The decay in customer loyalty observed in J.D. Power and Associates' financial studies conducted in 2009 and 2010 is beginning to translate into higher levels of defection. In the J.D. Power 2011 survey of consumer financial holdings,1 the percentage of customers who left their bank in the previous 12 months to start a primary relationship with a new bank has increased to 8.7% from 7.7% in 2010.

On the one hand, the increased churn is good news, in that more consumers are coming into the market and represent more opportunities to acquire additional customers. On the other hand, the increased churn makes customer retention a pressing area of concern for financial institutions. Given the significant financial investment that banks undertake to increase acquisition through advertising spend, promotional gifts/cash awards, and promotional rates, it could be argued that it is more financially prudent to lower attrition rates than to increase acquisition rates by the same percentage.