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Rex Bennett, Ph.D.Professor Emeritus, University of San Francisco

President, Achieving Unlimited July 20-22, 2015

Payment Systems Innovations

Square

Paypal

Square Capital

Source: Accenture Consulting: The Digital Disruption in Banking, 2014 North America Consumer

Digital Banking Survey, Sample Size = 4,000.

CHANGE‘It is not the strongest of the species that survives,

nor the most intelligent that survives.

It is the one that is most adaptable to

CHANGE.’Charles Darwin

‘On the Origin of Species’ 1859.

Superior Competitive Advantage

• Strategies that position a bank

• So that it can achieve superior, long-term, profitability

• In spite of:– industry and environmental changes,

– competitor actions,

– and…market/customer shifts

Question:

Why should I do business with your bank rather than one of your

competitors?

• What differentiates your bank? • What value does your bank provide that others

don’t?• What advantages does your bank offer me, the

customer?

• HOW WILL YOUR BANK HELP ME ACHIEVE MY FINANCIAL GOALS?

Few banks either have or can articulate answers to these fundamental, core questions.

Source: ‘Winning Through Customer Experience,’ Ernst & Young Study, 2014.

Customer Dissatisfaction with How Financial Institutions Help Them Achieve Their Financial

Percentage Dissatisfied

• Credit Union Customers: 34%

• Regional and Local Bank Customers: 39%

• National Bank Customers: 47%

Source: Morpace Inc. Research, Farmington Hills, MI.

Automated Wealth Management

‘Why should I do business with your bank rather than one of your

competitors?’

If you are not

DISTINCT

You will be

EXTINCTTom Peters

‘In Search of Excellence’

Profit Implications of Market Strategies (PIMS)

Harvard University

Strategic Planning Institute 35 Year Plus Study of 3,000 Strategic Business

Effects of Market Strategies On Return of Investment (ROI)

(Or What Banks Term Return on Equity…ROE)

Profit Implications of Strategies: Key Findings

Market Structure Variables

Differentiation Profits

Return on Investment PercentagesRELATIVE RELATIVEPRICE QUALITY/DIFFERENTIATION

Low Medium High AverageHighMediumLow

Average

Return on Investment Percentages

RELATIVE RELATIVEPRICE QUALITY/DIFFERENTIATION

Low Medium High AverageHigh 17 18 34 23%Medium 9 2 16 9Low 15 11 36 21

Average 14 10 29 17%

Competitive Structure Variables

Relative Perceived Quality

Profits

Source: Profit Implications of Market Strategies (PIMS), Strategic Planning Institute,

Harvard University

Do Banks Deliver

Exceptional Customer Satisfaction

and Relative Perceived Quality

To Attract and Retain Customers?

American Consumer Satisfaction Index

Consumer Satisfaction Scores: 100 Point Scale University of Michigan, National Quality Research Center, December 2014.

2011 2012 2013 2014 13 to 14

J.P. Morgan Chase 70 74 76 74 -2

Citigroup, Inc. 73 70 74 74 0

Wells Fargo 73 71 72 72 0

Bank of America 68 66 69 69 0

All Banks 75 77 78 76 -2

All Other Banks 80 79 83 80 -3

Credit Unions 87 82 85 85 0

Highest Score Ever Achieved over

47 Industries Tracked by ACSI

For your region,

Google J.D. Power

2014 US Retail

Banking Study

For your region,

Google J.D. Power

2014 US Retail

Banking Study

October 30, 2014.

Attrition by Customer Tenure

If you include share of wallet, the banking industry’s customer, revenue, and PROFIT loss ratio is almost certainly

15% or more.

Sources: American Bankers Association, Bank Marketing Survey Report; ABA Retail Banking Survey Report, TARP Research, Arlington, Va.; Rex Bennett research.

Customer Lifetime Profit Value (CLPV)

Net present value of profit streams over the lifetime of the

customer

RETAINING A CURRENT CUSTOMER IS 5 TO 7 TIMES MORE PROFITABILE

THAN ACQUIRING A NEW ONE

Household Profit Percentiles: 400 Bank Composite

Profits Effects of Reducing Customer Loss Ratio

• Decreasing customer loss ratio by 5% for bank customersResults in an 85% increase in profits

• Or about a 17% increase in profits for each 1% decrease in the customer loss ratio*

• Decreasing customer loss ratio by 5% and maintaining it for 5 years results in a 100% increase in profit

• Or about 20% increase in profits for each 1% decrease in the customer loss ratio**

• Decreasing customer loss ratio by 5% increases profit by 47%• Or about an 9+% increase in profits for each 1% decrease in the customer loss

ratio***

• *Frederick Reichheld, The Loyalty Effect (Boston: Harvard Business School Press, 2003).**American Bankers Association, cited by Customer Service Profiles, Omaha, NE.

