The unsatisfactory state of banking research

An amusing facet of bank advertising at present is the contest between ANZ and National Australia Bank over which of them can justify bragging rights as being "first" or "number one" in business banking.

Rival display ads, running on high rotation in metropolitan newspapers over recent weeks, rely on favourable use of survey data derived from one of several syndicated research reports on what business think about their banks.

NAB's ad has the bank's customer satisfaction ratings several heads above those of rivals. ANZ's, stretching the graphic, emphasises that it is preferred pick in business banking.

Most likely there are few potential bank customers reading the fine print in the ads, and none are likely to be able to review the research material supporting these claims.

Still, the episode serves to highlight the ebb and flow of this corner of research into the financial services market, with four firms producing output just as likely to puzzle the small audience of intended users in the middle management of banks as it is any curious newspaper reader.

As reported in the prior article DBM Consultants, a firm with longstanding contracts producing bespoke research for banks, has in the last year begun to undertake (and publicise) research into customer satisfaction.

DBM, which started this work in the first half of 2009, surveys around 19,000 businesses each year, with most completing surveys online (and with a very low reject rate) and the rest telephone interviews (where the decline rate is higher).

One feature of the DBM research is that it covers most business segments, from micro business with turnover of less than $1 million (and representing 89 per cent of all business) but also reaching very large businesses. DBM cuts this data into four categories.

TNS may have the longest standing survey in this segment, dating back 10 years or so. One reason for paying some attention to the TNS series is that it is one of three research surveys that help determine a sizeable percentage of the bonus payable to senior staff at Commonwealth Bank.

The TNS survey covers 12,000 businesses a year with a turnover of up to $300 million and relies on telephone interviews.

Roy Morgan Research over recent years have begun emphasising findings from a sub-set of its decades old household surveys and based on in-person, household interviews. Of 50,000 households surveyed each year Roy Morgan categorise 3500 as small business owners.

The Roy Morgan sample is thus very much a survey of the views of owners of very small businesses, a sector not reached by TNS or East.

The firm is embarking on an expansion of its business banking research, with interviews already underway with businesses with higher turnover, and no upper limit on its target market.

Roy Morgan also, of course, compile data on consumer views of banks (which is reported in this newsletter regularly).

East & Partners produces a syndicated survey that debuted in 2006 and which featured a "sentiment" index. The firm interviews, by telephone or in-person, around 10,000 businesses a year with turnover of between $5 million and $500 million.

The firm's discontent with the "satisfaction" measure that is a central theme of the work of its three rivals - and to some of its own index on sentiment - is leading East toward a different approach, at least in the limited research insights that it circulates widely.

East & Partners wrote in a research note last month that it was "no longer going to be talking about unsustainable, meaningless measures of 'customer satisfaction'."

East asked in the note if "perhaps its time to re-evaluate the investment being made by banks in promoting broadly based customer satisfaction numbers as a reason for customers to do business with them.

"Customers aren't switching their whole relationship anyway and the game is much more about gaining wallet share and lifting cross sell among existing customers."

East was picking up trends of declining customer satisfaction (though at odds with trends in the research of rivals, thought the different definitions of the business market, described above, and the different survey techniques can make these comparisons pointless, a point East's researchers often make).

So East is now emphasising measures of "customer experience predictors".