To Fight Waning Consumer Loyalty, Here’s How Marketers Can Shift Focus and Tactics

Banks' traditional ambition to be the "primary" provider of their customers' financial services may be increasingly irrelevant in today's multi-platform world. To prosper, a new report argues, marketers will have to rethink the relationship between brands and products and alter their channel and communication tactics accordingly.

The report: 2024 Financial Services Trendwatch: The Evolution of Banking Loyalty [March 2024]

Source: Vericast

Why we picked it: As financial institutions navigate a landscape of digital disruption and evolving customer expectations, marketers need fresh insights to formulate forward-thinking strategies that cultivate enduring loyalty across diverse audiences.

Executive Summary

The 2024 Financial Services TrendWatch report from Vericast offers a comprehensive analysis of the pivotal trends reshaping customer loyalty, channel preferences, product marketing strategies, and demographic influences in the banking industry. By leveraging data from their Awareness-to-Action Survey, the report addresses complex, often contradictory, forces defining consumer acquisition and retention.

Key Takeaways

  • The nature of consumer loyalty is being redefined, with nearly half (46%) of customers open to either switching banks entirely or using multiple institutions concurrently for different financial needs.
  • While the strategic importance of physical branch locations persists, with 39% citing proximity to home as crucial, consumer preferences are steadily shifting towards digital channels, particularly among Gen Z.
  • Effective financial marketing demands an adroit omnichannel approach combining direct mail and digital tactics to maximize reach and resonance across generations.
  • Interest rates, though significant, are only one of many factors shaping modern banking decisions, with incentives, fee structures, and customer service experiences carrying substantial weight.
  • Brand familiarity and recognition drive 67% of consumers’ responsiveness to offers, yet product appeal remains vital for acquisition, underscoring the importance of strategic brand-product synergy.
  • Generation Z exhibits distinct priorities valuing personalized banking engagement, proactive financial education, and aligning services/offerings with their unique goals around savings, credit, and investment.

What we liked about it: The report frankly acknowledges that consumer behavior and loyalties are in flux and that marketers will require flexibility and nuance to discover the right channels and tactics.

What we didn’t: While we liked its advocacy for a shift from brand to product marketing, the report’s discussion of product marketings is limited to traditional tactics, like incentives, without addressing the potential need for more far-reaching product innovation.

The State of Loyalty

While the traditional notion of customer loyalty to a primary financial institution persists, consumers’ attitudes and behaviors are evolving. The report found that 46% are either actively open to switching banks or already supplementing their primary accounts across multiple providers for different needs.

Overall, a majority of consumers (57%) tend to stick with their banks unless offered substantial incentives for moving. But these dynamics vary across age groups, with 38% of Gen Z and 34% of millennials expressing minimal loyalty and openness to change. And diverse financial portfolios are becoming the norm, with affluent consumers and fintech adopters holding an average of 3.1 and 3.4 accounts respectively across various institutions.

Where the People Are At:

Consumers maintain relationships with 2.6 separate financial institutions, a number that rises to 3.4 among users of emerging fintech services.

Banking customers’ brand loyalty is changing along three dimensions:

Shifting priorities for banking decisions: Competitive interest rates have long been a primary factor shaping consumers’ banking considerations. However, modern priorities like the absence of monthly fees (35%), cash incentives (35%), and having no minimum balance requirements (29%) are challenging the supremacy of rates, cited as the top driver by only 25%.

For Gen Z specifically, issues like poor customer service (22%) and lack of technological sophistication (25%) are more pressing concerns than interest rates (8%). As this generation increases its financial independence, their distinct preferences catered through seamless digital experiences and educational resources will be pivotal for fostering loyalty.

Brands are losing ground to products: The age-old marketing conundrum around prioritizing brand building versus product promotion takes on new significance in financial services. While two-thirds (67%) of consumers are more responsive to offers from familiar brands, their individual reception differs across product categories. Checking accounts (36%), savings accounts (33%), and credit card incentives (31%) generate the highest initial interest.

Achieving the ideal brand-product harmony requires astute audience segmentation. For instance, Gen Z ranks checking (30%) and credit card (29%) offers as top draws, while boomers gravitate more towards savings accounts (38%) and checking (38%). The unifying thread is consumers’ urge to form a more profound connection beyond just transactions.

Dig Deeper with Gen Z:

A notable 25% of Gen Z consumers cited superior technology as a motivator to switch banks, well above the 11% cross-generational average.

Ballooning spheres of financial influence: For Gen Z, the sphere of financial influence is rapidly evolving beyond the traditional advice channels of family, advisors, and news sources. A substantial 26% of Gen Z cite video-centric platforms like TikTok and YouTube as places they turn for money management guidance.

This paradigm shift presents an opportunity for financial brands to partner with relevant influencers and creators. By crafting authentic, educational content tailored to these digital communities, institutions can engage the next generation of consumers through the channels they natively inhabit.

The omnichannel imperative: As digital integration becomes ubiquitous across all sectors, financial marketing can no longer rely on any single communication channel to drive engagement. An omnichannel strategy carefully calibrating direct mail, email, social media, and other tactics is now essential.

While direct mail remains an effective touchpoint for 44% of consumers receptive to offers, email (46%) and social media advertising (26% for Gen Z) are vital components of a well-constructed media mix. Notably, Vericast’s data shows a 39% incremental lift in household response rates when combining direct mail with digital channels.

Looking Ahead

As the report’s findings illustrate, the financial services landscape is being reshaped by powerful forces – from channel fragmentation and demographic shifts to evolving attitudes around loyalty and product marketing. While these undercurrents introduce new complexities, they also open avenues for innovation.

By staying attuned to these emerging trends, prioritizing strategic brand storytelling, fostering omnichannel proficiency, and designing experiences calibrated to distinct audience segments, financial institutions can cultivate engagement and growth.

Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.

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