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Code Halos: The Key to Improving Banks' Net Promoter Score

18/02/2015 12:21 GMT | Updated 19/04/2015 10:59 BST

A company's Net Promoter Score (NPS) has become an important measure of customer satisfaction. It asks them a simple question: how likely they are to recommend that company to a friend. The responses split the audience into three groups: promoters, passives and detractors. By subtracting the percentage of detractors from the promoters, banks obtain their NPS. NPS has been a valued metric in many consumer-facing industries for several years, but its importance and influence in financial services is growing fast.

Everyone wants a better NPS, and the secret to achieving this is simple: know your customers better. Improved understanding of customers means banks can deliver an enhanced service; as a result, loyalty will potentially increase as their clients are more likely to be an advocate.

NPS' emergence in financial services, and particularly retail banking, is partly due to increasing competition and a greater ease with which customers can switch provider. Traditionally, NPS has been seen as less relevant in industries where there are significant barriers or costs associated with changing to a rival provider, since peer recommendations are not such an incentive to change. In the UK at least, several changes are making it much easier for consumers to switch banks. Firstly, a Parliamentary Commission on Banking Standards, which reviewed standards and culture in the country's banking sector back in 2013, resulted in a new scheme designed to help customers switch current account provider by removing penalty charges. One year after the scheme was introduced, current account switching increased by 19%, with over a million customers moving. Further changes, including the ability to port account numbers from one provider to another, are planned in the years ahead. As it gets easier for customers to switch, exceptional service and product innovation become more important in making sure customers are not tempted by a rival.

Secondly, consumer behaviour has been altered significantly by the rise of social media and mobile technology. Today's banking customers are always connected, always online and heavily influenced by social recommendations and word of mouth. In years gone by, customers' frustrations or bad experiences with a bank would largely be limited to their immediate personal network. Now anyone who has problems with their bank can broadcast their complaints much further. If several customers are experiencing the same problem at once and all begin talking about it online, the issue can escalate into a major, highly visible reputational crisis that lingers in customers' minds - such as when a glitch suffered by a bank in December 2013 left customers unable to use their debit or credit cards on 'Cyber Monday', one of the busiest online shopping days of the year. By 9pm on the day, over 11,000 social media posts complaining about the fault had been shared online - not a great advertisement for current or potential new customers.

In order to address these modern challenges and improve their NPS, banks must turn to the wealth of digital information that surrounds their customers. Every digital click, swipe, "like", buy, comment and search produces a unique virtual identity around every one of us - what we at Cognizant call a Code Halo. Code Halos offer unprecedented insight into consumers' behaviour, preferences and needs. By tapping into this data and analysing it, banks can understand their customers better, react faster when needed and anticipate their future requirements.

Social media has a massive part to play here. Banks' own social media channels have become critical to customer responsiveness and therefore NPS. In the event of any unexpected problems, the social detractors that emerge have to be tackled quickly and ideally turned into advocates or even promoters. To do this, banks have to actively monitor for and identify customers talking about a poor experience or problem and provide direct, timely support. It is no longer acceptable to ignore these posts, or send a stock holding statement - customers want personalised responses and regular, informative updates. Even if the issue cannot be resolved right away, good responsiveness can calm detractors down and prevent the problem being broadcast more widely. If a bank can immediately solve an issue reported on social media, the original detractor could even be turned around completely and made into a promoter if they share the positive resolution to their problem.

In the longer term, analysing banking customers' Code Halos can improve product development and service innovation. Analysis on a macro scale can reveal evolving customer habits and preferences, enabling a bank to meet new requirements as they emerge, and crucially, before its rivals can react. A new video banking service recently announced in the UK takes full advantage of the huge popularity of smartphones, tablets and ever-changing disruptive technologies to offer its customers face-to-face, online service. This kind of innovation comes from understanding how customer behaviour is evolving alongside technology, and then developing new solutions and experiences to match. Again, by providing innovative services that customers value, a bank is more likely to retain them and turn them into promoters.

The importance of Code Halo thinking will keep growing as consumers continue to become more connected and social. For example, the current boom in wearable technology and life tracking might lead to a whole new range of insights that could drive a new wave of banking services. The key for banks is to never stop listening and analysing the data at their door step. By harnessing it, they can turn more of their customers into active promoters, and improve their increasingly important NPS.