Posts Tagged ‘customer loyalty’
The following is from the Q&A session of our most recent webinar entitled, “Trends in Banking Loyalty and Customer Communication.” To view a recorded version of the webinar, please click the link.
You mentioned that the marketing, especially on web sites, was getting more simple and streamlined. Are the products themselves doing that as well, or is it just the marketing?
The products are definitely getting more complicated, but the banks are working toward communicating about them in more simple terms. One example is the way that banks are communicating fees on the accounts. The banks have tried to get the fee information down to just one page of disclosures to easily convey the most important and common fees and conditions. With the packaging of products, customers must often meet more and more conditions in order to qualify for preferred pricing. That usually means maintaining a certain minimum balance or the requirement to utilize the product a minimum number of times each month.
Are product packages actually increasing loyalty? What stops customers from switching banks not on a simple product base but on an entire bundle?
The product packages that are based only on demand deposits don’t necessarily tie customers that strongly to the bank. For that reason, banks are focusing on rewards, self-servicing options and packaging loans and investment products with demand deposit products. One example of rewards is BankAmeriDeals. Customers earn rewards through the credit and debit card, but they must bank online to receive the rewards. The rewards are also available through the mobile app, which allows customers to use rewards at the point of sale. That approach effectively ties five products together. If the customer finds those rewards valuable, they are less likely to switch to another bank. In terms of mobile apps we’ve seen a lot of advancement in the functionality to make them more useful. One reason is just because of natural evolution, but another is because banks are trying to stay ahead of the competition. Providing a great mobile experience might not entirely prevent customers from leaving, but it might provide at least one reason to stay. Online bill payment would also fit into this category. More importantly; however, is that a lot of the packages now include investment or loan products. Those products are much more difficult to move, so packages that include them tie the customer more strongly to the bank.
Are discounts needed to encourage bundling?
The idea behind the bundling is that it provides customers with something they can’t get by purchasing the products individually. So, yes, discounts are needed.
Are there any moves among banks towards building an emotional/communal value offer?
Most of the offers we see are based on cash incentives or features and benefits such as ease, simplicity, control, and financial management. Emotional appeals are more frequently seen in investment offers, specifically retirement. We sometimes see communal messages in print or statement inserts. An example would be Chase’s Community Giving program. The bank communicates it in statement inserts and online, specifically through Facebook.
For the customer who is primarily self-servicing through remote channels, do you have any recommendations on how banks should communicate with them?
Banks need to consider communicating with the self-servicing customer when the customer has logged into online banking or the mobile banking app, possibly even within email alerts. This obviously needs to be done very carefully – if not done so, it runs the risk of irritating customers.
Roughly 30% of our customers don’t do online banking. Do you think banks should keep trying to convert them, or focus on the customers that are already doing online banking?
If a customer has been with the bank for a long period of time, and has received repeated communications about online banking and bill payment, but still hasn’t converted, it’s most likely that the customer won’t convert. Instead, banks should probably focus on getting new customers enrolled in online banking immediately.
It seems like a lot of messaging is done on the statement, or as statement inserts. But as the industry pushes its customers to receive paperless statements, how does that affect customer communication?
By pushing customers to paperless statements, banks lose statement inserts as a communication channel. That’s potentially a big loss based on how much customer communication is currently done that way. Banks generally provide online PDF versions of the statements and include all of the statement inserts, but it’s questionable as to how many people really read the inserts in the electronic format. Obviously banks need to evaluate other channels – online, email and mobile.
You talked about website redesigns. We all know that people are resistant to change. How do customers feel about website redesigns? Is a redesign a dangerous thing to do, because it runs the risk of confusing customers?
It’s well established that customers don’t like change, so any changes need to truly make navigation or some other immediately visable aspect easier for customers. The recent efforts by banks to redesign their sites were right on target though. The navigation is truly easier and customers aren’t bombarded by multiple marketing messages.
