These are some of the results from the recently conducted studies among bank consumers in the three Baltic countries and in Russia. The study has been conducted as an integral part of the Pan European Performance Satisfaction Initiative (EPSI Rating). This is the second wave there in the Baltic States. It is done in order to support the development of customer oriented and driven services throughout Europe.

The study is based on interviews with more than 2,500 individual customers representing all three Baltic States and great Saint Petersburg, second biggest city in Russia that counts more than 4,5 Mln inhabitants. The data collection company Hermelin Research conducted it through telephone. EPSI Rating using the same approach and model as in the 20 countries that are part of the initiative does all analysis. Thus, the results can be compared with those available on an annual basis from many other European countries.

Main results

Overall, satisfaction in the banking industry in the three Baltic States is relatively high as compared to other countries in the North European hemisphere. It is especially high in Lithuania though declining.

The average results for the Baltic countries are:

Satisfaction in banking sector by country according to EPSI 2005

One of reason lays in different level of consumers' expectations in Baltics and Western countries that is based at consuming experience and quality/range of banking products and services at the market. It is easier to satisfy consumer at developing market due to his/her low expectations. That is why market players that provide solid customer-oriented offerings have a competitive advantage there not only in short terms, but also in a long run, creating a loyal customer for future with less costs.

As it is seen from the table above, the Lithuanian consumers give their banks the highest scores, while the Estonian and Latvian customers are less satisfied on average. The Russian banks are scored lowest among those countries compared here.

At the same it is important to note that customers in Baltic countries have changed opinion regarding banking products and service during the last year, as well as in Russia.  Estonia and Russia can boast with EPSI growth while Latvia did not change a lot. Lithuania demonstrates the most intriguing scenario where EPSI has dropped almost at 6 points (see graph below).

This fall - at 6 points almost - is a significant change. The satisfaction index is reported on the scale 0 - 100. The higher score the more satisfied customers. Averages usually fall in the region 60 - 75. Any company receiving a score above 75 has a strong position among its customers, while those below 60 face risks of loosing the customer base. The statistical precision is good for the overall results, and a difference of 1 unit or more for the country average is significant.

Besides external benchmarking, banks should follow up situation and trends in their own EPSI /Loyalty. This monitoring gives useful additional background information for tactics and decision-making when it comes to company value assessment and regional marketing strategies.

One of examples is given at the picture below. It shows positioning of main banks operating in the Baltic Region from the point of view of final customers. Hansabank in Estonia is on top among bank customers. In Latvia and Lithuania, SEB is holding the leading position, all according to their respective customers.

It is interesting that Other banks are relatively down in comparison with SEB and Hansabank in Estonia and Latvia.  But in Lithuania they obviously compete with SEB and Hansabank, getting even higher scores than Hansabank. In this situation the one who wins the first is the customer, as far as high competition drives higher quality.

The respective numbers are as follows:

Satisfaction with the Bank in Baltic States

Customer Satisfaction is a strong driver of loyalty with your current bank. Those customers who express high satisfaction are much more due to remain with their bank and also to increase their relationship, than those showing low satisfaction. The relationship between satisfaction and loyalty is shown in the following diagram.

The trend presents the linkage between satisfaction and loyalty towards leading banks with operations in Baltic countries. It is also important information for banks for better understanding their customers' behavior in different countries and to react accordingly.

Loyalty dynamics in banking sector in Baltics can be characterized as positive in general, though Lithuania is showing dropping down (see graph below):

Loyalty demonstrates growth in Estonia, Latvia and Russia, but in Lithuania it is falling (from an extraordinarily high level).

It should be noted that more detailed analyses clarify the loyalty dynamics profiles for named above banks.  Hansabank has succeeded to gain in loyalty in two countries while all other observed banks have increased it in one country each. 

Generally speaking, the Customer Satisfaction measure functions as a leading indicator capturing crucial information about future trends and market development. There is also a strong positive relationship between Satisfaction - driving Loyalty - towards Profitability.

The EPSI Rating

EPSI Rating is an integrated system for the collection, analysis and dissemination of information about what customers expect, how they perceive quality and how they value the products and services they buy.  Measurements provide information about customer satisfaction, the reasons for it and its effects on loyalty, trust and repeat purchases.

In partnership with the leading European quality organisations EFQM (European Foundation for Quality Management) and EOQ (European Organisation for Quality), EPSI Rating has developed a common European standard for measuring customer satisfaction. This common standard, EPSI Rating (European Performance Satisfaction Index), has been developed to offer European organisations a common frame of reference in order to measure customer satisfaction and loyalty independently and to analyse improvement measures. EPSI Rating is based on the EFQM <li/>Excellence Model<li/> developed over the last 10 years. Such harmonised measurements have been performed and presented in a large number of countries since 1999.

Using EPSI Rating gives different stakeholders unique knowledge about both customers and competitors. It gives information about both the own organisation and the main competitors in terms of image, expectations, quality of products and/or services, value for money, satisfaction and loyalty

High-quality production and distribution are crucial in achieving a long-term competitive edge. For this reason, it is important to pay attention to quality as it is perceived by customers. To do this, the corporate sector need to know how customers perceive quality based on regular, independent surveys. EPSI Rating has been launched with the aim of satisfying this need. By using EPSI Rating, companies, organisations and other stakeholders can analyse issues such as:

•  Where does the consumer receive the best value for money?
•  What properties/functions of a company does a customer value the most?
• How is customer loyalty affected and what is required to encourage repeat purchases?
• Is Swedish quality a powerful argument in the eyes of today's customers?
• How well do domestic companies compete with those from the rest of Europe, North America and Asia?

This data is crucial for both the individual company - e.g. when it comes to benchmarking and prioritising quality measures - and the investor.  It is also important as far as the industry as a whole and society in general are concerned. The data also provides information on competitiveness, customer loyalty, future company value and on the feeling of well-being perceived by different users. Furthermore, it highlights the relationship between productivity and quality and pinpoints import competition. Compared to the majority of traditional key ratios and analysis models, EPSI Rating is very much forward-looking and hence gives the user an idea of what to expect as regards future competitiveness and profitability trends. The value of the future customer base can also be directly analysed based on the data the index provides. The increasing number of industries being surveyed by EPSI Rating also enhances comparability and the value of the information in general.

For more information, and links to the Baltic network, check the web-site: www.epsi-rating.com, or contact the EPSI Rating secretariat in Stockholm. More details about the Baltic results are found on the EPSI Baltics web-site: www.epsi-baltics.org. More information about the results for the Baltic Banking sector can also be obtained from Gunnar Ljungdahl on E-mail: GunnarL@sseriga.edu.lv.