***Rex Bennett, Ph.D., Customer Lifetime Profit Value, calculated with assumed 5% investment return interest rate, 2015. Supporting Data: ‘Managing Customers as Investments,’ Gupta and Lehmann, Wharton School Publishing, 2005.

The Four (4) Factors Customers Use to Evaluate

Bank Quality

Determinants of Customer Acquisition,

Satisfaction, Retention and Profitability

Factors Customers Use to Evaluate Bank Quality

• Tangibles: Financial Products

• Tangibles

• Empathy: Listening to the customer

• Tangibles

• Empathy

• Responsiveness: Responding with innovation financial products and expertise to help customers achieve their financial goals

• Tangibles

• Empathy

• Responsiveness

• Assurance: Do financial products and expertise work as promised?

Factors Customers Use to RATE The Quality of Bank Performance

R esponsiveness

A ssurance

T angibles

E mpathy

Factors Customers Use to Evaluate Quality

• Tangibles

Factors Affecting Customers Perceptions Of Bank Performance

DIMENSION AND DEFINITION

EXAMPLE QUESTIONS

Tangibles: Appearance of physical facilities, equipment, personnel, communication materials, and Financial Product Features.

What are the features of the revolving line of credit?

How does the bank’s cash management system work?

What are the features of the bump CD?

What types of PFM tools does the bank have?

What are the features of the bank’s mobile banking products?

Does the bank have virtual assistants?

Virtual Banking Vs.

Traditional Branches

Source: Strategic Choices for Banks in the Digital Age, McKinsey & Co., January, 2015

Mobile Phone Banking Users Growth 2013-2015 = 42%

Tablet Banking Users Growth 2013-2015 = 46%

Average Monthly Branch Transaction Volume

Source: Financial Management Solutions, Inc., Teller Line Study, March 2013.

One-third (33%) of Americans did NOT visit a branch bank during

the past 6 months.

Source: Bankrate.com Study, released March 27, 2014.

But 59% Do Not

Prefer Branch

Source: Financial Management Solutions, Inc., Teller Line Study, March 2013.

In Teller Labor Costs Per

Transaction

Efficiency Ratio: Non-Interest Expense

• Efficiency ratio = Non-interest expense divided by the sum of net interest income plus non-interest income

• What does it measure:

How much of every dollar of revenue the bank brings in (after paying interest expense) does it spend on non-interest expense (such as salaries, premises, IT, marketing, etc.)

EFFICIENCY RATIO COMPARISON

• Average 2014 Efficiency Ratio for Top 200 Community Banks (based on Profitability)

= 64.4%• Average 2014 Efficiency Ratio for All 851 Community Banks ($2 Billion or

= 74.5%Average 2014 Efficiency Ratio for Banks from $1-$10 Billion

= 63.2%Average 2014 Efficiency Ratio for Banks over $10 Billion

= 62.6%Average 2014 Efficiency Ratio for All US Banks

= 63.0%Source: fdic.gov. Dec. 31, 2014 data.

Source: ‘The Future of US Retail Banking, McKinsey & Company, 2014.

A 7% decrease in

the efficiency ratio

results in a 20-25%

INCREASE IN

PROFITS

The Future: The OMNICHANNEL Bank

Seamless integration of:

• Traditional Branches

• Micro Branches

• Video ATM’s

• On-line Banking

• Mobile Banking

Source: Bain Consulting: Customer Loyalty in Retail Banking, 2013.

High Digital Usage Correlates with Customer Loyalty

Source: Bain Consulting: Customer Loyalty in Retail Banking, 2013.

Source: Infosys, Finacle, efma, ‘Innovation in Retail Banking’, October 2014.

Millennials and Over 55’s

Page County State BankClarinda, IA $190 Million

Hub and Spoke

Video Tellers

Micro Branches

May 19, 2014

• 32% of SBOs bank via mobile devices.

• 31% of SBOs say they are likely to adopt mobile banking in the next year

Source: ath Consulting, January 7, 2014.

Mobile Banking and Small Business Owners (SBOs)

Source: 2014 Monetizing Mobile Banking for Small Business

Customers, Ratewatch and Simon-Kucher & Partners.

• 66% indicate that they would likely switch banks for one with a better mobile offering

• Conversely, 37% of bankers failed to even mention mobile banking in rating factors that influence SBOs in their choice of a bank.

Missed Revenue Opportunities

VIRTUAL WALLET

www.pncvirtualwallet

Apple Pay

7 Reasons to Love GoBank

1. Customized debit card

2. Balance bar…no need to login

3. Custom alerts…choose only those you want

Custom Alerts

7 Reasons to Love GoBank

1. Customized debit card2. Balance bar…no need to login3. Custom alerts…choose only those you want4. Negotiable monthly fee: $0 to $9 (again using a

sliding bar)5. GoBank Fortune Teller (checks your budget before

you spend)6. GoBank communication style (informal)7. GoBank referral program (invite friends by

sending them $1 using the person-2-person payment feature)

GObank: Brand Name of Green Dot Bank: FDIC Certificate #22653

• Asset Growth: $68 Million Dec. 31, 2011

• to $478 Million, December 31, 2013 to $861Million, December 31, 2015.

