Why does customer loyalty matter? How can financial services insitutions leverage loyalty to improve their relationships with their customers, increase revenue, and improve retention? These are questions that need answering. The complexities of the financial services and insurance industries make efforts to foster brand loyalty unique for several reasons. The average person is a customer of five different financial services companies, and only 12% of customers maintain a relationship with a single provider. So, it seems that most of us are in an open relationship with our current account providers. An era of open banking is driving competition and newcomers like Starling have gone through quick expansion. It’s more vital now than ever before for financial services companies to pay attention to the digital landscape and quickly evolve—or risk getting lost in the shuffle and losing valuable customers.
Everything In One Place
Big retail banks still dominate when it comes to market share, but market saturation is expanding. Challenger bank brands take advantage of lower barriers to market entry and they can even receive customer banking data shared securely via APIs (following the ‘Open Banking Mandate’).
2018 regulations require financial service organizations to make consumer data available by request. This enables innovative digital-first challengers to offer aggregation and pull together financial data from multiple sources to be displayed in one interface. Forget spreadsheets of incomings and outgoings from various accounts. Early adopters are now flocking to providers like Yolt and Curve to see all of their accounts in one single, slick and beautiful app.
Stickiness Equals a Stronger Relationship
The key is to make your service and your partnership with the customer sticky. Despite the fact that consumers may not want to sever ties completely with big retail banking providers, their attention may be diverted to secondary financial products. While looking at all of their finances, a consumer might be drawn in by the appeal of instant access savings accounts, insurance products, or perhaps a travel money service. When it comes to fostering loyalty, it’s essential to maximize the value of the customer relationship by ensuring multiple product holdings are had by each customer. Today, 55% of adults now hold financial products with between two to five companies. In other words, there are plenty of fish in the sea and consumers know it.
Customer Loyalty in Insurance
Insurance providers can find it even harder to hold onto customers, let alone build loyalty. Making banking sound alluring is hard enough and inspiring passion for insurance can be an Everest climb for marketers. Unfortunately for insurance providers, insurance is often considered a necessary inconvenience; a means to an end. That means that there are limited chances for meaningful interaction within the average customer’s policy lifecycle and renewal windows (which often act as escape routs for dissatisfied policyholders.
This is bad news for insurance providers and tough for consumers also, who feel unrewarded for their loyalty. It may seem like there is a shortage of loyal policy holders to reward, but there’s certainly no shortage of consumers waiting to be won over by insurance companies. 35% of consumers would be loyal to an insurance brand if it offered rewards (UK Home Insurance Industry Report – Mintel, 2019).
Digitalized Experiences will Shape Customer Loyalty and It’s Up to Digital Marketers to Ensure Those Experiences are Streamlined
A sound data strategy can be the answer to providing winning customer experiences. As McKinsey pointed out in a recent report, COVID-19’s impact on the world changed how companies view loyalty. More interactions shifted online to virtual channels.
Customer relationships and revenue have come under pressure in this increasingly digitized economy. That’s why banks must rethink their revenue drivers, look for new opportunities, and reorient offerings toward an advisory and protection focus with digital leading the way. Advanced analytics helps them identify those niches of growth.
Financial services was already data-intense, but COVID-19’s effects will expand this data even further. Financial institutions must focus on making the quantity and quality of their data into governed and operationalized data. A better eye will be kept on customer retention because data will be used to actively identify clients at risk of attrition. According to Bain & Co., increasing customer retention rates by 5% can increase profits by anywhere from 25% to 95%. Behavioral analytics will generate invaluable data that can be used to create individual customer action plans tailored to clients’ specific needs.
Client expectations from their financial institution(s) must also change. Customers expect completely seamless digital experiences and offerings. Sometimes their expectations are unrealistic and other times, their not. The financial institution without a sound digital strategy is simply going to lose customers to their more digitalized competition. What was once a decision made by banking experts is now in the hands of UX designers and content strategists. They are the people designing customer experiences in the digital realm. What’s possible now is really almost limitless—or at least limited to the minds and imaginations of digital marketers.
Get started analyzing your brand and to discover what you can do to leverage customer loyalty. Reach out.