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Wed 18 Feb 2009 04:00 AM

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Holding on

In difficult economic times, and a highly-competitive environment, investing in customer service is vital for both customer retention and profitability. But research suggests that many banks in the region still have a long way to go.

In difficult economic times, and a highly-competitive environment, investing in customer service is vital for both customer retention and profitability. But research suggests that many banks in the region still have a long way to go.

2009 is going to be a challenging year for Arabian banks. The Union of Arab Banks estimates that profitability will be down by as much as 40%, and Markaz - the Kuwait Financial Centre - claims deposits and loan levels will also drop.

As the number of new customers declines and profit margins become tighter, customer satisfaction is an issue banks should focus on in order to make sure they are in a strong position to compete and retain business.

"In the past there was a feeling that there was another customer around the corner as they were coming in their thousands," says Robert Keay, managing director of Ethos Consultancy, which compiles the ‘Annual Service Quality Bank Benchmarking Study'. "That is changing, therefore every business has to look after the customers they have as there might not be another one in the door tomorrow."

"The journey to excellence in delivering customer satisfaction and creating customer loyalty begins the very day a new prospective customer contacts your business and enquires about your services," says Philip Forrest, president of The International Customer Service Institute and author of ‘Sold on Service'.

Despite this, a study by consultants A.T. Kearney found that many bank customers in the Middle East are not happy with the level of customer service they receive and that this has a direct impact on banks' potential profitability.

Authors of the report found that customer retention was a major problem in the Gulf, due to a shortage of skilled staff; a lack of product transparency; limited responsiveness and follow-up on customer requests; and poor online and phone banking services.

The report found that half of all UAE nationals and 90% of non-nationals believed they receive neutral or negative customer service from their bank. By comparison, in the US market, % of customers believe they receive neutral or negative service, while 76% classed themselves as "satisfied".

Bank managers who look at the bottom dollar may want to start improving their customer service as A.T. Kearney estimates that a 5% increase in customer retention increases product profitability by 20%.

It also reports that banks in the US could generate an additional US$1billion in deposits if they can make 5% of their customers highly satisfied.

"A customer who is satisfied is less likely to leave, and obviously customer retention would spread customer acquisition costs over a longer time frame and thus make the relationship more profitable for the bank," says Alexander von Pock, manager of financial services at A.T Kearney Middle East, and co-author of the report.

So how are regional banks currently performing in relation to customer service? The best indicator currently available is the Annual Service Quality Bank Benchmarking Study.

An independent report, it analyses customer service in 28 of the region's leading banks by visiting branches, making enquiries through banks' websites and phoning their call centres for help.

For the 2008 study, 725 branches were visited, 435 telephone calls were made and bank websites were visited 300 times. The top five performers were National Bank of Ras Al Khaimah (RAKBank), First Gulf Bank, Emirates Islamic Bank, Abu Dhabi Commercial Bank and Dubai Islamic Bank.

RAKBank topped the list for the fourth year running, while Lloyds TSB was the best international bank and Al Hilal Bank was the best performing new bank. Abu Dhabi Commercial Bank was highlighted for the most improved, while a notable decline in service was noted for National Bank of Abu Dhabi, Union National Bank and Royal Bank of Scotland.

The findings found that, in general, 40% of enquiries placed through banks' websites were answered, compared to 22% in 2007. Forty three percent of telephone calls to call centres were answered within 15 seconds, a decrease from 52% in 2007.Follow-up rates from websites appear to have improved, however. Of the 300 enquiries made through websites, 93 received follow-up telephone calls, a 50% improvement on 2007. At branch level, 93% of researchers thought the waiting time to get to a teller was acceptable, and 94% considered the teller to be "quick and efficient".

But in the four years the study has been carried out, Keay believes that not much has changed overall in terms of the quality of customer service on offer.

"Banks have grown exponentially and there is no talent pool to recruit from, so banks are forever recruiting people from all over the world. Different people from different parts of the world have different perceptions of what customer service is. Therefore if the bank doesn't actually train them the bank's way, unfortunately they will then deliver what they think is good," says Keay.

Von Pock believes that in the boom era staff retention was as much of a problem as customer retention, as he claims there was a staff fluctuation rate among banks of as much as 30%.

With the current freeze on recruitment levels this problem may actually decline and staff training levels within banks may actually increase as a result. This will result in staff remaining with the same bank for longer; however whether this leads to better customer service remains to be seen.

Staff training, motivation, support, moral and monitoring are key factors in achieving world class customer service, believes David Martin, a business consultant at RAKBank, which is currently regarded as the best bank in the Middle East for customer satisfaction.