• Employees: 15 • Profit Per Employee: 2014

• $653,000• Source: FDIC Statistics on Depository Institutions (SDI).

The New Banker:

A Virtual

Assistant

USAA Bank Virtual Assistant

Virtual Mobile Assistant:

Over 200 Voice Commands

PFM (Personal Financial Management)

OFM (Online Financial Management)

Percentage of Customers Who Are Interested in Receiving Advice Via

Source: ‘Winning Through Customer Experience,’ Ernst & Young Study, 2014.

27 percent currently use a PFM

with an additional 14% planning to use.

PFM Usage Forecast

• To Categorize Expenses– 2014: 14 Million

– 2016: 38 Million

• For Budget Management– 2014: 12 Million

– 2016: 25 Million

• For Investment Analysis and

Recommendations– 2014: 14 Million

– 2016: 26 Million

Source: Aite Group: December 2012

All Categories Forecast

To Have 86% or

Greater Increase in

Next 2 Years

Does a PFM Increase The

Value of An OnLine Banking Site?

93% of Customers Indicate They Are Very Satisfied or

Somewhat Satisfied With Their PFM

Over 90% of Consumers Think a PFM Enhances The

Value of an OnLine Banking Site

Source: Yodlee Research.

Thus, look to and use PFM (Personal Financial Management) or OFM (Online Financial Management) tools such

as Mint, FinanceWorks (Intuit), Yodlee, Geezeo, Banno, and MoneyDesktop.

Over 40 Million People Use Yodlee

Personal Financial Management Tools

(PFM)Source: Yodlee

Acquired by Jack Henry and Associates, March, 2014.

MoneyDeskTop

Source: thefinancialbrand.com, April 19, 2013.

Banks Flock to PFM’s with ‘Bubble

Budgets’

• Tangibles

• Empathy

DIMENSION AND DEFINITION EXAMPLE QUESTIONS

Empathy

Access: Approachability and ease of contact.

How easy is it for me to talk to senior bank officials when I have a problem?

How easy is it for me to get through to a person who can handle my question over the phone?

Can I use social media to communicate with the bank?

Can someone in the bank clearly explain to me how I can use my mobile devices to better manage my finances?

Empathy

Communication: Keeping customers informed in language they can understand and listening to them.

Can the loan officer clearly explain the various charges and fees associated with my card?

Are changes in fees clearly communicated?

Does the bank engage in two-way communication?

Does my bank solicit my feedback about its performance?

Empathy

Understanding The

Customer: Making the effort to know customers and their needs.

Does the bank match the services they provide me with my needs?

Does the bank have personal financial management (PFM) tools to help me achieve my financial goals?

Does the bank ask about my needs, problems, and ideas for services?

Why Is Website and Mobile App Performance Important?

• 90% of customers form perceptions of company based on customer service center experience…including WEBSITES

Source: Center for Customer Driven Quality, Purdue University.

Web Site Analytics

Analysis of Website Traffic: Visits, Bounce, Time of Site, Number of Pages Visited, Conversion

Google Analytics Definitions

• Visits = Sessions: period of interaction between a visitor's browser and a

particular website, ending when the browser is closed or shut down, or when the user has been inactive on that site for a specified period of time.

• Visitor: A visitor is a construct designed to come as close as possible to defining the

number of actual, distinct people who visited a website. The most accurate visitor-tracking systems generally employ cookies to maintain tallies of distinct visitors.

• Bounce Rate: Bounce rate is the percentage of single-page visits or visits in which

the person left your site from the entrance (landing) page.

• Pageview: A pageview is an instance of a page being loaded by a browser. Google Analytics logs a pageview each time the tracking code is executed.

• Unique Views: Google Analytics records a visitor as NEW when any page on your site has been accessed for the first time by a web browser.

Google Analytics Definitions

• Visits = Sessions: period of interaction between a visitor's browser and a

particular website, ending when the browser is closed or shut down, or when the user has been inactive on that site for a specified period of time.

• Visitor: A visitor is a construct designed to come as close as possible to defining the

number of actual, distinct people who visited a website. The most accurate visitor-tracking systems generally employ cookies to maintain tallies of distinct visitors.

• Bounce Rate: Bounce rate is the percentage of single-page visits or visits in which

the person left your site from the entrance (landing) page.

• Pageview: A pageview is an instance of a page being loaded by a browser. Google Analytics logs a pageview each time the tracking code is executed.

• Unique Views: Google Analytics records a visitor as NEW when any page on your site has been accessed for the first time by a web browser.

GOOGLE ANALYTICS DEFINITIONS• Conversion: A conversion occurs when a visitor reaches a GOAL

which does NOT have to be an account opening or sale.

