The Churn Challenge: Four Big Ideas for Banks and Credit Unions Looking to Drive Down Attrition

Understanding and managing attrition is vital for most businesses’ long-term success — impacting revenue, profitability, and overall growth. But it matters especially in competitive categories like consumer financial services, where differentiation is low and customer acquisition costs are high.

Banks and credit unions lose on average nearly 15% of customers and members each year, according to industry reports and studies. For many it’s a more-than-stubborn challenge. But getting control of your attrition rate is within reach of any financial institution, provided it’s willing to put its data in the service of deeper customer ties.

"Consumers are inundated with communications all day, every day," Sue Schabert, Vice President of Reporting and Analytics at Marquis told The Financial Brand. "It’s vital that a financial institution taps into as much data and insight as possible to beat others to the punch, to build a meaningful customer relationship."

To get to the heart of the churn challenge, Marquis — a Plano, Texas-based marketing and compliance solutions provider for financial institutions — examined 764 marketing campaigns that reached 5.8 million contacts for banks and credit unions over the past year. One big takeaway: Using data related to socio-economic profiles and customer behavior can help cut Marquis client average attrition rates by more than one-third of the national attrition average.

But the battle against churn requires not just a well-considered data strategy but also a smart tactical ground game. Here are four big ideas to get your institution started on both.

Demographics and Psychographics: The Power of Behavioral Targeting

Leveraging socio-economic profiles and financial behavior data enables financial institutions to proactively monitor customer activity and identify shifts that signal potential receptiveness to specific offers. By anticipating key moments, banks and credit unions can implement marketing campaigns designed to align with customer needs and behaviors, driving higher engagement.

For instance, many customers pay off auto loans 18-24 months ahead of schedule, often preceding a new vehicle purchase. Recognizing this pattern, financial institutions can deliver targeted auto loan offers just as these customers are likely to seek financing. Similarly, significant account transactions — like a large deposit or withdrawal — serve as indicators of potential interest. An influx of funds might present an opportunity to market high-interest savings accounts, while a sizable withdrawal could prompt an offer for competitive credit terms.

This data-driven approach is not just strategic but highly effective. Automated campaigns boast a 5.23% response rate, compared to 2.3% for traditional single campaigns, and deliver a return on investment of 1,344%, significantly outpacing the 390% ROI of standard campaigns.

Snail Mail Matters: The Power of Email Plus Direct Mail

For those wondering whether to campaign via old-fashioned snail mail or email, the answer is both. The average response for direct mail was 3.89% and 3.4% for email, while using both channels garnered a 6.97% rate. The combined approach was more than three times more effective than mail alone for new account campaigns and attracted larger deposit amounts, too.

The effectiveness of old-fashioned mail may come as a surprise, but a study by Temple University and the U.S. Postal Service Office of Inspector General found that physical ads — direct mail, billboards, publications — are actually more effective in leaving a lasting impression than digital ads and also result in stronger memories across all age groups. (The Temple / USPS study used neuromarketing techniques, a field that combines insights across neuroscience and psychology.)

"Consumers love mail that’s personally addressed to them, and they don’t get much of it in their mailbox anymore," said Schabert. "Following mail with an email provides a one-two punch — that follow-on communication really drives the message home."

Onboarding Sounds Like Table Stakes but It’s a Critical Opportunity

It’s well known that properly onboarding new customers and helping them see the value in your product or service from the start reduces the risk of early churn. What may be less well-known is that marketing automation campaigns to onboard customers deliver among the best response rates in their own right — coming in at around 13% on average, according to Marquis — when a combination of direct mail and email channels is used.

As such, they far outpace the study’s second-most effective campaigns, those driving new products, which average 9.3% (using the same combined approach).

The data emphasizes how important it is to get the onboarding experience right. Customers tend to come in to fulfill one need, but warm and friendly questions during onboarding can reveal other needs. Whether during the initial in-person encounter, or as an outbound follow-up by your service representatives, ask questions such as, "What do you want from a credit card," or "What matters in your banking relationship?"

Staff should identify areas where they have a solution or reward that will resonate. Engaging clients with more than one product builds stickier relationships, reducing churn.

Single-Product People: Make the Most of a Non-Optimal Relationship

Single-product customers are transactional, so encourage a "journey" that could lead to a deeper relationship. Propensity modeling can inform FIs which customers are most likely to respond to what offer. For example, someone with an auto loan may respond well to offers of a credit card or a consumer loan while someone nearing retirement may welcome a home equity line of credit offer.

Having used data to target the right prospects, make sure your campaign is compelling. Specific offers with a call to action perform better than warm and fuzzy messages. Include a compelling offer such as "payments or rates as low as" or "receive a bonus amount." Make sure your offer stands up to the marketplace competition.

Striking the right balance between data analytics and high-touch tactics is critical. Combined with warm and friendly human interactions, data insights can reduce churn while also improving service quality. "It’s a holistic approach to engage and grow relationships," said Schabert. "Everybody else is doing it, so if you’re not doing it, you will see customers come in, but they will leave just as quickly."