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Monday, August 18, 2014

Banking Brand Myths: Larger Banks Don’t Care, Smaller Banks Offer Better Service

By Beth Youra

This post is part of Gallup's ongoing series on the shifting landscape for financial institutions. It provides insights into channel optimization, emerging customer behaviors and preferences, product penetration and relationship growth, engaging the most critical affluent and business customers, and reshaping banks' overall value proposition.

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In banking, we often hold these “truths” to be self-evident: Large banks offer their customers a wide array of products and services including leading and varied technology, but they don’t care as much about their customers. Here’s another: Smaller banks offer their customers a high level of personal service built around an amazing customer experience, but often lack technology. However, according to Gallup research on retail banking brand attributes, while some of these long-held beliefs are true, others need to be revisited.

Myth: Large Banks Don’t Care as Much as Small Banks
While it is true that national banks score better or as well as their smaller counterparts on attributes like, “Lets me bank anywhere, anytime, anyway I want,” and “Rewards me for the relationship I have with them,” they also do just as well or slightly better than their smaller counterparts when it comes to helping their customers think about and manage their finances to meet their goals. This should really come as no surprise, as these are the banks that have the most robust investment services spanning affluence groups and solid web-based solutions for financial planning.

Large banks also tend to better train their platform employees on how to have a sales conversation that actually spans the larger pictures of a customer’s life rather than just asking basic questions like how many checks they write a month and if they want to use mobile banking. When it comes to caring about customers’ long-term financial goals, this manifests with customers saying these large banks do just as well as their smaller counterparts on attributes like, “Leads you down a path to your financial goals.” So, while maybe not known for their warm and fuzzy attitudes, national banks have proven that they do care about their customers’ financial futures just as much as their smaller colleagues.

Myth: All Small Banks Are Good at Creating Customer Connections
Yes, in general, the smallest of the small banks are good at creating personal connections and being there for their customers in the way that the largest banks are not. But not all smaller banks are created equal. Small regional banks do not score that much better than their large regional and national counterparts and actually score worse than other smaller banks when it comes to attributes like, “Strikes the right balance between the latest technology and personal service,” “Is always on my side,” and “Is a bank you will use for the rest of your life.” This begs the questions – what do these small regional banks stand for? What is their value proposition? If customers aren’t getting better technology, better financial planning, or better service, how will they compete in the future?

We may still live in a time when a lot of customers pick a bank because the branch is closer to their house or their parents set up an account for them when they were kids, but as technology changes, including how we interact with banks, these reasons are becoming less important. Smaller regional banks will need to either invest more in the people side of the business or the technology side of the business to have a chance at creating a compelling differentiation in the market.

Bank Size Definitions:
National: 5000+ branches or $400B+ deposits
Large Regional: <$400B to >$100B in deposits, 1000 to <5000 branches
Small Regional: 400 to <1000 branches & $50B to <$100B in deposits
Small Banks: <400 branches or <$50B in deposits (does not include Credit Unions)

Thursday, August 14, 2014

College Is Worth It, But Only If We Make the Most of It

By Brandon Busteed, Executive Director of Gallup Education

There have been plenty of headlines in the news about rising college costs and the implications of Americans borrowing more than $1 trillion in student loans to pay for it. The debate has primarily focused on the financial and economic consequences of these loans -- such as worries about default rates, what it means for the housing market if a generation of college graduates delays buying homes, and the en vogue question: “Is college worth it?” So far, economists and pundits have answered with an emphatic “yes” to college being worth it, citing the average lifetime earnings of college graduates compared with those without a degree. Using that math, the answer may be right. But what if we’ve been asking the wrong questions and using the wrong equations to get this answer? 

Recent findings from the Gallup-Purdue Index -- a massive study of more than 30,000 college graduates in the U.S. -- show that few graduates are having experiences in college that are strongly linked to the long-term outcomes that matter most: a great career and great life afterward. Perhaps we should be asking a different question altogether -- to paraphrase President John F. Kennedy’s famous call-to-action: “Ask not what college can do for you, but what you can do for (or in) college.”

