Jim S Miller

Thoughts on the Client Experience and Banking

The Prime Experience Index (PXI): A Better Way for Banks and Credit Unions to Measure the Customer Experience

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For banks and credit unions, the goal of providing a superior customer experience is to improve the bottom line.  This is achieved through higher customer retention, greater share of wallet (by cross-sell, balance growth, increased usage of services), reducing customer price sensitivity (resulting in increased fee income and higher margins) and creating customer advocacy (having customers recommend your institution). The Prime Experience Index (PXI) by Prime Performance is a simple, transparent method to help banks and credit unions measure their customer experience and achieve these goals.

At the most basic level, banks need to meet their customers’ needs (meets needs) and deliver service that satisfies their customers (satisfaction with service).  Next, banks need to deliver experiences that create loyal customers who are likely to come to the bank first for their future financial needs (repurchase intent) and recommend the bank to others (likely to recommend).  By looking at four measures; satisfaction with service, likely to recommend, repurchase intent and meets needs, a clear picture of the customer experience emerges.  While these measures tend to be significantly correlated, not one of them accurately measures the customer experience on its own.  The Prime Experience Index (PXI) is comprised of these four components.

 

Understanding the PXI

Why are all four of these measures important when many companies use only the likely to recommend question, also know as the ultimate question or net promoter score?  Prime Performance analysis* shows that focusing just on the likely to recommend question, or any one of the questions, does not adequately capture what is important to customers.  For example, our research revealed that the range of products and services a bank offers does not influence how likely a customer is to recommend the bank, but it is the single biggest driver of meeting customers’ needs.  Likewise, quality financial advice has almost no bearing on how satisfied a customer is with the service received, and only moderate influence on likelihood to recommend, but is a significant driver of repurchase intent.  By only measuring satisfaction or likelihood to recommend, banks and credit unions are likely to discount or ignore elements of the customer experience that are important to their customers and are significant drivers of profitability.

The PXI is a single metric showing how banks and credit unions are doing on delivering a superior customer experience.  Changes in the PXI score can be directly attributed to changes in one or more of the underlying four measurements and therefore; institutions can better identify areas of strength or weakness.  The PXI methodology also calls for measuring many of the underlying drivers of the customer experience.  Some of these are important to all four PXI metrics, such as being easy to do business with and looking out for the best interest of the customer, but others may be significant drivers for one metric like products and services are for Meets Needs or advice is for Repurchase Intent.  See Exhibit 1 for the drivers for each metric.

 

Calculating the PXI

The PXI is the average of the scores from four questions.

  • Thinking about [bank or credit union name], how satisfied are you with the overall service you receive?  (Satisfaction with Service)
  • How likely are you to recommend [bank or credit union name] to a friend or colleague? (Likely to Recommend)
  • How likely are you to come to [bank or credit union name] first when you need additional financial products or services? (Repurchase Intent)
  • How effective is [bank or credit union name] at meeting your financial needs? (Meets Needs)

At Prime Performance, we measure each of these questions on a seven point scale (from 1 to 7).  We consider a 6 or 7 to be a positive response and a 1, 2 or 3 to be a negative response.  For each question, we calculate a net score, which is the percent of positive responses minus the percent of negative responses.  The PXI is calculated by averaging the four net scores into a single score.  This score can be used to compare different institutions, or to track performance over time for a single bank or credit union.

Exhibit 1

 

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Written by Jim S Miller

November 9, 2011 at 1:54 pm

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