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).

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.