The problem with college today is that we’ve heaped massive expectations upon it. It’s the supposed ticket to a better future and the American Dream. Parents and students are often willing to make huge sacrifices to get a college degree, because we’ve all believed -- without any doubt -- that it’s the path to success. And worst of all -- thanks to an increasingly consumer-driven mindset about higher education -- we have created the expectation that it’s an automatic path at that. When you pay good money, you expect a good grade and a good degree. We put more emphasis on getting into college than on what students should do to make the most of their experience while enrolled. 

And as we’ve learned from the Gallup-Purdue Index findings, when it comes to your engagement in work and well-being in life after college, what matters most is how you do it, not where you go. The type of institution, whether it is prestigious, private, or highly-selective, doesn’t matter. What matters a lot is having at least one professor who makes you excited about learning, professors who care about you as a person, and a mentor who encourages your goals and dreams. Graduates who “strongly agree” that they had all three of these experiences in college double their odds of being engaged in their work and of thriving in their overall well-being. Yet only 14% of all graduates strongly agree that they had all three of these important college experiences. And when it comes to the one experience we found to be most relevant to graduates’ long-term success in life and work -- having a mentor in college -- eight out of 10 graduates failed to get this. How you do college is more important than where you go. And what we’ve learned most recently about student loan debt furthers the case. 

Graduates with higher amounts of student loan debt are less likely to be thriving in their overall well-being after college, and for much longer than many of us would have guessed. For younger graduates who got their diplomas between 2000 and 2014, those with more than $25,000 in student loan debt are worse off on all elements of their well-being -- purpose, social, physical, community and financial -- compared with their loan-free counterparts. In other words, high loan debt may negatively affect all aspects of well-being for as long as 15 years. Those who graduated between 1990 and 1999 and who took out more than $50,000 in student loans are worse off on three elements of their well-being -- purpose, physical, and financial -- for as long as 25 years after graduation. In simple terms, graduating from college with as little debt as possible and making the most of the experience may be the keys to making college “worth it.”

This new research tells us there is much more we can all be doing to improve the efficacy and ROI of college. Students can’t just rest on their laurels after getting into college, but they must realize the hard work has just begun. College won’t be the magic bullet they hope for, unless they take full advantage of it by finding great professors and mentors, working on long-term projects, finding internships that apply what they are learning, and being extremely involved in an extra-curricular activity. Parents need to look for these attributes in a college, rather than the prestige of the brand or the fancy buildings and dining halls on campus. And they can’t expect these things to just happen to their child; they need to help emphasize to their child that it’s what they do in college that matters.

College leaders, faculty, and staff need to embrace a new reality. It’s no longer assumed that college is the best path to a great job and a great life. Higher education institutions need to constantly prove it now. There’s no better way to do that than to understand how the fruits of its labor -- graduates -- are doing in the long run in their careers and lives. A diploma isn’t worth much if it doesn’t lead to a good job. And college -- despite everything we’ve been raised to believe -- is not the ticket to a good life…unless students make the most of it.                      

Wednesday, August 13, 2014

Workforces Devoted to Weaknesses Are Dangerous

“Gallup has studied the most successful people in the world, and we’ve found that they are not well-rounded individuals,” said Paul Allen, Gallup Strengths Evangelist, July 24 in Arlington, Virginia, at the Next Generation of Government Training Summit for new and rising leaders in government. “Instead, they are people who discovered that they had natural talent for something at a very young age. They concentrated on that, invested in it, and turned that raw talent into strength.”

When you accept that nature gave you incredible talents and choose a career that allows you to use them -- and if you have a manager who lets you play to those talents -- you can achieve some amazing things. Instead, most managers want us to work on what we’re terrible at until we rise to the point of mediocrity. Perhaps that’s why we tend to become less and less engaged as we age. As Allen says, 76% of fifth graders are emotionally and intellectually engaged in their work, but that number dwindles to 61% in ninth grade, 44% in 12th grade, and 30% among adults.

In this speech, Allen discusses why a workforce devoted to its weaknesses is dangerous for companies and society as a whole, and how to prevent it from happening to your organization -- or to you.

Watch the full speech:

For more information on how to build on the innate talents in every individual to boost performance, visit the Gallup Strengths Knowledge Center.

