Why it’s important to retain customers
Digital transformation of all sectors, including banking, has unsurprisingly generated new consumer expectations. Nowadays, customers not only expect banks to provide them access to financial products and services using the latest technologies, but also that these services will cater to their evolving needs.
Fintechs coming onto the scene who provided easy access to financial solutions, only forced banks to take a harder look at their customer retention practices. It should therefore come as no surprise that the acquisition cost of customers is becoming a major concern within the banking sector – with so much investment going toward providing new and innovative financial products and services, how can they ensure customers stick around long enough for their efforts to be worth it? Considering the 15% average customer attrition rate accounted for by retail financial institutions every year, customer retention should be one of the main concerns for banks.
Plenty of reports outline the importance of prioritizing customer retention to ensure long-term profitability. In fact, a Gartner survey from 2021 indicated that 70% of CMOs, CSOs and over half of general managers see that their revenue is linked to existing customers. Unfortunately, while this may be true, according to another study conducted by Forrester Consulting on behalf of Sopra Steria in late 2021, only 14% of the 900 decision makers surveyed said that their bank’s technology infrastructure and applications had what it takes to deliver a great and differentiating customer experience (CX). For this reason, improving CX (in all facets, not just technologically) is a key objective for many banks, with 72% of survey respondents indicating it as a critical or high priority.
There is a clear differentiation between the value banks place on their existing customer base and their ability to generate revenue, and their faith in the existing customer experience they provide. That’s why banks need to actively make an effort to retain existing customers. Considering most banks have just 25% of their customer’s wallet share, it’s essential for banks to improve the CX journey to access more revenue from their existing customer base.
With a critical priority to improve the customer experience, banks must first know why the customer is not satisfied. This all ties into customer retention, and banks’ abilities to gather data on the existing customer journey.
While customers might have previously stayed with one bank because it was too complicated or too much effort to change, digital banking has thrown this notion out of the window. It’s now easier than ever for customers to change banking providers if they aren’t satisfied with the service they’re getting.
As such, banks need to not only work on attracting new customers, but also retaining the ones they already have. In this article, we’ll outline the four key steps banks can take to increase customer retention.
Tracking adoption of new products and services
How can banks ensure that any new products or services they release cover the long-term needs of their customers? Tracking. By consistently tracking the adoption alongside the actual usage of a product or service, banks will better be able to ensure their products stand the test of time, and are able to adapt to the changing needs of the consumer.
Which tracking indicators are most important? While daily or monthly uses as well as overall adoption are key factors to consider, it’s vital for banks to also establish certain KPIs and track them consistently. For example, by examining at which stage customers lose interest or demonstrate dissatisfaction, banks will be able to implement the necessary changes to generate a more desirable outcome and therefore increase customer retention.
Big Data and consumer feedback
Going hand in hand with tracking customer engagement is populating consumer feedback. It’s important for banks to understand whether their customers are happy with the current level of products and services they’re being offered, and if they aren’t, that the necessary steps are taken to improve customer satisfaction. Considering 65% of a company’s business is generated by repeat customers, taking their feedback seriously should be considered of great importance.
So what is one of the most common ways banks are generating feedback? The answer is Big Data. Big Data opens up a whole new world into the lives of consumers, allowing banks to gain valuable insight regarding the segmentation of their customer base along with their income and spending habits, as well as enabling them to collect feedback from customer reviews. All of this insight becomes incredibly valuable when determining consumer pain points, and how they can best offer products to fulfil these needs.
Translating feedback into tangible offers
What’s the use of populating consumer feedback if you don’t use it to create added customer value? By making use of collated feedback, banks can gain real insight into their customers’ current and projected future needs, in order to generate tangible offers. By understanding what consumers like about their existing products and services as well as what they dislike, banks can better understand the changes needing to be made in order to improve the customer experience. For example, by understanding at which stage of the process or rather which product or service causes the customer to drop out, banks can make the necessary changes to better the CX. It’s no surprise that happy and satisfied customers are statistically 87% more likely to purchase either upgraded or new services.
A successful product launch
Why go through all of the trouble of identifying a great product based on your customers’ needs, and then not launching it properly? It’s essential to utilize well thought-out, targeted marketing to best leverage the value of your new products or services. To do so, you must identify the right channels to communicate your product in a way that will accelerate its adoption. Banks can ensure their products are well adapted by educating customers consistently on the benefits of their products and services.
Another important aspect to consider at this stage is avoiding overconfidence. When asked to rate their bank’s ability at embedding products and services into partner channels, 72% of respondents rated their banks as “Good” or “Excellent.” However, based on previous feedback relating to a lack of confidence surrounding the CX they offer, it appears there is a bit of a misalignment here. Without a great and differentiating customer experience (CX), banks won’t be able to generate such an increase in revenue from any product or service they release.
Sopra Banking’s solutions
While over two-thirds of survey respondents rate their organization’s “ability to enable rapid improvement based on customer feedback or insight” as either “Good” or “Excellent,” 30% of respondents still rated it as “Average” or below. This means that for many banks, there’s still a good amount of work to be done when it comes to turning customer feedback into tangible changes. With this, how can banks receive the help they need to improve the customer experience and retain more customers? This is where the importance of a software solution comes into play.
With so much data involved every step of the way, it’s essential that banks utilize a strong and reliable software solution capable of analyzing and processing these large amounts of data. By using a software solution with analytic and dashboard capabilities, banks can track data at every stage of the customer journey, including the adoption of various products and services.
At Sopra Banking Software, our customer success department offers our clients access to a digital banking platform, which allows us to partner with our clients to achieve real success. We start by defining KPIs and business expectations in order to build a strategic action plan that allows us to track success as well as customer engagement. Our aim is to illustrate the real ROI and measure the tangible success of banks by using and maximizing the value of our digital banking platform. Considering just a 5% increase in customer retention can increase profits by 25% to 95%, a well thought-out customer retention strategy is incredibly valuable.
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