– A URL Destination goal is a page that visitors see once they have completed an activity. For an account sign-up, this might be the “Thank You for signing up” page. For a purchase, this might be the receipt page. A URL Destination goal triggers a conversion when a visitor views the specified page.

– A Time on Site goal is a time threshold that you define.

– A Pages per Visit goal allows you to define a pages viewed threshold.

• Definitions of Google Website Metrics:http://www.google.com/support/googleanalytics/bin/answer.py?hl=en&answer=33087

www.google.com/analytics

www.googlewebsiteoptimizer

http://www.youtube.com/watch?v=XJT9TCqzw4U

Cost of Google Analytics and Google Web

Optimizer:

Predictive Analytics

Customers Want Proactive Advice

What is Predictive Analytics?

• Predictive analytics using data gathering, analysis, and modeling to predict unknown future events.

• For example, Nexflix, Amazon, Google use predictive analytics to recommend products or services.

• Most useful application is to forecast customer needs, targeted marketing messages, and product needs.

Source: predictiveanalyticstoday.com, February-March 2015.

Source: Gartner,

February 2014.

http://www.gartner.com/

technology/reprints.

do?id=1-1QHKSEP&ct=

140206&st=sb

Includes an assessment

of the

strengths and cautions

for all

of these BI vendors.

MoneyDeck PFM Analytics

Top 12 Predictive Analytics Freeware Software

Source: predictiveanalyticstoday.com, March 2015.

Source: predictiveanalyticstoday.com

• Tangibles

• Empathy

• Responsiveness

Responsiveness: Willingness to help customers and provide prompt service and develop new FINANCIAL PRODUCTS AND EXPERTISE.

When there is a problem with my bank statement does the bank resolve the problem quickly?

Are charges for returned merchandise credited to my credit card account quickly?

Does the bank continually develop new expertise and innovative products to help me achieve my financial goals?

• Tangibles

• Empathy

• Responsiveness

• Assurance

DIMENSION AND DEFINITION QUESTION

Assurance

Reliability: Ability to perform the promised service dependably and accurately.

Do the financial products work as promised?

EXAMPLE QUESTIONS

Assurance

Competence: Possession of the required skills and knowledge to help the client achieve their goals.

Is the CSR able to communicate the features of the new product clearly and accurately?

When I have a question, can an officer or other bank representative answer them knowledgeably?

Are the bank personnel well-trained and knowledgeable about financial matters?

EXAMPLE QUESTIONS

Assurance

Credibility: Trustworthiness, believability, honesty of the service provider.

Does the bank have a good reputation?

Are the interest rates/fees charges by my bank consistent with the services provided?

Does the bank deliver the quality it promises?

EXAMPLE QUESTIONS

Assurance

Courtesy: Politeness, respect, consideration, and friendliness of contact personnel.

Does the CSR have a pleasant demeanor?

Are the initial telephone contact people consistently polite?

Am I treated with attention and respect?

EXAMPLE QUESTIONS

Assurance

Security: Freedom from danger, risk, or doubt.

Is my credit card safe from unauthorized use?

Are my assets and financial information safe with the bank and bank personnel?

• Tangibles

• Empathy

• Responsiveness

• Assurance

Product Related

Service Related

People in Their Work Environment

• Satisfiers

• Dissatisfiers

Top Three Factors Influencing Job Satisfaction

Profits

SMALL BUSINESS BANKING

October 30, 2014.

Small Business Market

• Percentage of SBO’s who feel that it is important for the financial institution to be knowledgeable about their business’s industry

– $100 K to $1 Million: 74%

– $1 Million to $5 Million: 78

• Percentage of Loan Business

– $100 K to $1 Million: 42%

Source: BAI: Small Business Demand for Banking Services 2012

Changes in Asset Mix

2014 Yields $100 Million -$1 Billion:

Securities: 2.24%

Loans: 5.09%

2014 Yields All Banks:

Securities: 2.14%

Loans: 4.30%

5% Decrease

5% Increase

Small businesses are lower on their perceptions that banks offer loan

products that meet their needs than are the banks themselves

Source: PayPal Working Capital, March, 2014.

Hesitancy to Engage Business Owners in Financial Discussions

• Average front line banker does not come from a business background

• Don’t understand– cash flow– receivables– inventory turn– working capital– other important small business management function

• Thus, hesitant to engage in financial dialogue to identify financial issues and solutions for small business

Cash Flow Insightspnc.com/cashflowinsights

TOOLSTo Help Your Bank Achieve Competitive Advantage And

Superior Performance

Profits

• Tangibles

• Empathy

• Responsiveness

• Assurance

Product Related

Service Related

CSAT:Customer Satisfaction Ratings

Dissatisfied

Satisfied

1 2 3 4 5 6 7

Net Promoter Score (NPS)

How likely is it that you would recommend the ______ Bank to a friend or colleague?

0 1 2 3 4 5 6 7 8 9 100=Not at All 5 = Neutral 10 = Extremely

Likely Likely

Source: ‘The One Number You Need,’ Harvard Business Review, Frederick Reichheld, December 2003.

