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Don't Ask What They Want, See What Decisions They Make

Posted By Jeff Steblea, M.A., Vice President, Research Analysis & Management Market Street Research, Friday, January 10, 2014
Updated: Thursday, January 9, 2014

Successful banks and credit unions have learned the importance of research. From customer satisfaction surveys to analysis of big data, a regular regimen of industry research is integral to brand assessment and strategic planning for an organization's future. But unfortunately, most questions used in banking industry research do not effectively tell you how consumers decide which banks or credit unions to use.

"Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank."

In an ideal world, we’d all like to live just down the street from a bank with the highest level of personal service, the lowest fees on accounts, a robust online banking platform, the highest rates, and the largest ATM network. And that's just for starters! If you ask consumers how important each of these factors are in deciding which bank to use, they will usually say that ALL of them are highly important.

"Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank."

So how do consumers really decide which bank to use? They’re going to have to make some trade-offs. They might decide that a bank's ATM network is the most important criterion for them. Or maybe they like to bank in person at a nearby branch where they are treated like family. This is the power of conjoint analysis--it demonstrates the real-world trade-offs consumers make when considering a decision. Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank.

To conduct conjoint analysis, you begin by coming up with three to five attributes you want to test against each other. These attributes are the criteria you think consumers are likely to weigh when selecting a bank, and should vary based on the competitive landscape in your market area.

Next, you assign levels to each of these attributes. For example, the levels for location might be "located nearby” and "located farther away.” For personal service, the levels might be "excellent personal service” or "average personal service.” It is important not to assign levels that represent extremes; the choice you are providing to consumers highlights the advantage they stand to gain--the exceptional over the merely average.

At this point, you take these attributes and, using a statistical software program, combine them into a limited number of scenarios. The scenarios describe the possible configurations of these exceptional and average attributes. You then present consumers with each scenario and ask them how likely they would be to use the bank described by each scenario. For example, you might open by asking the consumer to imagine that they have moved to a new state and there are a variety of banks they can use. The first bank is farther away, has excellent personal service, average fees on accounts and services, and a larger ATM network. The next bank is located nearby, has excellent personal service, low or no fees on accounts or services, and a smaller ATM network. You proceed through each of the possible combinations, asking the consumer after each one how likely they would be, on a 10-point scale, to use the bank described by that scenario.

After collecting the data, you derive a rating for each of the attributes, and this rating shows us the relative importance of each attribute. By presenting consumers with a series of such scenarios, you get them to think actively about the trade-offs they are willing to make and their answers reveal the true underlying preferences that guide their banking decisions. Finally, in analyzing the data, you can conduct a market segmentation analysis based on the attributes that are important to different types of consumers. This analysis can show you, for example, how large the ATM-driven segment of the market is, as well as the prevailing demographic characteristics of consumers in this segment.

Tags:  market research 

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