How Consumers Choose a Bank: A Tale of Two Surveys
Your checking account marketing efforts are lagging, so you turn to some of the published research out there to figure out how consumers really choose a bank. Always good to rely on data to make decisions, right?
Right. But which research survey you turn to may influence your ultimate decisions.
What Influences Consumers' Choice of Banks?
Forrester Research asked consumers about the "most important factors influencing people's selection of a new banking provider." It found that the three most-frequently cited factors were lowest fees, local branches, and friend/family recommendations.
So, if you want to improve customer acquisition, just lower your fees, open more branches, and get your customers to provide more recommendations, right? Well, not so fast.
I recently surveyed consumers, too, about what drives their decision to choose a bank. I, too, found lowest fees and convenient bank locations at the top of the list.
But after the top two responses, my ranking looks very different from Forrester's. I found that roughly four in 10 consumers cited "best value for the money" as an important factor, nearly as many who cited branch locations. And not far behind was "best online and mobile banking tools" mentioned by 35% of survey respondents. Why the big discrepancy?
- Different question. I limited survey respondents to just three responses, forcing them to prioritize the factors that mattered most to them. I can't be sure of this, but based on Financial Brand's reporting, the Forrester survey did not impose the same limitation. As a result, what we see are the most frequently cited factors--but because a respondent could check off all 10 factors, there's no way of telling which factors were more important than the others.
- Different prompts. My survey included responses for "best value for the money," "best rewards program," and a couple of prompts regarding tools for mobile payments and PFM. By not including those prompts, respondents to the Forrester selected "family/friend recommendations" more frequently than they did in my survey. In addition, Forrester skewed its own result by including "existing relationship with institution" which is irrelevant when selecting a "new" banking provider as their question indicated. My survey wasn't flawless, either, however. "Best value for the money" was a poorly worded option because it could be interpreted in any number of ways by respondents.
- Different sample. On its site, Forrester said it surveyed US online adults, and I would guess their sample was representative of the entire online adult population. My survey excluded consumers over the age of 72. Why? Most of the banks and credit unions I talk to aren't trying to sell checking accounts to those people. So why skew my survey findings with the responses of a segment most financial institutions are looking to sell to? I'm not saying Forrester's choice was wrong--just saying that will produce different results.
It's The Segments That Matter
Even with an appreciation for how two surveys may differ in trying to address the same question, looking at consolidated results isn't helping you. You're going after specific segments of the market, right? So what help is data about segments you're not interested in?
It's a fact of the banking market--as it has been for years--that younger consumers represent a disproportionate percentage of the demand for financial products like checking accounts and credit cards. It's a life stage thing. It's true for today's Millennials as it was for Gen Xers and Boomers before them.
So before concluding that lower fees and convenient branch locations are the most important factors influencing consumers' choice of banks--as both surveys do--let's look at the generational breakdown.
Lowest fees are at the top of both the younger and older Millennials' list of factors, but a few things stand out:
- Convenient bank locations is less important to Millennials than to older consumers. Thirty percent of young Millennials and 35% of older Millennials cited branch locations as one of the three most important factors versus 41% of Gen Xers and half of Boomers. The in-branch experience, however, was equally unimportant to each of the generational segments. I guess you can put up a sign on an empty building, call it a branch, and you'd take care of consumers' need for convenient branch locations.
- Rewards programs are more important to Millennials than to older consumers. The percentage of consumers citing rewards programs as an important factors declines with age. A similar pattern occurred with "combined debit/credit rewards program."
- Digital banking tools are roughly equally important to each of the generations. In fact, young Millennials were the least likely to cite digital tools as a factor in their decision (but only by a couple of percentage points). The percentages in the low to mid-thirties across each of the four segments is in marked difference to the Forrester survey which found that only 13% cited "digital capabilities" as a factor. No way the addition of the 72+ crowd accounts for that difference.
- Referrals are more important to Millennials than to older consumers. But the percentage of Millennials citing this as a factor was far down their list.
Consumers--and Millennials in particular--may be opening checking accounts in branches but that doesn't mean that branches, or even branch locations, are that important to their decision.
Bottom line: Dig into research numbers you find (yes, even mine) to understand exactly what the survey asked, what prompts were included (and not included), and who was surveyed.
Director of Research