Why Focus on Closed Accounts?

Why focus on closed accounts?

Are you customers going out the back door as fast (or faster) than you are bringing them in the front door?

Research tells us that it costs 10 times more to bring in a new customer than it costs to keep an existing customer. We also know that the longer the tenure the customer has with an institution, the profitability of that customer generally goes up. Long term customers are much more likely to become advocates (or unpaid sales people) for your institution. Another way of saying it is that it is much more costly to regain lost market share than it is to protect your market share in the first place.

Over my career, I have conducted numerous closed account surveys. These surveys were primarily closed checking account surveys. Most people identify their primary bank or credit union relationship by where they have their checking account. Percentages vary a little from survey to survey but the results are generally very consistent.

80% of all closed checking accounts are for uncontrollable factors. Customers get divorced, they get married, they move, they die, they simply no longer need the account, etc. etc. Another 10 - 12% cite rates and fees as the reason they close their accounts. The remaining 8 - 10% close their accounts because of customer service issues.

Banks and credit unions need to concentrate on the 18 - 20% of customers who close there accounts for reasons the institution can impact.

First, let's talk about rates and fees. An institution doesn't need to pay the highest rates and charge the lowest fees. But the institution does need to stay competitive!

Remember my earlier statement. IT IS MORE COSTLY TO REGAIN MARKET SHARE THAN IT IS TO PROTECT IT IN THE FIRST PLACE!

Now let's talk about customer service. This is an area all institutions can impact immediately. While there are many components to customer service, a immediate positive impact can be made by making sure your frost line staff do the following three things:
1. Use your customers name during the transaction.
2. If staff must leave the teller station, ask for permission and explain why they
need to leave.
3. Thank the customer at the end of the transaction.

You may have to invest in training, you may need to rewrite job descriptions, etc. but the return will be well worth the effort and the cost.

Bottom line - Focus on the 20% of customers that your institution has some control over!

You can reduce attrition!

Have a great week/weekend!

Mike