As the Middle East banking sector becomes increasingly competitive and consolidated, regional banks will face shareholder pressure to focus on value rather than revenue growth. However, a recent Bain study of companies from a wide range of industries in 12 countries shows how difficult this is to achieve. Over the past decade, just one company in eight proved to be a sustained value creator, by registering 5.5 percent annual sales and earnings growth and above-average total shareholder return. One key to sustainable value creation for regional banks is scale; among Saudi banks, for example, the largest players are also the most profitable. Given that scale is important, banks must focus on retaining their customers and capturing those of the competition through improving customer satisfaction. Bain studies have shown that sustained value creators enjoy customer satisfaction nearly 2.5 times higher than competitors. In a study, Dubai-based Emmanuel Yoo, Bain partner and Tom De Waele, principal, said despite the proven importance of customer satisfaction as a key factor in profitability and value creation, companies have a poor understanding of their customers' level of satisfaction. According to a Bain study, 80 percent of companies believe they provide a superior experience, while customers concur in only 8 percent of cases. This suggests three big challenges for regional banks that set out to improve customer experience: 1) Customer experience is difficult to design and control 2) It needs to be accurately measured 3) Disciplines that sustain and improve it need to be embedded in the bank culture in order to achieve customer-led growth One big reason why a coherent customer experience is so difficult to achieve is that it is influenced by a wide range of variables, from "hard" inputs, such as products and pricing, to "soft" inputs, such as service delivery, brand image, and convenience. This broad range of inputs helps explain the absence of accurate customer satisfaction measurements within most organizations. While measuring financial profit has been well developed for more than a century, measuring customer loyalty is not as far advanced. Most customer loyalty measurements face several challenges, including: limited track records, lack of standards, lack of focus throughout the organization, and inconsistent and often improvised data gathering processes. A single, holistic query is more useful for management than a detailed survey based on a complex breakdown of factors. For example, Bain has defined a metric called the Net Promoter Score (NPS) based on a single, key question. It asks customers, "On a scale of 0-10, how likely would you be to recommend our company to a friend or colleague?" To be effective, the NPS must be embedded in a bank's operations. This involves both a top-down and bottom-up approach. The top-down approach uses an NPS survey to gauge the bank's performance and help decision makers set improvement targets. The complementary bottom-up approach provides feedback to employees for improvement. Implementing a full potential Net Promoter System requires eight key elements: • Measure performance – It is important to design a robust metric that allows a bank to understand its baseline performance, define improvement targets, and evaluate progress. • Understand the economics of loyal customers – To evaluate which actions are most likely to win promoters or avoid creating detractors, banks need to quantify the incremental value of a satisfied customer. • Identify "moments of truth" - Just a few customer interactions, such as taking out a loan, reporting fraud, or replacing a lost or stolen credit card have disproportionate influence on earning customers' loyalty and deserve the disproportionate attention of bank employees. • Close the loop – Defining a closed-loop feedback process enables employees to monitor and improve performance continuously. This includes identifying customer feedback touch points, defining the method and frequency of feedback, and putting in place a standard reporting format across the organization. • Engage the front line - It is also important to motivate employees to embrace customer satisfaction through training programs and financial incentives that reinforce customer loyalty, real time feedback, and coaching on customer service. • Instill a bias for action - Once the measurement process is in place, the next step is to set up cross-functional teams to lead NPS improvement initiatives and facilitate the sharing of best practices. • Support with robust infrastructure - Throughout the transformation process to a customer-centric model, firms must develop a robust infrastructure to support the NPS implementation, including adequate resources, well-defined reporting tools, and sufficient IT support to sustain the effort. • Lead and communicate - Customer-centric banks need to embed a loyalty focus deep in their organization through clear communication and leadership.
