Many banks focus on customer retention as if it’s the endgame in customer relationships. Since data show it’s anywhere between six- and seven-times more expensive to acquire a new customer than retain an existing one, it is good business practice to focus on customer service. But it’s nowhere near enough.
Retention is just one side of the coin. You don’t just want to keep customers. You want to encourage them to increase the business they do with your bank.
Think of it as retention with a purpose. Obviously, it’s important to encourage customers to stay with you. That means devoting efforts toward strong customer service, hoping that translates into a long relationship. That means providing for their basic needs, meeting expectations and monitoring how satisfied these customers are with your bank.
But you want more out of your customer relationship. Instead of just keeping them, you want them to be more active customers. As Peter Drucker, the famed management consultant, used to say, the purpose of a business is “to create a customer and grow that customer.” It’s the growing part that many banks forget when they focus on retention. Good strategies with existing customers demand that your try to grow each customer’s lifetime value to your business.
Trouble is, it’s often difficult to understand what services or products existing customers want. For one thing, most data points available, like a promoter score, just give a general view of satisfaction, and that’s how most banks assess likelihood of retention. Satisfaction isn’t a great predictor of retention: Research shows 75 percent of customers who leave or switch companies for a competitor say they were “satisfied or completely satisfied” with the business they left -- at the very time they switched.
And those satisfaction scores don’t give any insight into what you truly want out of retention: the ability to have those customers devote more of their business to your bank. Customers can be satisfied, and can even recommend your bank to others, but that doesn’t mean they are inclined to give you more of their business. In fact, data collected by Informa Research Service’s SEA Score, which measures member and customer engagement, show there is virtually zero correlation between customers intending to stay with their current primary financial services providers and whether they would use those same providers for additional financial products and services.
That’s why retention has to be coupled with action, and that action requires better data and better data analysis. Flat data points in the present don’t give you an idea of customer habits in the future. In today’s market for banks, with so many transactions online, outside branches and offices, having a primary focus on retaining customers isn’t enough. Your chances of keeping them are slim, and your chances of having more of a share of their future business becomes even slimmer.
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.