In 2000, RAKBank, which up until then was predominantly a commercial bank, began a major push into the retail sector. From the start, its corporate emphasis was on customer satisfaction and one of the first appointments was to hire a manager for service quality.

"We laid down a series of service standards that our staff had to meet, whether that was answering the phone, talking to a customer over a cash counter, opening an account or opening a credit card," says Martin.

"Those service standards are all measured by our staff internally, by mystery shoppers and by third parties and our staff are sent on refresher courses twice a year."

Martin points out that through RAKBank's monitoring systems, it can then know at any given time what customer satisfaction levels are, and if there are any areas that need attention.

"Different systems and bodies, both external and internal, are constantly measuring us and we have always found that if you tend to measure something it tends to improve," he believes.

This focus on customer satisfaction has paid off, as Martin reports that the bank's retail customer base has risen 6,000%, from 5,000 to 330,000, in eight years. At the same, he claims the bank's profitability has also risen by 2000%.

Word of mouth has been the bank's main method of customer acquisition. "If you get a recommendation from somebody else, it costs me nothing to advertise for it but it costs me a lot to maintain that service," says Graham Honeybill, RAKBank's general manager.

"We are not perfect," says Honeybill modestly, "[but] one of the things we do - that is unique in this part of the world - is that we apologise if we are wrong. You don't often see us in the newspapers, as if the newspaper sends us a letter of complaint it gets answered within 24 hours. If we are wrong we admit it." The bank has a policy of sending disgruntled customers a bunch of flowers and Honeybill reports that its flowers bill for last year was for 15 bunches.

Satisfied staff lead to satisfied customers, and Honeybill reports that the bank has a range of staff moral measures in place that are aimed to keep staff motivated and content. It recently held an ‘Oscars' night where staff were awarded with statuettes and also regularly award staff who perform well.

"Most competitors have a tiny department with one or two people involved in service quality; we have 40 people on service quality and training," says Martin.Happy staff may make for happy customers, but banks also need the latest technology to be able to give quality customer service. While some regions of the Middle East are resistant to voice activated systems - such as Saudi Arabia - the UAE is embracing new forms of communication technology.

Fadi Hani is a country manager at Avaya, which supplies software and hardware products to a range of banks across the region. Avaya offers a contact management service where customers are contacted and surveyed about their level of satisfaction.

Its ‘Contact Centre' service is different to traditional call centres, in that agents are equipped to take webchat, email and phone queries.

For security reasons, banks generally use their own staff but Avaya supplies the technology and also has business partners who organise the agent training. For banks that wish to record, monitor and analyse agent calls, a call monitoring service can see instantly how customers are being serviced.

Hani reports that Avaya has seen a lot of interest from banks in automated pro-active contact technology. This is where a computer selects a batch of customer details and the system begins calling the numbers. As soon as a human voice answers, the call and the customers details are then fed to an available agent.

"This is in big demand at the moment, as you are contacting customers to pay you money, but you also reduce the overheads of getting the agent to look up a customer's number, dial them and wait for an answer," says Hani.

After the weather and the traffic, bank customer service standards are usually the third most common conversation topic in the Middle East, but for all the criticism thrown at banks they aren't as bad as it would seem.

A customer service study carried out in the UK, which included banks, found that 55% of calls were answered within two minutes and companies took an average of four days to respond to emails.

The study also found that email queries sent into companies in the UK were only answered 46% of the time and in 28% of the time not at all.

While standards may be declining in the UK, customer service is becoming a priority in the Gulf. "I think there will be a big investment in service quality this year and we have already started to see it," says Keay.

"We have won three major contracts from major local banks in the past six weeks and there is going to be a drive to make sure they ring fence the customers they've got, because they don't want to give them poor service so they can lose them to another bank."

On the balance sheet it also makes sense, as A.T. Kearney found that if a medium-sized Gulf bank introduced world standard customer service levels then they could increase their profits by up to US$150million a year. That's food for thought, especially in current times.

Customer service in the Middle East

A summary of findings from the 4th Annual Service Quality Bank Benchmarking Study:

• On average only 40% of enquiries placed through banks' websites attracted a response

• 13% of telephone calls to call centres were not answered within three minutes

• 43% of telephone calls answered by call centres were answered within 15 seconds

• 74% of callers stated that they felt that the bank representative they were talking to was knowledgeable enough to assist with the enquiry

• Of 300 website enquiries, only 93 telephone calls were received following up the enquiries.

• 69% of researchers felt that the greeting they received from the customer service person in the bank branch was "warm and genuine"

• 88% of researchers felt that the customer service person serving them had a friendly attitude towards them

• 16% of customer service staff were distracted, talking to other staff or answering their mobile phones whilst dealing with the customer sitting in front of them.

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