The secret to customer satisfaction is a niche market

But service is no substitute for a good deal!

HSBC’s subsidiary First Direct has topped the polls yet again in MoneySavingExpert.com’s twice-yearly high street bank customer satisfaction survey gaining 92% of ‘great’ service votes, with 6% voting ‘OK’ and just 2% ‘poor’. Impressively enough, these are the exact same results it achieved in February. However, these figures don’t really reflect what customers want, writes Anna Milne

If a bank ranks consistently highly for customer service, wouldn’t you expect its switch-in rate to be high? Account switching stats for the UK collected by TNS since the introduction of the seven day switching guarantee show that First Direct bank gained just 3% of switchers between June and July. With this in mind, First Direct sitting pretty at the top of the satisfaction survey merely suggests that people who favour a direct bank service already have it in place, feel well-served and have no reason to leave, explaining the borderline zero loss rate of customers. And why aren’t people switching over to First Direct? It’s not that they care about customer service, they just don’t want to use a direct bank and the rewards aren’t high enough.

So First Direct offers an efficient, niche service. Hence, happy customers- but very few new ones. And its profitability is questionable as its results are curiously absorbed by HSBC’s.

Take Santander. Its 123 account has drawn customers due to its 123 high interest account. It’s a straightforward USP and according to TNS, Santander has been the switching frontrunner for some time now with practically a third of total joiners and just 9% of leavers. Despite the Spanish-owned bank having focused on improving customer service, the rewards are really what are pulling the punters in. Santander spent the first four years of the satisfaction survey at the bottom and has climbed two places but all this shows is that the service improvement measures they have put in place have kept the new customers that they have gleaned.

Barclays plummeted to the bottom of the 14-long list from a respectable sixth position in February, over a quarter of Barclays respondents saying the service they received was poor. Dead last in the poll, its net switching rate was zero. It is trundling along without a real niche pulling factor. Despite blazing a mobile solutions trail, its overall operation is unfocused and maybe it can’t be everything to everyone. A unique USP might mean its ‘net switching margin’ would improve greatly and as a result, its customer service poll ranking.

Challenger banks- and there are 26 new banking licences being applied for- clearly need to identify and perfect a niche market. Existing banks as well, for that matter. Newcomers will be at a disadvantage in getting to grips with ever tighter regulations but have a distinct advantage in being able to create a bespoke, modular service right off the bat instead of being faced with overhauling a monolithic legacy system. Those that can master simplicity and efficiency with confidence will win out.