NAB has eclipsed its major bank rivals in signing up new customers over the past four years, however they are attracting the wrong type of consumer, warns Roy Morgan Research.
From July 2011 to July 2015, NAB grew its customer numbers by 15.7%, according to research conducted by Roy Morgan Research, which was well ahead of
CBA (including Bank West), who came in second with growth of 5.2%.
ANZ grew its customer base by 2.7% and
Westpac grew its customer share by 2.5%.
The big four banks combined increased their personal customers by 1,042,000 over the four years. This is an increase of 5.5% and is above the population growth over the same period (5.2%), indicating the majors are retaining their dominant market position despite strong competition.
However, Roy Morgan Research says it is important to understand the potential value of the segments in which the growth is occurring, not just the overall growth in customer numbers – which indicates that NAB may be attracting the least sustainable growth.
According to the research, the most important segment in terms of dollars is the top quintile, which accounts for only 20% of the population but it represents nearly two- thirds (63%) of the total market value of financial services. In contrast to these high value customers, the lowest value quintile account for less than 1% of total market value (0.3%).
Whilst NAB did account for the strongest growth in the top quantile with 9.2%, the major bank showed the greatest growth in the lowest value quantile, growing this market segment by a massive 32.5%.
Norman Morris, Roy Morgan Research’s industry communications director says NAB’s approach to growing its customer base could be an issue for its customer profitability.
“The strong NAB result in terms of customer growth is likely to be as a result of the ‘break-up’ campaign that started in 2011 with a combination of cutting fees, aggressive home lending and focus on improving customer satisfaction which had been lagging well behind their peers,” he said.
“Since that date, customer satisfaction increased to rival the big four leader, the CBA. We have seen that this campaign appears to have increased customer numbers across all segments but with the greatest growth being in the lowest value segment (probably as a result of reduced fees), this represents a potential issue for customer profitability.”
