July 18, 2005
Banking Industry Focus
Affect of Wait Times on Affluent Customers
by Brickstream Business Consultants
Affect of Wait Times on Affluent Customers
Long wait times can have a dramatic impact on wealthy customers. This was clearly demonstrated by comparing two branches on the west coast only a few miles apart. The first branch boasts affluent customers whose deposits are six times the average at $65,000 per customer. The second branch has a more average deposit rate.
During a 30-day period in summer 2004, over 250 customers abandoned the teller queue without being served at the affluent branch compared with almost 400 people who abandoned queues at the average branch. However, these wealthier customers demonstrated a lower tolerance for waiting in line. The observed difference is that increased abandonment in the wealthy branch was triggered by queue lengths as low as 10 people whereas the customers at the average branch reacted after lines approached 20.
By not recognizing or taking action on the circumstances that lead to abandonment, this branch incurred missed sales revenue projected to be $2,000 for this one month, or $24,000 on an annual basis.
While this high customer value branch did provide better service regarding wait time than the other branch, and did have significantly less abandonment, the impact of those who did abandonment the branch is magnified by the much higher value of the average customer. Where the value of the customers lost at the average customer value branch was $125,000 per year for the 15 customers projected to switch banks, the value of the 10 customers we project to leave wealthy customer branch is in excess of $37,000 for this one month, or more than $440,000 for the year. And this is without taking into account that higher value customers have much higher expectations regarding service level.
In the current competitive banking landscape, banks can not afford to miss any sales opportunities. Measuring customer behavior, including wait times and line abandonment is the first step in analyzing the bank's performance in customer retention. This quantitative approach also provides the yardstick for measuring future performance enhancements and providing a return on the bank's improvement investments.
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