Wednesday, July 2, 2014

It’s the Educonomy, Stupid

“It’s incumbent upon all the leaders in our country -- education, business, and government alike -- to turn a made-up word into a reality. Let’s build the world’s first educonomy,” said Brandon Busteed, Gallup’s executive director of Education. Busteed delivered this compelling message to top U.S. education policymakers on June 30, 2014, at the Education Commission of the States’ National Forum on Education Policy Agenda.

Busteed’s remarks, which aired on C-SPAN, revealed insights from Gallup research studies exploring the links between education and long-term success in life and work. During his speech, Busteed emphasized that education leaders need to measure and focus on the outcome that matters most to Americans: finding a great job. He explained that, as a nation, there is nothing more important we can do than build the world’s most effective “educonomy” by seamlessly integrating our educational system, our employers, and our job creators. 

Watch his speech in its entirety:

Download Busteed’s presentation. For more information on how Gallup gives education leaders tools and advice to help teachers, students, and schools succeed, visit the Gallup Education Knowledge Center.

Tuesday, July 1, 2014

Engaging Students Is the Key to Teacher Effectiveness

By Mark Pogue, Senior Director Strengths Education

Growing up in the ’60s I had the unusual privilege of attending a small elementary school, Lake Elementary, where my grandfather was the principal. He performed all the normal activities you’d expect from a teacher who also doubled as the principal for our small school: teaching 6th grade, coaching basketball and baseball, all while managing the small facility that served the needs of so many students throughout the years. But what was most remarkable about attending Lake Elementary was the emphasis my grandpa put on relationships and the importance of each individual student. 

I can’t tell you how many times I heard “he was the best teacher I ever had,” "he always seemed to know just how to challenge me,” and “next to my parents he’s one of the most important people in my life.” Hopefully we all had at least a few teachers in our lives who had the kind of impact my grandpa did on students’ lives. All in all, it was probably only a handful. However, times may be changing. In a new Gallup-Education Week survey, an overwhelming majority of superintendents emphasize the importance of engagement in the evaluation of teacher effectiveness. 

These superintendents acknowledge how tough it is to find great teacher talent and just how important talent is to fostering teacher effectiveness. Ninety-four percent say student engagement is crucial to measuring teacher effectiveness. And that statistic is followed by only 6% saying years of teaching experience made a significant difference in effectiveness. Our superintendents believe we have to find and recruit teachers who start with the talent to be successful and then develop it.

Students in my grandfather’s classes were engaged, and all the teachers were held to that same expectation. At 65, he was still making the rounds at recess, making every student in his school feel special and important. With those feelings also came the sense that something was expected of us. If we were special and important, we had better not squander our potential on anything less than being a success and getting the most out of what we’d been given.

There are obviously a lot of factors that contribute to student success, and the superintendents emphasize most of them in their responses -- excellent curriculum, removing barriers for disadvantaged students, strong teacher talent and performance. Reading through the results in the new Gallup-Education Week survey, I’m encouraged both by the sense of urgency in our school leadership and that so many of our districts’ leaders want to be spending more time with students!

Visit our Education Knowledge Center to learn more about helping students, teachers, and schools succeed.

Wednesday, June 25, 2014

Three Ways to Engage Consumers On Social Media

By Ed O'Boyle, Global Practice Leader

Ever since Facebook first introduced brand pages in 2007, companies have been flocking to social media. Many business leaders believe that the more they post and share about their products and services, the greater their chances of attracting customers and generating revenue.

But just-released research from Gallup’s State of the American Consumer report suggests that much of these efforts have been misguided.

Social media are not the powerful and persuasive marketing force many companies assumed they would be. Gallup finds that a full 62% of U.S. adults who use social media say that these sites have absolutely no influence on their purchasing decisions. Another 30% say these sites have some influence, and just 5% say they have a great deal of influence.

And although companies may think that people who “like” or follow them on social media are an attentive audience, our research suggests otherwise. Of consumers who report liking or following a company, 34% still say that social media have no influence on their purchasing behavior, while 53% say they have only some influence.

When compared with more traditional forms of social networking, social media initiatives may actually be the least effective method for influencing consumers’ buying decisions. Gallup research has shown that consumers are much more likely to turn to friends, family members, and experts when seeking advice about companies, brands, products, or services. Social media sites have almost no sway.