The ONE Critical Question for Profitability Growth

Net Promoter Score

• Calculate the percentage of customers who respond with 9 or 10 (promoters) and the percentage who respond with 0 through 6 (detractors) and passively satisfied (7 and 8).

• Subtract the detractor percentage from the promoters percentage.

• Result: Net-Promoter Score

Net Promoter Score

• Note: The median net-promoter score for more than 400 companies based on 130,000 customer survey responses was just 16 percent.

• High profit and high growth firms need an NPS of

40 percent or greater.

CES:Customer Effort (or

Experience) Score

Customer Experience (Effort) Score (CES)

How much effort did you personally have to put forth to handle your request?

Very Low Very High

Effort Effort

1 2 3 4 5

Harvard Business Review, ‘Stop Trying to Delight Your Customers,’

July-August, 2010.

HBR, July-August, 2010.

CEB: Corporate Executive Board www.executiveboard.com

HBR, July-August, 2010.

SUS:System Usability Scale

System Usability Scale (SUS)

Bank Competitive

GAP Analysis

Empathy/Listening/Communications GAP

GAP 1 (EMPATHY GAP): Statements 1-14

Statements: 1-4 Marketing Research sub-GAP

Statements: 5-8 Upward Communication sub-GAP

Statement: 9 Levels of Management sub-GAP

Statements: 10-13 Horizontal Communications sub-GAP

Statement: 14 Overpromising-Underdelivering sub-GAP

Responsiveness GAP

GAP 2 (RESPONSIVENESS GAP): Statements 15-22

Statements 15-18 Management’s Commitment

To Superior Performance sub-GAP

Statement 19 Goal Setting sub-GAP

Statement 20 Task Standardization sub-GAP

Statements 21-22 Perception of Feasibility sub-GAP

Assurance GAP

GAP 3 (ASSURANCE GAP): Statements 26-37

Statements 23-24 Teamwork sub-GAP

Statements 25-26 Employee-Job Fit sub-GAP

Statement 27 Technology-Job Fit sub-GAP

Statements 28 Perceived Control sub-GAP

Statements 29-31 Supervisory Control Systems sub-GAP

Statements 32-33 Role Conflict sub-GAP

Statements 34-37 Role Ambiguity sub-GAP

General GAP Level Guidelines:

GAPS: 0-1.25 Probably not a significant competitive problem 1.25-1.75 Unclear…may or may not be a significant

problem…interpret as you would a financial analysis ratio. For example, if you had a potential borrower with a low current ratio (current assets divided by current liabilities), this might or might not be a problem for the company….you would look for the specific reasons. The same thought process applies to the GAP analysis. From 1.25 to 1.75, these might or might not be a problem. Analyze the GAP and then assess whether or not that particular GAP level inhibits your bank or area’s ability to retain or acquire customers from the chosen target market.

1.75 or Higher: Probably a competitive disadvantage. If you don’t

consider it a significant problem, comment as to why not.

GAP 1: Management Does Not Understand or Effectively Manage Customer Expectations

• Lack of Marketing Research Orientation

Including lack of website and social media analytics

• Inadequate Upward Communication

• Too Many Levels of Management

• Lack of Horizontal Communication

• Tendency to Overpromise and Underdeliver:

External Communication Problems

Empathy/Listening/ Communications GAP

More Than Managers 50 Percent Super- All Direct visors Employees Cust. Cont.

GAP 1: EMPATHY/LISTENING/ COMMUNICATIONS GAP

1. The bank regularly collects information about the needs and product/ service expectations of our customers.

3.41 3.39 3.43

2. The bank effectively uses digital techniques (including website analytics and

social media) to better understand customers and to communicate with them more effectively.

4.11 3.33 4.89

3. The bank uses data mining and analytics to assess customer financial usage and to predict additional products to serve customers better.

4.78 5.01 4.55

4. The bank regularly uses market research and other information gathered from customer in decision making.

3.49 3.83 3.15

1a.Average for Marketing Research sub-GAP 3.95 3.89 4.01 (Add First 4 Questions and Divide by 4) 5. Managers in our bank frequently interact with customers. 1.50 1.75 1.25 6. The customer-contact personnel in our bank frequently 2.11 2.32 1.89 communicate with management. 7. Managers in our bank frequently seek suggestions about 2.55 3.32 1.78 serving customers from customer-contact personnel. 8. The primary means of communication in our bank between customer- 2.64 3.27 2.00 contact personnel and upper management is NOT memos, texts, or email.

1b. Average For Upward Communication sub-GAP 2.20 2.67 1.73 (Add Questions 5-8 and Divide by 4)

9. There are NOT too many levels of management between customer- 1.83 1.94 1.72 contact personnel and top management in the bank.

1c. Average For Too Many Levels of Management 1.83 1.94 1.72 sub-GAP

Empathy/Listening/Communications GAP

10. The people who develop our advertising and social media consult employees like me about the realism of promises made in our advertising.

