the forefront of the research and customer-service movement, seeking to measure, among other things, how its investment in branch automation and automated teller machines has affected competitiveness. Citibank claims that its customers are more satisfied than those of other banks with the 24-hour access, and that general satisfaction levels have been improving.

"The entire bank and each of its business units have staff responsible for service quality," said spokesman William Ahearn.

The decentralization is necessary because New York City customers differ from others whom Citibank serves in expectations and demands. "Hi, how are you?" from a teller may not be what time-pressed city dwellers regard as quality, Mr. Ahearn said.

Such research, and the way institutions are following up on it, may be behind the measurable gain in quality that showed up in this year's American Banker-Gallup survey.

Despite thrifts' tradition of quality, cited by Mr. Robinson, their reputation was sullied by financial problems, according to American Banker surveys in recent years. This year thrifts trailed, at 62%, in the of percentage customers saying they were "very satisfied" with their primary institution. Commercial banks scored 65% and credit unions 78%.

Across-the-Board Gains

Nevertheless, thrifts shared in gains that affected financial institutions across the board in 1991. For thrifts as for banks, the "very satisfied" percentage was up five points from 1990's. Credit unions, the perennial leader in customer satisfaction, enjoyed an eight-point jump.

Asked if service quality had improved in the past year, 20% of thrift customers said yes. That was better than banks' 17% but behind credit unions' 29%.

All types of institutions got high grades for staff courtesy: 64% of commercial bank customers, 68% of credit union customers said their institution was excellent in this regard.

In problem-solving, by contrast, 45% rated banks excellent, 53% rated thrifts excellent, and 56% rated credit unions excellent. And in competitiveness of fees, only 29% were very happy with their banks, compared with 36% for thrifts and 52% for credit unions.

"There is no question - the industry is making a major effort in the area of quality," said Barry Deutsch, a former bank marketing director who now heads the Deutsch Consultancy Corp. in Coral Springs, Fla. He was among many observers who said those efforts are paying dividends.

|Real Displeasure'

Mr. Deutsch warned, however, about complacency. "When you get into detailed quantitative research and focus groups, you begin to hear real displeasure with banks' core service levels."

"Consumers have been trained to expect the level of service they now get," said Anat Bird, national director of financial institutions consulting at BDO Seidman, New York. Institutions try to attract business by differentiating themselves from competitors through "what bankers define as better service," she said. "The customer does not know what better service is. He'll know it when you show it to him."

|Flight to Quality'

The view from Idaho is different: "The customer is generally more demanding than ever," said Robert J. Lane, president and chief executive officer of West One Bank, Boise, part of the $4.9 billion-asset West One Bancorp.

"There is a flight to quality," he said, that has led West One to step up its consumer research. "Five years ago, we simply didn't have the same concern for the customer and commitment to superior service that we have today."

Mr. Stemper, the New York-based consultant, said that after "five years of hype" about service and quality, "the message is getting through to the customer-contact level, and service has generally gotten better."

Tough Customers

The American Banker survey shows a core of dissatisfied customers that has held steady in recent years at about 4%. Marketing experts say that is too high to dismiss as chronic and must be whittled down.

Conversely, the number saying they were "very satisfied," while jumping to 66%, has merely rebounded to the 1988 level. Another percentage point or two would mark a real breakthrough.

If bankers' goal is to retain and gain profitable customers, they may need such a breakthrough, because competition is intensifying on all sides.

"The banking industry's strength is distribution . . . and quality service," said Mr. Motley of Premier. And in distribution, none of the nonbank competitors, including American Express Co. and Sears, Roebuck and Co., "can match the 50,000 bank branches in the country," he said.

PHOTO : Despite More Qualms About Industry Health...

Consumers rating the U.S. banking system "unhealthy"

PHOTO : Customer Satisfaction Is Rising Again

Percentage "very satisfied" with principal financial institution

PHOTO : Promise in Nontraditional Products

Customers are especially receptive to money market, stock, and bond funds

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