In preparation for my upcoming webinar – The New Checking Landscape: Adapting to Reg E and the Durbin Amendment – my colleague, Julie Lizer, and I were brainstorming ideas and talking about the banking industry. We started to compare it to the airline industry. Granted, banking and flying don’t appear to have much in common. But think Fees, Reward Programs and Status.
From my perspective the banking and airline industries have a lot in common these days. Both are struggling with revenue and profitability. Both keep talking about fees (rather than core business products and services, I might point out.) And both have a lot of customers who are really unhappy with what they get from the company.
I would prefer not to fly these days. It’s just not a pleasant experience, partly because there are so many fees on top of the ticket price. It’s also just plain uncomfortable. And at 5’ 2”, if I’m uncomfortable in the seats, that means the overwhelming majority of passengers are even more uncomfortable than me.
Really? Make your customers pay. Then make them pay some more. Then make them uncomfortable and treat them rudely. I have no status on any airline so I get no rewards, no benefits and no services.
As a result, we try to fly Southwest whenever possible, mainly because they don’t charge to check baggage. When you’re a family of five, those baggage fees add up quickly. Plus the employees just seem happier. For the most part, however, we fly whatever airline is cheapest. We have no loyalty whatsoever.
Julie, on the other hand, has Super Duper Platinum Premier Status on one of the big airlines. She goes out of her way to fly with that airline—including paying more for a ticket—simply because the benefits of the loyalty program make it worth it. She’s somewhat oblivious to the fees, because with her status, the fees are waived.
She asked me what I thought about the fees in the banking industry.
The way Julie feels about flying is similar to how I feel about my bank. As a customer, I could care less what my bank decides to charge me. The number and the size of my products with my bank ensures that I’ll never be charged fees. And like Julie, I’d probably be somewhat inclined to pay a bit more to stay with my bank. It would be a complete hassle to move everything. And I like that fact that having everything at one place gives me preferential treatment. In other words – I. Have. Status.
As a market research professional, however, I think eventually the pendulum will swing the other way. When TCF started offering free checking in the mid 80s, everyone eventually followed suit. Not that long ago, TCF announced that it would charge $9.95 on accounts that didn’t maintain a balance of at least $500 or use direct deposit. By May, the company lost 250,000 accounts – basically all the accounts they had gained since 2004. The company changed course slightly and eliminated the minimum balance requirement for accounts that have at least 10 transactions a month.
Checking accounts are simply another commodity at this point. Consumers need them and there’s not much difference between them. I certainly like my bank, but I don’t love my bank. If we moved, I would evaluate the banks available in our new area.
In other words, although I enjoy the preferential treatment I get with my bank, they haven’t done anything to establish strong brand loyalty.
Many banks advertise convenience and ATM availability. In a Mintel survey, among people who had switched banks, 38% of those surveyed indicated the reason was because they moved or convenience. Of course, convenience means different things to different people. For me it’s about online banking, online bill pay tools and mobile banking. Quite frankly, I could care less if there was an ATM on every corner. I pay for everything – including my $1.69 cup of Starbucks coffee – with my debit card.
I think it’s interesting that banks are doing away with debit rewards, a tool that can actually increase loyalty. Even more interestingly is that Citibank, which offers the ThankYou Network rewards program, has not announced any plans to eliminate its reward programs. The bank has the most extensive loyalty program in the industry, and rewards customers for all their banking activity.
Airlines have some of the oldest, most successful loyalty programs in existence. But they’re not necessarily routed in tangible material rewards. The true value, at least according to Julie, is the fringe benefits – free baggage check, early boarding, upgrades, a special customer service number, beverage tickets, etc.
Rewards won’t resonate with every customer. But neither will convenience or the number of ATMs. The banking industry is doing very little to instill loyalty in customers and is instead focused on short-term revenue goals.
Perhaps, however, a longer term focus on loyalty and cross-sell efforts would be more beneficial. A more extensive rewards program – one that incorporates more than just material goods and incorporates status and services into the program – might achieve just that.