Brokers show banks how word-of-mouth pays

Consumers are more likely to say something negative than positive about their bank

Like all service-based industries, financial services relies heavily on consumers recommending trusted advisers to their friends, or spreading the word about a product they feel meets all of their needs.

One channel that has relied heavily on word-of-mouth for growth is brokers. The fact that the mortgage broking industry has managed to capture 40 per cent of all new home loans shows just how critical referrals can be. Despite pressure from several angles, analysts say brokers are here to stay ("Broker versus branch"). This is because customers that use brokers to source a loan are three times more likely to recommend their broker than those who source a loan from a bank branch.

Research from brandmanagement ("Frequent visitors less fulfilled") reveals banks still have a long way to go to convince branch users to recommend the branch to others. In fact the more times a customer visits a branch in a month the more likely they are to be a “detractor” – somebody who actively warns others to stay away from the bank.

As more banks pay attention to the Net Promoter Score metric ("I heard it on the grapevine") they are coming to grips with the cold reality that consumers are more likely to say something negative than positive about their bank. Banks are now on a mission to ensure customer expectations are not only met but exceeded. The banks that succeed in exceeding customer expectations more often will be well placed to build positive word-of-mouth.

May/June 2008

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