How to Manage Your Opportunity to Reduce Controllable Attrition Rates

In an earlier edition of Stellar Insights, I discussed at length the effects of attrition on growing retail market share. One issue I addressed was the importance of identifying product-specific patterns in attrition. While this can be helpful across your entire product line, there are specific products that can be significantly impacted by a dedicated effort to manage account attrition. In this article, I will concentrate on one particular area of growth – retail checking accounts.

The first step in managing attrition is to have the data necessary to identify areas of opportunity. One thing that has always concerned me about the banking industry is that there appears to be no standard measurement for account attrition. Therefore, let’s discuss how we recommend tracking this most important issue.

Regardless of what product any business sells, the first year with a new customer is when most opportunity lies in affecting attrition rates. After all, first-year attrition rates are much higher than subsequent years. My recommendation is to track attrition by quarter for the entire first year, as well as by product-type. Below is an example tracking various checking account attrition for one of our clients:

Notice how the attrition rate varies by product. Also note, in June 2016 there was a reduction in overall checking attrition of 7%. This decrease was accomplished by adjusting marketing efforts away from areas that showed high historical attrition within their market. I consider this to be one of the easier and less labor-intensive ways to manage checking account attrition. 

The next step is to survey customers on why they have closed their accounts, which requires a bit more time and labor. I recommend a combination of telephone, mail and email surveys. I am a firm believer in utilizing the Net Promoter Score system to secure this information. This method begins with a survey of recent transactors that asks a simple question, “On a scale of 0 – 10 (with 10 being ‘highly recommend’) how likely are you to recommend our institution to a friend or family member?” Make sure to give the respondent the opportunity to explain why (if the score is below a certain threshold). These responses are key to finding actionable changes that can be controlled to improve retention before an account is closed. Instead of a formal program such as Net Promoter Score, a simple phone or mail/email survey to recently-closed account holders will garner the necessary intelligence needed to address your attrition issue as well.

At this point, you should categorize the findings by controllable attrition (manageable issues) and uncontrollable attrition (unmanageable issues such as death, long-distance moves, etc.). The opportunity lies in managing controllable attrition. These problems could include such things as product offerings, service issues, staffing, hours of operation, online banking process, etc. An important consideration at this stage is your institution’s ability to address issues as they are identified. Your institution’s willingness to make and accept change will be critical if you expect to have a positive effect on account attrition.

In a more recent development, consumer use of mobile devices has skyrocketed. We are seeing mobile device use with Facebook and other digital marketing campaigns exceeding 80% of the responders. Mobile considerations, including design and responsiveness, are areas that need immediate attention if you are to remain competitive. As great as social, digital and mobile campaigns can be from a marketing standpoint, the failure to communicate effectively via mobile devices can be devastating from both an attrition and growth perspective.

In closing, I have only touched on a few ideas that can assist in reducing account attrition. Numerous other factors need to be considered as well since many attrition issues cannot be easily fixed. The best way to start the process is to identify how large your attrition problem is at your institution. In my experience over the past 17 years in the banking industry, most institutions have failed to identify attrition as a major factor in growing retail market share. Like many industries, the downfall is that the focus is on new account/customer acquisition only. Those institutions that I consider to be “High Performance” all focus on attrition as part of their checking acquisition strategies. I hope you do as well!

Craig Simmers is Founder of Stellar Strategic Group, LLC. Craig can be contacted via email at craig.simmers@thestellarfinancialgroup.com or call 410-990-0172