These findings raise a question: is there an inherent flaw in the idea of using social media to drive purchasing, or have companies just been using social media poorly? The fact that some portion of buyers credit social media with having real influence suggests the latter may be true. Consumers are drawn to social media because they want to take part in the conversation and make connections. But many companies continue to treat social media as a one-way communication vehicle and are largely focused on how they can use these sites to push their marketing agendas.

To positively influence purchasing through social media, marketers should learn to use it to listen and interact. Consumers are more likely to engage when the brand-related posts they encounter are:

  1. Authentic. Social media sites are highly personal and conversational. And, as Gallup finds, consumers who use these sites don’t want to hear a sales pitch. They’re more likely to listen and respond to companies that seem genuine and personable. Companies should back away from the hard sell and focus on creating more of an open dialogue with consumers.

  2. Responsive. The social media world is 24/7, and consumers expect timely responses – even on nights and weekends. Companies must be available to answer questions and reply to complaints and criticisms; ignoring negative feedback can do considerable damage to a brand’s reputation. Instead, companies must actively listen to what their customers are saying and respond accordingly. If they made mistakes, they must own up to them and take responsibility.

  3. Compelling. Content is everywhere, and consumers have the ability to pick and choose what they like. Companies must create compelling, interesting content that appeals to busy, picky social media users. This content should be original to the company and not related to sales or marketing. Consumers need a reason to visit and interact with a company’s social media site and to keep coming back.
When companies focus their social media efforts on pushing product and not cultivating communities, they overlook the real potential of these channels. Gallup research has consistently shown that customers base purchasing decisions on their emotional connections with a brand. Social media are great for making those connections -- but only when a brand shifts its focus from communication to conversation.

A version originally appeared on the Harvard Business Review Blog Network.

Sunday, June 22, 2014

Gallup Examines the State of the American Consumer

The financial collapse in 2008 and the ensuing Great Recession have changed American consumers. Millions of people lost their jobs; spending and investment evaporated; and bankruptcies and foreclosures intensified. Consumers lost confidence -- not just in the U.S. economy, but in their own financial security, too. These negative effects continue to stall economic growth.

While many factors affect growth predictions, much of the nation’s ability to rebound rests with consumers and how much money they are comfortable spending. Gallup research indicates that consumers today are feeling better about the economic climate in the U.S. and are spending more money. However, their spending has not reached pre-recession levels. For many consumers, the economic downturn left lasting financial and emotional scars.

These findings are from the State of the American Consumer: Insights for Business Leaders report, which Gallup released Monday. The report shares data from Gallup’s ongoing study of U.S. consumers from 2008 through 2014 and examines how consumer spending, confidence, and expectations have shifted because of the economic downturn. It offers advice on how companies can more effectively measure and manage their own customer engagement in this new normal and on how leaders can improve customer engagement and organizational performance.

Here are some key insights from this report:
  • Gallup’s Economic Confidence Index, although still in negative territory, shows that American consumers are more confident in the U.S. economy now than they have been in the past six years. The index averaged -16 for the first quarter of 2014, which is 32 points higher than the average for 2008.

  • Daily spending in the first quarter of 2014 reached an average of $84. While this showed an improvement over recent years, daily consumer spending still trails behind the 2008 average of $96.

  • The percentages of U.S. workers who said they were worried about job security or reductions in wages or benefits were nearly as high in 2013 as they were in 2009 and nearly double the levels seen in 2008.

  • Gallup research has found that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth over the average customer. In stark contrast, “actively disengaged” customers represent a 13% discount in those same measures.

  • Companies that engage both their employees and their customers gain a 240% boost in performance-related business outcomes.

  • Retail banking customers who are fully engaged bring 37% more revenue per year to their primary bank compared with those who are actively disengaged. 

  • Just 5% of consumers who use social media say these channels have a “great deal” of influence on their purchasing decisions, while 62% say they have no influence at all. Gallup research reveals that friends, in-store displays, television commercials, and even mail catalogs and magazines have more influence on consumers’ purchasing decisions than social media.

  • Consumer electronics shoppers who are fully engaged make 44% more store visits in one year than shoppers who are actively disengaged. On average, they spend $373 per shopping trip, while actively disengaged shoppers spend $289 per trip.
For more findings, read the full report and visit Gallup’s Customer Engagement Knowledge Center.

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