Happy customers come back for their future banking needs, and they refer friends and family to their financial institution — right?
Time-honored banking wisdom as well as consumer surveys support this belief, in part. But consumers have shared one more thing when polled by Gallup: Banks and credit unions miss nearly 40% of opportunities in their relationship with customers when they focus only on satisfaction.
How do banks overlook so many chances to strengthen relationships and bring in more business?
By using the powerful combination of satisfaction plus engagement. Perhaps they do so because increasing customer engagement is riddled with risks, and practical barriers hamper success in channels that offer high returns on investment. Each of these challenges is surmountable once leaders understand what they can do about them.
Engagement: A New Competitive Battleground
Most consumers hold two to three products at any one institution. Households typically use about ten products. Only the very best organizations sell more than four products to any one customer, not including “go with” services such as debit cards that accompany a checking account.
To increase households’ product-service usage, banks and credit unions must identify what causes consumers to add to the relationship. According to a Gallup survey of some 9,000 consumers that use banking services, engagement is the missing link. When addressed, improved engagement increases customers’ interest in buying additional products from their banking provider.
Gallup found that 45% of consumers who were satisfied with their banking relationship also said they would consider their institution for their next product or service. If that sounds good, it’s nearly 40% shy of the true relationship opportunity. About 83% of consumers polled said they would consider their institution for their next product or service when they are both “satisfied and fully engaged.”
Incentive for Growth:
Improved engagement increases customers' interest in buying additional products from their bank.
Financial institutions leaders now race to engage “fully” because it offers growth with current customers — the most efficient kind. With a possible 40% increase in customers’ usage on the table, engagement becomes much more than a marketing “nice-to-have.”
Industry surveys clearly show financial institutions are investing to engage. About 80% are implementing new technologies, 73% are adding new processes and procedures and 51% are working with outside vendors to improve and increase their engagement. Nearly half (48%) are adding new team roles to support new engagement tactics.
Not All Engagement Is Equal
The road to greater customer product usage might be paved in gold, but it’s not lined with roses. Consider the bigger picture. Consumers say “fully” engaging them bodes well for the bank, but what does that mean? Do they want more or better engagement? We are all consumers, so we intuitively know the answer — we all want better engagement and only more engagement when it is better.
Consumer studies paint an even more vivid picture.
Research from Personetics found that while more than half of consumers (51%) want more help than they’re getting from their financial provider, 40% of those who have received communication from their provider were “unhappy” about the generic advice they received. Translation: When banks attempt to climb to full engagement, they’re cannibalizing their customer satisfaction most of the time. The relationship and opportunity costs are not small.
Gallup research shows that only one in five consumers (19%) would go to their bank for their next product or service when they are neither satisfied nor fully engaged.
The Risk of Doing Nothing
If a bank currently has “satisfied, but not fully engaged” customers — 45% of whom would consider the bank for their next need — wouldn’t it be less risky to just do nothing? It seems better to stay at a 45% opportunity than risk unatisfactory engagement and a fall to 19%.
Unfortunately, risk confronts banks on both sides. On the one hand, consumers have as many as 30 relationships with banking providers, all of which will use digital engagement to serve their customers more and more. Other banks and credit unions — especially the largest financial institutions — now invest to do the same.
If other providers reach full and satisfied engagement, they win the cross-sell game. When a competitor gets consideration 83% of the time, it means others — those who are not considered more than 45% of the time — get less and less consideration. In that case, the competitor grows by siphoning off customers every year. And as competitors set a higher standard, consumer expectations will follow.
For each of these reasons, bank leaders should consider that risking 19% may be a small price to pay when competitors will soon send the opportunity rate closer to zero with every passing year. Banks must choose: Pursue an 83% cross-sell opportunity or succumb to an opportunity that can fall much further than 19%.
If leaders choose growth, serving customers better and investing in the long-term franchise value of the organization, they can chart a path through the risks to fully engaged and satisfied customers. The key is to remove the barriers that prevent personalization, decrease engagement value and hamper sales and marketing operations.
Removing the Biggest Obstacle
While leaders will face a series of improvements as they seek full engagement, they can remove the first and biggest challenge: They must ensure the project isn’t doomed from the beginning.
When surveyed by Total Expert, bank leaders reported the reasons behind poor engagement satisfaction. Providing value to each customer segment — not to mention each customer individually — presents a scale problem, and it’s one that can only be addressed by harnessing data and automation. Most banks, however, don’t have technology made for that purpose.
When banking leaders self-categorized their institutions, the majority said they had just begun using contact data, banking data, segmentation and digital engagement. In that category, only 10% leverage data from multiple sources to segment customers. Some 52% send the same message to all customers and 70% still manually leverage data. No wonder 66% of consumers don’t value their engagement. Banks don’t have the tools that make valuable engagement possible.
The Broken System:
Over half of financial marketers standardize messaging instead of personalizing the content to match the customer.
In case leaders read this and think the message is “buy engagement tech,” hang on. It is true that banks need the tools to overcome the challenges of scaled and valuable engagement. But often it’s the tools that have doomed them from the beginning.
Most banks have never done digital engagement before at the level consumers expect. They don’t know how technology should be used to solve their scale challenges. What expertise does the platform contain and provide for growing a bank? Is that built into the software itself? Leaders seek engagement to create better depositor onboarding, to grow relationships through cross-selling or lend again to past borrowers. But they’re buying blank canvases — platforms without already-developed industry-specific functionality.
To avoid engagement’s biggest obstacle, leaders must not place bets on technology or on their bank’s know-how to develop technology to fully engage and satisfy customers. This approach mandates that they learn that through trial and error within customer engagement. If the goal is to reach that 83% opportunity with customers — avoiding that 66% failure rate — don’t wait for firsthand experience. You no longer need to take the risk. A much easier road to being fully engaged awaits you and the customers who clamor for a relationship upgrade.