4.95 5.22 4.68

11. I am almost always aware in advance of the promises made in our 2.72 2.74 2.70 bank's advertising and social media campaigns. 12. Employees like me interact with operations and IT people to discuss the 3.49 3.50 3.47 quality of products and service the bank can deliver to its customers. 13. Our bank's policies on serving customers are consistent among the 2.12 2.81 1.42 various departments and branches that interact with customers.

1d. Average For Horizontal Communication sub-GAP 3.32 3.57 3.07 (Add Questions 10-13 and Divide by 4)

14. Our bank does NOT make promises we cannot keep 3.84 3.77 3.90 in an effort to gain or keep customers.

1e. Average for Overpromising-Underdelivering sub-GAP 3.03 2.16 3.90 (Score for Question 14)

OVERALL MEASUREMENT OF GAP 1: EMPATHY GAP 2.84 3.17 2.89 (Add 1a + 1b + 1c + 1d + 1e and divide by 5)

Overall Competitive GAP Summary

OVERAL GAP MEASUREMENT SUMMARY

GAP 1: EMPATHY GAP 2.84 3.17 2.89 GAP 2: RESPONSIVENESS GAP 2.83 3.11 2.56 GAP 3: ASSURANCE GAP 1.76 2.00 1.65 OVERALL PERFORMANCE RATING (WITH 0 = 100%, 1 = 83%, 2 = 67%, 3 = 50%, 4 = 33%, 5 = 17%, and 6 = 0%).

GAP 1: EMPATHY GAP 53% 47% 52% GAP 2: RESPONSIVENESS GAP 53% 48% 57% GAP 3: ASSURANCE GAP 71% 67% 73%

Sources of Information• Bank Administration Institute (BAI) bai.org

On the homepage: Create an account.• Deloitte Consulting: deloitte.com

At the bottom of the homepage, click on email subscriptions• NCR: ncr.com

At the top of the homepage, click on log in and then register• McKinsey & Company: mckinsey.com

At the top of the homepage, click register.• BrightTALK.com Subscribe to weekly emails.• Harvard Business Review: hbr.org Register upper right. 15

free articles.• Nuance: nuance.com• Ernst & Young: ey.com

Click on connect with us.

Websites• www.cbancnetwork.com

Site for sharing information from and with other financial institutions.• http://mashable.com/

Probably the best site for overall social media information• http://mashable.com/2009/01/12/track-online-traffic/

50+ Ways to Track Web Traffic and Use Analytics• http://www.doshdosh.com/list-of-social-media-news-websites/

Information on most usable social websites.• http://www.netbanker.com/

Extensive updates on web and mobile banking• http://www.google.com/analytics/tour.html

Home page for signing up for and using Google Analytics• http://google.com/alerts

Google monitors keywords and alerts you • http://docstoc.com

Store documents for sharing with customers and potential customers• http://slideshare.com

Store slide shows for sharing with customers and potential customers (can imbed in LindIn and Facebook)• http://www.ping.fm/

One site for updating all social media. • www.compete.com

Site for comparting website performance among competitors. • www.financeworks.com

Site for Intuit PFM Tool • www.veri.com

On-line course on a wide variety of topics; e.g., Search Engine Marketing, Facebook Your Business, Financial Market• http://www.williammills.com/wp-content/uploads/2012/08/BAB-final.pdf

Excellent report summarizing extensive banking related surveys and data for 2012 from many different sources.• Corporate Executive Board: Excellent resource for customr experience score audit. Specific questions for audit.

http:// hwww.executiveboard.com

Summary: 4 Key Questions

1. How do we FIND OUT what customers want –both outcome and process qualities?

EMPATHY

2. How do we PROVIDE what the customers want?

RESPONSIVENESS AND ASSURANCE

3. How do we MEASURE firm, group, and individual performance on key ‘Customer Valued’ attributes?

4. How do we REWARD exceptional performance on ‘Customer Valued’ attributes?

Greatest Competitive Advantage in the World

Customers Go Where They Get Rewarded for Going

Customers Stay Where They Get Rewarded for Staying

“We do not act rightly because we have virtue or excellence, but we

rather have those because we have acted rightly. We are what we

repeatedly do.”

“Excellence, then, is not an act but a habit.”

-- Aristotle

Commit yourself and your bank to doing…to providing exceptional customer satisfaction

and performance

Then you will simply be THE BEST!

And the most PROFITABLE!

‘You either take charge of change,

Or change will take charge of you.’

Kemmons Wilson

Founder of Holiday Inns

In Conclusion:

Success Is A Journey ...

