Few industries have undergone as many dramatic shifts as banking has over the past decade. An explosion of mobile capabilities, a worldwide financial crisis that shook consumer confidence and a still-developing regulatory response have changed the way customers interact with their banks. That’s made it more important than ever for banks to understand the mindset of its customer and what it takes to retain their business, acquire additional assets and attract new business.
Yet, customer measurement and evaluation tools haven’t kept pace with consumers themselves. Here are three key ways bank executives could be misreading their current customers.
Focus on Loyalty Alone
There’s always been a mystique around customer loyalty. Indeed, loyalty is important, but it is just one metric for evaluating relationships. Banks with a measurement program built on loyalty probably have a sense of customers they can retain, ones that are more likely to reaffirm their relationship with a bank. But being loyal doesn’t necessarily equate to business growth. Nor does loyalty do much to help you create a strategy to get new customers. In fact, a focus on loyalty might get in the way of your growth. After all, customers who are loyal can also be customers who are averse to risk and less likely to do more business in the future.
Forgetting the Power of Transactions
The relationship between deposits and payments is paramount. One quarter of consumers now use a credit card as their primary form of payment, according to data from Informa Research Service’s SEA Score, which measures member and customer engagement. Many customer-measurement programs look at a small slice of the relationship; if your customers are using other issuers’ credit cards, how is that impacting you? Without tracking the whole relationship around a transaction, bank executives are at a disadvantage.
Many customer-measurement systems, like a promoter score, were developed decades ago—before a lot of new bank customers were old enough to get an allowance. These tools focus on retaining customers, but that could be a fool’s errand. Millennials are less likely to stay with a bank, and loyalty looks a lot different to them than it did to their parents. Last year, 18 percent of Millennial customers switched their banks, according to data from Accenture. That was almost twice the rate of people aged 35 to 54, and more than six times the rate of customers over age 55. Any measurement that doesn’t put a primary focus on attracting new Millennials (that is, encouraging them to leave your competitor) falls short.
For more information on Informa Research Services' customer engagement and loyalty research and The SEA Score™ program, contact us at 800.848.0218 or email firstname.lastname@example.org.