1. Enhancing Client Loyalty Mindanao Supervisor’s Forum November 19 – 20, 2003 Cagayan de Oro City

2. What is LOYALTY? Loyalty is the attachment a client feels for a bank’s staff, products, and services

3.  Avails self of your products regularly;  Purchases across product & service lines – loan, savings (esp. voluntary), others  Refers others  Resists the pull of the competition How would you know a loyal client?

4. What kind of “loyalty” do your clients have? No loyalty - who offers the best deal? Inertia loyalty - nowhere else to go Latent loyalty – seasonal clients Premium loyalty - proud of their affiliation to the bank

5. The Customer Lifecycle Profitable Begins to Be Profitable Labor-Intensive/ Not Profitable Not Profitable

6. Customer Life Cycle… First few loans - cost of providing a loan is less than the revenue it generates. Loyal clients - produce increasing profits over time. Client desertion - causes serious growth problems!

7. Impact of Client Desertion Lost profits Bank subsidizes the competition Drop in outreach and portfolio loan staff tends to look for new clients may lead to increased risk in portfolio quality, or neglect of existing clients. Disgruntled clients may bad mouth the bank, poor image Bank may lose its staff.

8. First step to enhance loyalty: measure client retention, dropouts Client Retention Study what makes clients loyal Monitor the number of referrals made by a client and how recent they are Client Dropouts Study why clients voluntarily leave Strategize how to bring them back.

9. First, make sure bank products suit the client’s needs; Product review Listen to what clients say Determine how to satisfy customer demand while satisfying the needs of the bank Elements to Consider in Formulating Client Loyalty Strategy

10. Second, create formal mechanisms to monitor client preferences. For example: - On the loan application, ask why the client chose to apply with the bank - Complaints or suggestion box - Focus group discussions - Train staff to listen to and report client complaints - Customer surveys - Exit interviews of clients voluntarily leaving

11. Mechanism to monitor… Track client feedback using a database Process and examine feedback data on a monthly basis to identify trends Elements (con’t)…

12. Does bank have appropriate incentives – to transition group clients to individual clients and to commercial clients in line with growth? –for existing clients to identify new clients? –Offer incentives to good clients (such as rebates, gifts, etc.) Elements in Formulating Client Loyalty Strategy: Offer Incentives

13. Regularly review product policies, procedures –Are your good repeat borrowers leaving because of overly conservative policies, such as: Very low loan sizes (Can you provide larger loans to good repeat borrowers?) Requiring 2 co-makers even when client’s income is sufficient to cover loan and/or deposit balance is large. Prohibiting withdrawal from deposits and/or punishing clients who make a withdrawal by drastically reducing their loan entitlement –Allow some agricultural income to be factored into cash flow analysis, but only during the season Elements … Client Loyalty Strategy: Review/Modify Product Policies

14. Review/modify forced savings policies –Begin to transition compulsory savings into voluntary savings, but continue to offer collection of savings deposits –Block only the minimum amount of savings needed to guarantee loan Elements … Client Loyalty Strategy:

15. Balance disciplining clients with serving them (be able to handle differently those who can pay but refuses to pay from those who really cannot pay at that moment) Elements … Client Loyalty Strategy:

16. Create other innovations on product features and adding products in response to client needs -Offer seasonal loans to good clients in preparation for peak sales (i.e., Christmas and fiestas) -Link with other institutions to offer other products (eg. Rewards program) and services (eg. Insurance and ATM cards) Elements … Client Loyalty Strategy:

17. Market rural bank’s strength as the one- stop shop for ME’s full range of financial service needs, including checking, savings, as well as other loans Develop an image that will enhance the client’s confidence in banking with you Client Loyalty Strategy:

18. Enhancing client loyalty is the bank’s most important business strategy!

19. An overall client loyalty requires: -excellent service -a commitment to responding quickly to client complaints -a commitment to offer products & services that respond to client needs -identifying dissatisfied clients to try to win back their affections.