Not A Destination

And I Wish You Well on Your Journey of Success

Thank You

Appendix ABank Competitive GAP

Analysis

General GAP Level Guidelines:

0-1.25 Probably not a significant competitive problem

1.25-1.75 Unclear…may or may not be a significant problem…interpret as you

would a financial analysis ratio. For example, if you had a potential

borrower with a low current ratio (current assets divided by current

liabilities), this might or might not be a problem for the company….you

would look for the specific reasons. The same thought process applies to

the GAP analysis. From 1.25 to 1.75, these might or might not be a

problem. Analyze the GAP and then assess whether or not that

particular GAP level inhibits your bank or area’s ability to retain or

acquire customers from the chosen target market.

1.75 Probably a significant competitive positioning problem. If you don’t

or Higher consider it a significant problem, explain your reasoning.

SECTION 1

Directions:

Listed below are a number of statements intended to measure your perceptions about your bank and its

operations. Please indicate the extent to which you disagree or agree with each statement by circling one of

the seven numbers next to each statement where strongly agree is 0, 3 is neutral, and 6 is

strongly disagree. There are no right or wrong answers. Please tell us honestly how you feel.

Remember 0 is Strongly AGREE and 6 is Strongly DISAGREE.

Competitive GAP Questionnaire

Strongly Strongly

Agree Disagree

1. The bank regularly collects information about the needs 0 1 2 3 4 5 6

and product/service expectations of our customers.

2. The bank effectively uses digital techniques (including 0 1 2 3 4 5 6

website analytics and social media) to better

understand customers and to communicate with

them more effectively.

3. The bank uses data mining and analytics to assess 0 1 2 3 4 5 6

customer financial usage and to predict additional .

products to serve customers better.

4. The bank regularly uses marketing research and other 0 1 2 3 4 5 6

information gathered from customers in the bank’s

decision-making.

5. Manager in our bank frequently interact with customers. 0 1 2 3 4 5 6

6. The customer-contact personnel in our bank 0 1 2 3 4 5 6

communicate frequently with management.

7. Managers in our bank frequently seek suggestions about 0 1 2 3 4 5 6

serving customers from customer-contact personnel.

7. The managers in our bank frequently have face-to-face 0 1 2 3 4 5 6

interactions with customer-contact personnel.

8. The primary means of communication in our bank 0 1 2 3 4 5 6

between contact-personnel and upper management

is NOT memos, texts, or email.

9. There are NOT too many levels of management between 0 1 2 3 4 5 6

customer-contact personnel and top management

in the bank.

Strongly Strongly

Agree Disagree

10. The people who develop our advertising and social 0 1 2 3 4 5 6

media consult employees like me about the realism

of the promises made in our advertising/social media.

11. I am almost always aware in advance of the promises 0 1 2 3 4 5 6

made in our bank’s advertising and social media

campaigns.

12. Employees like me interact with operations and IT 0 1 2 3 4 5 6

people to discuss the quality of products and service

the bank can deliver to its customers.

13. Our bank’s policies on serving customers are 0 1 2 3 4 5 6

consistent among the various departments and

branches that interact with customers.

14. Our bank does NOT make promises we cannot keep 0 1 2 3 4 5 6

in an effort to gain or keep customers.

15. Our bank does commit the necessary resources 0 1 2 3 4 5 6

to provide high-quality products and service.

16. Our bank has internal programs for improving the 0 1 2 3 4 5 6

quality of products and service to customers.

17. In our bank, managers who improve quality of 0 1 2 3 4 5 6

quality of service are more likely to be rewarded

than other managers who do not attempt to improve

quality of service.

18. Our bank emphasizes serving existing customers 0 1 2 3 4 5 6

as much or more than it emphasizes selling to

acquire new customers.

19. In our bank we set specific quality of product and 0 1 2 3 4 5 6

quality of service goals..

20. Our bank effectively uses technology and automation 0 1 2 3 4 5 6

to achieve consistency and excellence in serving

customers.

21. Our bank has the necessary human and technological 0 1 2 3 4 5 6

capabilities to meet customers' requirements for

high quality service and products.

Strongly Strongly

Agree Disagree

22. Our bank believes that giving customers the high level 0 1 2 3 4 5 6

of products and service they really want will result in

HIGHER PROFITS for the bank.

23. Everyone in my bank contributes to a team effort 0 1 2 3 4 5 6

in servicing customers.

24. Employees in the bank feel a sense of responsibility 0 1 2 3 4 5 6

to help fellow employees do their jobs well.

25. I have the necessary capabilities, training, and resources 0 1 2 3 4 5 6

to do my job well.

26. My bank hires people who are qualified to do their jobs. 0 1 2 3 4 5 6

27. My bank gives me the necessary tools, equipment, and 0 1 2 3 4 5 6

technology I need to perform my job well.

28. I have the freedom in my job to truly satisfy my 0 1 2 3 4 5 6

customers' needs.

29. My job performance appraisal includes how well 0 1 2 3 4 5 6

I interact with and serve customers.

30. In the bank, employees who do the best job serving 0 1 2 3 4 5 6

their customers are more likely to be rewarded

(monetarily and non-monetarily) than other employees.

