The status quo is no longer good enough. Retail financial institutions must leverage their data and digital technologies to optimize the experience across channels and devices. Here's how to improve acquisition and retention by personalizing offers and messaging.
Note: This Stratecast | Frost & Sullivan whitepaper is brought to you by Webtrends, a technology company that specializes in measurement and optimization solutions for digital marketers and analysts in the financial services industry.
Nearly half (49.4%) of all customer interactions with banks and financial services companies now occur online — websites, mobile apps, email and social media. However, 37.9% of business is still conducted in-person at the branch, and 12.6% of interactions occur via voice calls. A study within the banking industry revealed that consumers opened 37% of new accounts online, 2% by mobile…and 40% in a branch.
Consumers are more wired than ever before, with a Web’s worth of choices literally at their fingertips. This also makes them less loyal. Now more than ever, it is easier to shop around and switch providers. Nearly half of banking consumers are not loyal to their provider: 26.8% consider themselves only somewhat loyal, while 20.6% say they are somewhere between “neutral” and “not loyal at all.” This can be partly blamed on a lack of intimacy; only 20.1% of customers say they are very confident their banking provider understands them.
This combination — consumer mobility, the broad availability of choices on the Web, and consumers’ lack of confidence that their institution understands them — can create very real dangers for banks and credit unions. Send the wrong, irrelevant or redundant information, and poof…there go some customers. Send the right information across the wrong channel, or fail to extend appropriate offers based on an understanding of the customer…poof, there go some more. A simple misstep here or there can send people scurrying to your competitors who are just a click away.
Financial marketers need to recognize that even if customers have not (yet) churned, more and more are poised to either switch or utilize multiple providers. A quarter of all consumers (24%) say they have switched their main banking provider at some point, with 10% doing so in the last two years. Another 11% plan to make a change imminently. More than one-third of customers (37.7%) hold accounts with multiple institutions. Among those ages 45-54, 42.5% hold one to three accounts with different banks. Clearly, FSS companies need to analyze their customer bases to understand how to not only retain their customer base, but to also how to grow accounts and wallet share. It boils down to acquisition, cross-selling and mitigating attrition.
Opportunity #1: Map the Customer Journey
The customer journey is not a constant, linear path. Consumers will pause and resume their journey over time, while using multiple devices — a mix of channels including the institution’s Web site, social media, contact center and branches. Without a clear, unified view of how people interact with these touch points, the customer journey may seem entirely random, when in fact he or she is following a clear path.
Communicating consistently and effectively with consumers across all touch points requires a clear understanding of their journeys. The good news is that you can look at the right data and bring it all together. Look at their needs: how well are those needs are being met? How happy or unhappy are they with their current service? What other products will they likely be interested in? How are customers using digital channels, and how does one channel influence interactions with another?
Most banking consumers use multiple channels to interact with their institution — helpdesk, chat, virtual assistants, phone, interactive voice recognition (IVR), email, mobile, etc. An overwhelming majority of customers (88%) use two or more channels to interact with their bank, and 46% use three or more channels within a 12-month period.
Customers expect a level of personal service across all these touchpoints. Yet due to the rapid evolution and deployment of these channels, financial institutions have struggled to keep up. Often the data from these channels is either not collected at all or not integrated with other data streams. Adding to the confusion, financial institutions have disparate product portfolios managed by different departments. Each department may interact with the same set of customers, using competing technologies or channels to facilitate customer interaction. Typically, these solutions work independently of each other. These channel and product silos create painful chasms between the institution and its customers, and result in disjointed communications threads.
Financial institutions need a unified view of their customers interactions, but for many banks and credit unions, a siloed approach makes it nearly impossible to map the customer journey. How can the institution address what matters most to consumers, and understand people’s unique needs across different segments, channels and product lines? Plagued with a siloed culture for decades, the sharing of information between departments is often limited (if it happens at all).
Opportunity #2: Building Bridges Between Online and Offline
Prior to the invention of the telephone, financial institutions had only one touch point to manage: the branch. Since then, new channels just keep on coming: ATMs, online help desk, call center, social media. The number of consumers who don’t see (and never want to see) the inside of a branch again continues to grow. Take Standard Chartered Bank, for example. It has customers spread over 40 countries — a diverse and representative cross-section of banking consumers. Three-quarters of Standard Chartered customers list the Internet as their first choice to communicate with the bank, while only 12% choose the branch as their primary point of contact.
Amazingly, despite similar experiences across the banking industry, many banks and credit unions still cling to the branch as the center of their universe; never mind that a third of all retail institutions have seen a sharp drop decline in their transaction volumes. Even though bank branches are dinosaurs in the modern retail delivery model, 40% of banking consumers still open accounts and sign up for new services at branches. Why? Because they want to? Or because they have to?
