J.D. Power and Associates Reports: Shopping and Switching Rates Increase Among Retail Bank Customers as Competition in the Industry Intensifies

Mar 01, 2011, 07:00 ET from J.D. Power and Associates

WESTLAKE VILLAGE, Calif., March 1, 2011 /PRNewswire/ -- As the banking industry continues to recover from the financial crisis, customers are increasingly shopping for and switching to new primary banks, according to the J.D. Power and Associates 2011 U.S. Retail Bank New Account Study(SM) released today.

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The study, which examines the bank shopping and selection process, as well as customer satisfaction with the account initiation and on-boarding processes, finds that 8.7 percent of customers in 2011 indicate they switched their primary banking institution during the past year to a new provider. In comparison, just 7.7 percent said the same in 2010. On average, customers in 2011 say they considered 1.9 banks while shopping—up from an average of 1.6 banks in 2010.

"The increased switching rate indicates more consumers are coming into the market, providing more opportunities for banks to acquire new customers," said Rockwell Clancy, vice president of the financial services practice at J.D. Power and Associates. "These customers appear to be more discriminating and diligent when selecting a new bank."

According to Clancy, the most common reason for switching banks is a change in life circumstances, although customers also switch because of fees and rates, unmet expectations and poor service. For customers evaluating and ultimately selecting a new bank, the most important factors driving their decision are advertising; branch convenience; products and services; promotional offers; and direct and indirect customer experience (including past personal interactions, recommendations and bank reputation.) However, pricing—fees and interest rates—carries relatively little weight in influencing customer purchase decisions, despite recent heavy media coverage of changes to fees for bank accounts and credit cards.

Banks that perform well in acquiring new customers—Chase, PNC Bank and SunTrust Bank, in particular—tend to be aggressive in their advertising and promotions.

"It's undeniable that the 'blunt instruments' of ad spend, branch density, and promotional offers such as gift cards have been effective during the past year in capturing market share," said Clancy. "The question is whether these provide sustainable competitive advantage, particularly when compared with customer acquisition gains resulting from positive past experiences with a brand and recommendations from friends and family, which are harder to duplicate."

One of the study's most unexpected findings is that less than one-half (43%) of customers who purchased an additional banking product made that purchase at their primary bank.  For customers who turn to another institution for an additional product, promotional offers such as gift cards carry the most weight in influencing the purchase decision.

"Customers who choose to stay with their current primary bank for additional products are most driven by positive past experience and perceptions that their bank is more focused on customers than on profits," said Clancy. "Clearly, banks that are not providing a noticeably better experience are more likely to lose the business of indifferent customers who are more easily lured by the next attractive promotional offer to come along."

The 2011 U.S. Retail Bank New Account Study is based on multiple evaluations from 4,791 customers who shopped for a new banking account or new primary financial institution during the past 12 months. The study was fielded in November and December 2010, and includes Bank of America; Bank of the West; BBVA Compass; BB&T; Capital One; Chase; Citibank; Comerica Bank; Fifth Third Bank; Harris National Bank; HSBC; Huntington National Bank; KeyBank; M&I Bank; M&T Bank; PNC Bank; RBS Citizens; Regions Bank; Sovereign Bank; SunTrust Bank; TD Bank; U.S. Bank; Union Bank; and Wells Fargo.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is a global marketing information services company providing forecasting, performance improvement, social media and customer satisfaction insights and solutions. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies is a leading global financial information and education company that helps professionals and students succeed in the Knowledge Economy. Leading brands include Standard & Poor's, McGraw-Hill Education, Platts energy information services and J.D. Power and Associates. The Corporation has approximately 21,000 employees with more than 280 offices in 40 countries. Sales in 2010 were $6.2 billion. Additional information is available at http://www.mcgraw-hill.com.

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power and Associates. www.jdpower.com/corporate

Media Relations Contacts:

Jeff Perlman; Brandware Public Relations; Woodland Hills, Calif.; (818) 598-1115; jperlman@brandwarepr.com

John Tews; J.D. Power and Associates; Troy, Mich.; (248) 312-4119; media.relations@jdpa.com

SOURCE J.D. Power and Associates