Cultivating highly satisfied bank customers has a profoundly positive effect on financial performance, according to a study from J.D. Power and Associates, a global marketing information services provider.
Based on a customer satisfaction survey at 20 leading banks operating in China, the study found that banks with the highest levels of customer satisfaction experienced a growth in profit margins of 129 percent on an annual basis between 2006 and 2008.
That growth rate was nearly three times the growth rate for banks with medium levels of customer satisfaction and more than 21 times that for banks with low customer satisfaction levels, the survey reported.
China Merchants Bank, the nation's sixth-largest commercial lender, ranked highest in overall customer satisfaction and performed particularly well in account handling and production offerings, according to the survey.
Shanghai Pudong Development Bank, China CITIC Bank and China Everbright Bank followed in the rankings.
"These top performers have a common strength in delivering a consistent and satisfactory experience to individual bank users, which distinguishes them from other banks and is more likely to bring them long-term success," said Rockwell Clancy, executive director of financial services for J.D. Power and Associates.
With the market maturing and becoming more competitive, Clancy said it's harder for banks to differentiate products and services.
Clancy said the key drivers to improve customer satisfaction levels will be related to problem resolution, transactions and customer interaction.
The company surveyed 3,930 bank customers at 20 leading banks that account for about 95 percent of the market share in Beijing, Shanghai, Guangzhou and Shenzhen.
Practices that most affected customer satisfaction levels, the survey found, were providing error-free account balance records and also problem-free banking experiences.
Another critical factor was keeping waiting times to meet with bank staff to a maximum of nine minutes.
"For banks in China, it is recommended that rather than focusing on expanding the number of outlets, more attention should be given to establishing stronger standards for customer service delivery and monitoring the results," Clancy said.
Unlike some foreign banks that are cutting costs in the economic downturn, Clancy said Chinese banks are better positioned to focus on pursuing competitive advantages such as aligning services to more closely meet customer needs.
For example, he said, the rapid growth of personal wealth in China in recent years has led banks to explore ways to create new niches with wealth management services.
China Merchants Bank and Bank of Communications are among those making an early foray into the high-end wealth management market, he said.
"For the sake of diversifying revenue centers and risks, banks are gradually shifting attention from corporate lending to retail banking," Clancy said.
"Thus, meeting the demands and expectations of individual bank customers is considered a critical task," he said.