By Phil Seward
Why are consumers drawn to a certain brand? Part of a brand’s popularity is rooted in the products or services it offers. Repeat customers may also find themselves attracted to a brand that can prove its commitment to earning its customers’ business. In the financial services sector, many brands offer various rewards and benefits, intended to drive customer engagement and loyalty. However, creating a holistic strategy for building customer loyalty is one of the most challenging tasks for financial services brands.
We live in an age where, more than ever before, consumers are choice-rich, patience-poor and have higher expectations for the experiences they are provided. They desire to be understood and recognized by the brands they interact with. In essence, people long to receive relevant and personalized experiences from the brands that they follow.
While many banks automatically think that these “personalized experiences” can be met by a plethora of rewards and benefits, brand loyalty is formed by more than just perks.
Rather, loyalty is determined by whether or not a brand can meet the growing needs of its customer base. In the end, if a brand cannot accurately identify its customers’ needs, it is likely to fail in meeting their expectations.
The power of customer loyalty.
In the digital age, financial services providers have seen the industry drastically change due to an increase in competition from non-financial institutions. In fact, research finds that two-thirds of Amazon Prime customers would be interested in using a banking solution produced by Amazon. Technology organizations are embedded in consumers’ daily lives, and pride themselves on putting the customer experience first and foremost, driving other brands to rise to the challenge of keeping their own customers happy. This expectation for an enhanced customer experience has made it harder for traditional banks to break through the noise and remain top of mind, putting them at risk of losing customers.
Building brand loyalty can be a powerful way to influence customer behavior and enhance the bottom line. However, achieving consistent loyalty is hard because it typically depends upon coordination across multiple business units—marketing, customer service, IT, lending and finance. Consumers often have relationships across multiple products and lines of business with their banks—from checking and credit cards to mortgages and other loans. Increasingly, they expect their bank to deliver a consistent experience across their entire relationship.
Do financial services understand the basics of customer loyalty?
A recent Forrester study, commissioned by customer experience firm Collinson, surveyed senior decision makers from businesses in the financial services, retail, travel and hospitality sectors. The study found that the majority of global financial organizations do not understand what drives their customers’ loyalty. In fact, two-thirds (66 percent) of financial organizations with revenues exceeding $300 million were unaware of why their customers are loyal to their organization. This reveals a prevalent disconnect between business objectives and loyalty objectives, and that most organizations are not measuring the right information to determine if their loyalty strategy is working. This not only puts customer relationships at risk, but also profitability.
While many organizations don’t understand the loyalty of their customers, an even more concerning statistic is that almost seven out of 10 financial brands (67 percent) do not even have a framework in place to measure loyalty in the context of overall business performance. In fact, more than half (55 percent) do not have a loyalty strategy in place that clearly defines a brand’s business objectives and goals. This lack of strategy is particularly worrisome as 62 percent of decision makers within financial institutions are planning to increase investment in loyalty technology over the next 12 months. Without the appropriate measurement framework, organizations cannot accurately determine the return on investment of their loyalty programs.
However, many organizations are taking a disjointed approach to studying loyalty, with over half (53 percent) failing to collect sufficient data—which is essential to gain a deeper understanding of who their customers are. The same number fail to integrate technology that measures loyalty with other internal systems. That means loyalty isn’t being accurately measured across the entire customer journey. When you consider this complex, fast changing environment, it’s no wonder that understanding true brand loyalty can often feel like an unachievable goal.
Identifying customer needs.
While it is surprising to see so many organizations approaching loyalty backwards, there is still opportunity for banks to better align with their customers’ growing needs. To do this, they must first recognize customers’ unique behavior in a digitally-driven society—they have higher expectations and are driven by having multiple choices available at their fingertips.
Brands are able to attract and retain the customers who can identify with their services. However, even though they may identify with a brand, customers desire to be recognized for their loyalty. This means having relevant and personalized experiences in the form of rewards, recognition benefits and communication opportunities.
Equally important, customer loyalty must be a major consideration at every stage of the customer lifecycle, from the first engagement all the way through the purchase and beyond. This approach allows banks to build deeper understandings of their customers—who they are, what they need as individuals and what drives their monetary habits. Once this is accomplished, banks can then better recognize, reward and create tailored experiences that will keep their customers coming back time and time again.
To make a positive impact, customer loyalty needs to be prioritized consistently across an organization. When approached correctly, loyalty programs can act as a powerful tool to influence customers’ spending habits and grow the bank’s bottom line. But first, banks must take a step back and be willing to proactively approach their measurement. They must determine whether their strategy is successful and analyze how it could be improved for a better return on investment. Without a solid base, even the most innovative and exciting propositions will fail to deliver against your business strategy. Those who get this right will be able to stand out from the crowd and develop deeper relationships with customers.
Phil Seward is senior vice president of loyalty strategy – Americas at Collinson, a global leader in customer benefits and loyalty.