31. The emphasis the bank places on selling to 0 1 2 3 4 5 6

customers is NOT so much that it makes it difficult

to serve existing customers properly.

32. What my customers want me to do and what 0 1 2 3 4 5 6

management wants me to do are usually

the SAME thing.

33. Bank management and I have the same ideas about 0 1 2 3 4 5 6

how to best perform my job.

34. I understand and have sufficient knowledge about all 0 1 2 3 4 5 6

the products and services offered by the bank

(including digital products and services) to serve

customers’ needs.

Strongly Strongly

Agree Disagree

35. I am able to keep up with the changes in the bank’s 0 1 2 3 4 5 6

products and service that affect how well I can do

my job.

36. I believe that I have been well trained by my bank 0 1 2 3 4 5 6

in how to effectively meet customers’ needs and

expectations.

37. I am sure which aspects of my job my supervisor 0 1 2 3 4 5 6

will stress most in evaluating my performance.

SECTION 2

The questions in this section are strictly for classification and will be used only to compare how different

groups within the bank feel about the issues in the questionnaire.

ALL RESPONSES TO THIS QUESTIONNAIRE ARE STRICTLY ANONYMOUS.

1. How long have you been working for a bank or financial institution?

____ Less than six months

____ Six months but less than one year

____ 1-2 years

____ 3-5 years

____ 6-10 years

____ 10-20 years

____ Over 20 years

2. Do you supervise other people?

____ Yes If yes, please answer question 3.

____ No If no, skip to question 4.

3. How many people do you normally supervise?

Full-Time Employees:

____ 1-2

____ 3-5

____ 6-10

____ Over 10

Part-Time Employees:

____ None

____ 1-2

____ 3-5

____ 6-10

____ Over 10

4. How much of your average work day is spent in direct contact with bank customers?

____ 0 percent

____ Less than 10 percent

____ 10-30 percent

____ 31-50 percent

____ 51-70 percent

____ 71-90 percent

____ Over 90 percent

THANK YOU FOR YOUR HELP AND COOPERATION

Questionnaires from:

Rex Bennett, Ph.D., and The Customer Driven Company by Richard C. Whiteley of The Forum Corporation and

Delivering Quality Service by Zeitham, Parasuraman, and Berry.

Appendix B

REX BENNETT, Ph.D.

SUMMARYA combination of business, management, and academic experience provides a broad basis and integrated perspective for competitive strategy, bank financial

management strategy, customer satisfaction retention, and strategic planning consulting.

CONSULTING EXPERIENCECompetitive strategy, bank financial management, customer satisfaction, strategic planning, and marketing research consultant to a number of international

and national banks and other firms. Among the clients:

International and National Banks and Organizations

• American Bankers Association • First Data Resources • Medtronic, Inc.

• Bank of America • First USA BankCard • Risk Management Resources, Inc.

• Bank Marketing Association • Kaiser-Permanente HMO • Target Department Stores

• Capital One • Key Banks (KeyCorp) • US Treasury Department

• Citicorp • KPMG Peat Marwick • US Agency for International Development

Regional and Local Banks and Organizations: Over 300 Clients

Banking and Executive Program Faculty Member

Instructor and Lecturer on Competitive Strategy, Strategic Planning, Strategic Marketing, and Bank Financial Management.

• Graduate School of Banking at Colorado • Pacific Coast Banking School • Southwestern GSB at SMU

• Stonier Graduate School of Banking • Graduate School of Banking at Wisconsin • School of Bank Marketing

• Graduate School of Banking at LSU • Barret School of Banking • US Treasury Department

SPEAKER AND PRESENTER

Nationally and internationally recognized speaker at hundreds of businesses, organizations, associations, and executive and management development seminars and courses. Speeches in the areas of achieving competitive advantage, becoming a customer-driven organization, customer satisfaction and retention, and strategic planning and thinking.

International ExperienceSpeaker and instructor for bank financial strategies, competitive strategies, and marketing strategies in Austria, Bulgaria, China, Czech Republic,

Hong Kong, Indonesia, Poland, Romania, Slovakia, Thailand, and Ukraine.

Manager, International Financial Services, KPMG Peat Marwick, Prague, the Czech Republic. Responsible for developing and

implementing bank training and curriculum for mid and upper management for the Czech banking industry. Topics included competitive advantage

strategies, international banking, asset/liability management, credit, bank management, and strategic planning.

Expert Witness: Bank Profitability and New Bank FeasibilityComptroller of the Currency

Several State Banking Commissions and Boards

Academic Position: Professor Emeritus

School of Business

University of San Francisco

2130 Fulton Street

San Francisco, CA 94117-1080

Publications: Numerous articles in such publications as:

The American Banker

Journal of Retail Banking

Bankers Magazine

Bank Marketing

Contact: Rex Bennett, Ph.D.

President, Achieving Unlimited

4 Excelso Trace

Hot Springs Village, AK 71909

(415) 302-1182 Cell

(501) 226-5555

rexbennett@achievingunlimited.com

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