Banks and credit unions must admit and accept that the branch is no longer the epicenter of their delivery model. Branches now exist as part of broader ecosystem that includes all channels, with digital touchpoints taking the lead. That’s not to say branches are irrelevant; branches are still part of the customer experience equation. After all, nearly a third of customers consider a personal relationship with their bank advisor to be highly important when choosing a bank. In fact, consumers want improved access to personal advisors. So financial institutions must upgrade not only the advisory skills of those who interact with customers, but also the data that advisors can leverage in their recommendations.
Not only do financial institutions need to focus resources and attention on the online experience, they need to connect those experiences with customer interactions in their branches. If cross-channel data is connected properly, financial marketers can make product recommendations based on each individual’s behaviors and preferences. Furthermore, linking transactions and product holdings with online behaviors can lead to better customer segmentation, which in turn creates a more tailored customer experience and more targeted offers for new products.
Opportunity #3: Build Online Experiences Around Consumer Segments
Banking consumers cite service as one of their most significant factors when choosing a bank. In one study 42.2% said service was their top priority, followed by branch locations at 24.3%. Service ranked higher than efficient online services (22%), and even rates (11.5%).
Banks and credit unions intuitively understand there is value in making the right offer to the right person at the right time, and consumers are increasingly expecting personalized offers. That’s why smart financial marketers segment their customer base; it’s the only way to provide a tailored experience. This form of personalization, although not necessarily down to the 1:1 level, is one of the most effective ways to improve the customer experience. The goal should always be to drill down to an increasingly granular level.
Financial marketers have the opportunity to know their customers better than most other industries, and can define segmentation schemes based around a multitude of variables. Sophisticated segmentation schemes can be achieved by obtaining analytic insights about customer demographics, behaviors, geo-location, purchase/transaction history, online behaviors, search history, requests for information, customer service interactions, and social media interactions. Leveraging this information empowers financial marketers to provide a more relevant online experience, and also to make appropriate cross-sell or upsell offers based on each consumer’s unique segment.
At the product level, one financial institution segmented its customers by the type of mortgage they had, enabling them to tailor the banner on the home page when various segments returned to the company Web site. The banner included relevant imaging for the type of customer and an invitation to check out a related product offering.
In our increasingly wired world, financial institutions must be diligent and work harder to maintain personal relationships with their customers; an effective segmentation strategy is a critical component in this strategy. Delivering an experience specific to various segments helps consumers feel like their institution understands and values them. That builds loyalty, which creates a fertile environment for upselling, cross-selling and retention.
Opportunity #4: Go Beyond the Basics With Mobile
While new opportunities in mobile channels can help financial institutions realize cost reductions, banks and credit unions must also be sensitive to consumers’ perceptions of financial institutions. The financial crisis of 2008-09 left consumers with a sour attitude towards banks. While people have become increasingly mobile and social, they are still people who seek one-to-one contact and interpersonal relationships.
Mobile will need to play a bigger role in how financial marketers interact with consumers. Yet many banks and credit unions continue to design their mobile apps for only the most basic tasks — deposits, transfers, and to check account balances. Data security issues, regulatory constraints, and technological challenges are often cited as hurdles that financial institutions consider too burdensome to overcome. Then there’s the lack of expertise and creativity concerning how to best leverage the medium.
Financial institutions need to go beyond simple transactions in the mobile channel if they hope to stay connected with their customers. For example, when a customer experiences difficulties while applying for a loan, executing a transaction or requesting information, it might be time for proactive human intervention. The financial institution can define triggers so that employees in the contact center or help desk are notified if the system spots any red flags.
A well-designed mobile communications platform will send proactive notifications, such as reminders and status updates. Prompts will offer help during the application processes. Customers who achieve milestones will be congratulated. This lets people know “someone is there” who cares and wants them to have a positive experience. Mobile can not only help financial institutions reshape consumer behavior and improve operational efficiency, it can actually serve as a tool to build relationships.
Consumers are demanding a different experience today, and the competitive landscape is changing. However, there is no one-size-fits-all approach — each institution’s solution will need to be developed with its unique goals and current capabilities in mind.
Financial marketers have multiple opportunities to work around the current challenges that exist in the market, while still providing a differentiated, personalized experience for consumers. The first step is to realize that the status quo is no longer sufficient; financial institutions need to change.
Key opportunities to develop a next-generation customer experience include:
- Customer journey mapping, including channel interaction insights
- Building an actionable central data repository to connect all online and offline behaviors
- Delivering the right message at the right time, on the right channel, through segmented personalization
- Getting creative with mobile by leveraging the unique capabilities in device location, and additive experiences such as the use of notifications
Financial marketers need to step up their game. Lack of customer insight prevents them from engaging consumers, personalizing the experience, and improving loyalty. They suffer from the lack of a unified view of the customer journey, and how branches fit within the retail delivery model. Failure to integrate data and behaviors across multiple touchpoints holds many institutions back.
The good news is that banks and credit unions can leverage data to gain an understanding of how consumers utilize each channel — online and offline — for a unified view of the customer. These insights will refine the customer journey, improve personalization, enable new innovations and drive significant programs forward.