J.D. Power and Associates Reports: While Small Businesses are Particularly Profitable, Banks Struggle to Satisfy These Customers

WESTLAKE VILLAGE, Calif., Nov. 5 /PRNewswire/ -- Banks struggle to satisfy small business customers, as these customers tend to be more difficult to please compared with the average retail banking customer, according to the J.D. Power and Associates 2007 Small Business Banking Study(SM) released today.

Now in its second year, the study measures small business customer satisfaction with the overall banking experience based on seven factors. In order of importance, they are: transaction methods (32%); relationship with representative (19%); products (15%); fees (10%); statements (9%); convenience (9%); and problem resolution (7%).

The study finds that the average satisfaction level of small businesses with their banks is 697 index points on a 1,000-point scale, which is considerably lower than the average satisfaction level among retail banking customers (763). However, enhancing satisfaction among small business customers is critical, as the average small business has a deposit balance of more than $255,000, compared with slightly more than $7,000 among retail banking customers.

"Achieving high satisfaction levels among small business customers can be beneficial to banks for a multitude of reasons," said Jeff Taylor, senior director of the banking practice at J.D. Power and Associates. "Highly satisfied small business customers with high levels of commitment are three times more likely to make recommendations to family and friends, and conduct more business transactions versus small businesses with moderate commitment levels."

Commerce Bancorp ranks highest among financial institutions with a score of 787, receiving particularly high ratings from business customers in all factors contributing to overall satisfaction. Citizens (734) and WaMu (725), respectively, follow Commerce Bancorp in the ranking.

The study also finds that proactively contacting small business customers has a positive impact on overall satisfaction, as business customers who were contacted provide overall satisfaction scores that are 60 points higher on average than those who were not contacted. In 2007, nearly 60 percent of small business customers report not being contacted by their financial institution.

"Even among the small businesses with $5 to $10 million in annual sales, we find that 33 percent reported having no contact from their bank," said Taylor. "Small business customers indicate that they prefer to be contacted about four times per year by their financial institution. Also, while most businesses prefer to be contacted about new products being offered by their financial institution, there are other options that these customers would certainly deem beneficial, such as receiving economic and financial advice, or getting tips on partnering with other businesses and expanding operations."

Additionally, 30 percent of all small businesses report having a teller as their primary contact with the bank. Scores for the relationship factor are considerably lower among customers whose primary contact is the bank teller, indicating small business customers prefer to have a key decision-maker as their primary contact.

The study also finds that problem prevention and problem resolution are key in enhancing overall satisfaction. More than 20 percent of small businesses report having experienced a problem in the past 12 months, which is nearly double the percentage of retail banking customers who say the same (12%). While processing/transaction errors (30%) and disputes on service charges (26%) are the two most commonly reported problems, the third-most-common issue -- poor customer service (10%) -- is responsible for the largest drop in overall satisfaction (226 points).

"The high number of problems and the low ratings for problem resolution both underscore the complexity and difficulty many banks face in serving their small business customers," said Taylor.

The 2007 Small Business Banking Satisfaction Study is based on 6,397 responses from financial decision makers at small businesses with annual revenues from $100,000 to $10 million. Customers were surveyed between July and September 2007.

    Overall Small Business Satisfaction Index Ranking
    (Based on a 1,000-point scale)

    Commerce Bancorp                       787
    Citizens                               734
    WaMu                                   725
    LaSalle                                721
    Capital One                            719
    Branch Banking & Trust                 717
    KeyBank                                716
    Wachovia                               716
    Fifth Third Bank                       708
    National City                          706
    Industry Average                       697
    HSBC Bank                              696
    American Express                       690
    SunTrust                               688
    PNC                                    686
    Union Bank of California               682
    Chase                                  677
    US Bank                                671
    Wells Fargo                            671
    Citibank                               670
    Regions Bank                           669
    Bank of America                        667
    Compass Bank                           658

Included in the study but not ranked due to small sample size are: AmSouth, Associated Bank, Banco Popular, Bank of New York, Bank of the West, Charter One, Colonial Bank, Comerica, Commerce Bancshares, First Bank, Huntington National Bank, ING, M&I Bank, M&T Bank, Merrill Lynch, North Fork Bank, Sky Financial, TCF Bank, TD Banknorth and Zions Bank.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, performance improvement, training and customer satisfaction. The firm's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2006 were $6.3 billion. Additional information is available at http://www.mcgraw-hill.com.

    J.D. Power and Associates Media Relations Contacts:
    John Tews                                Syvetril Perryman
    Troy, Mich.                              Westlake Village, Calif.
    (248) 312-4119                           (805) 418-8103
    john.tews@jdpa.com                       syvetril.perryman@jdpa.com

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power and Associates. http://www.jdpower.com/corporate