As featured in CU Management: Smart investments in physical and digital infrastructure during...
Too often, retention strategies are reactive, and the focus for financials often shifts from delivering value to cross-selling product. Retention becomes more about meeting the needs of the institution than the consumer. Consumer banking trends show attrition rates climbing and averaging 15% across the industry; it's clear that consumers expect something better and more proactive but aren't willing to wait around for it.
Before diving into the three steps to transition from reactive retention to proactive reacquisition, let’s briefly define what this approach is and why it requires a business to think differently.
Reacquisition is a two-way relationship between a customer and a business. It puts emphasis not only on why a customer should stay with you but why they should CHOOSE you time and time again. Consumers everywhere have an overwhelming amount of options for where they can choose to shop, live, invest, and do their banking today. Reacquisition in banking acknowledges that they have options, and conveys you are in it for the long haul.
To make it work, this approach requires a different kind of thinking. Outlined below are 3 steps to take to help you make the shift in favor of long-term growth:
Before taking action on anything, assessing the risk will tell you where and how to start. First and foremost, a reacquisition approach will help to slow and combat attrition. Work with your team to find out how many, how much, and which ones you are losing each year.
The average retail banking customer attrition rate is 15% per year with a one to two point net income loss.
Most financial institutions can put a value to their attrition; unfortunately, efforts often stop there. How much of that are you willing to invest in fixing the problem? The reality is, it doesn't often have to be any more than you are currently allocating for retention programs, but you likely have to change what you are doing to be more effective.
Once you know the volume, ask your team if you really know the reasons customers are leaving. Or why they are staying? Do changes in attrition correspond to any actions you've taken, like policy or product changes, or perhaps any competitive moves? Are there issues you've become numb to, or figures that don't line up? Listening to the data and to the direct feedback of your employees, customers, and the community at large isn't always easy, but doing it with an open mind will help you find ways to better connect with and meet the needs of customers before they look elsewhere.
You offer great products and services and want to make a difference in your community. But when you review your emails, branch messaging and other marketing, is that what you include in your messaging? Or do you feature rates, terms, and conditions?
No one, especially millennials, wants to feel they are being "sold" to, but most people want to feel understood, valued, and respected. When communicating an offer or a new service, make sure it is positioned in personalized ways, where the benefit to the consumer is clear.
As a non-traditional player, Chime has received significant attention for its explosive growth, surpassing Ally as the leading digital checking account provider among banking startups. Chime has been successful in connecting to consumers as a result of a clear and consistent value proposition that gives their target market exactly what they've been asking for from banks and credit unions for years. And they've spent the money to tell people how they can help them.
The stress of finances often keeps people up at night – especially with the uncertainty the global economy has faced for the last 12 months. More than ever before, consumers of all ages are seeking guidance and insight into their problems, turning to friends, family, and internet sites for advice. What if you could be their go-to? A beacon of financial hope and strength in the community?
As part of your reacquisition strategy, you can redesign the conversation around what you’re offering and emphasize its value proposition. Think with your team about how what you offer and how you serve can help your existing customers (and new ones); then craft a plan to tell them. Invite them to discuss and address their goals and needs with you, using sound financial products as a means to get there.
Bonus: If you find problems you can't solve with existing solutions, you can find partners or new product/service development opportunities!
We often forget what people say or do, but not how they make us feel. Imagine visiting your bank or credit union and being blown away by the environment and the people in it. Only in your physical spaces do you have the opportunity to trigger an arsenal of senses and emotions that create strong memories, keeping visitors engaged in their financial journey.
“Overall customer satisfaction with financial institutions tends to decline as consumers transition away from the branch and to digital-only banking relationships.” (2020 U.S. Retail Banking Satisfaction Study, JD Power)
Reacquisition requires financials to do more than providing an app and accurately process transactions. That's table-stakes in today's environment. Getting a customer to choose you over and over again means giving them something they can't get anywhere else, something that delights. This approach helps nail customer loyalty in retail banking.
What might this look like? The opportunities are endless on how to create an experience within your branches. From branded content with smells and sounds to free educational resources, from community rooms and shared workspaces to full-service coffee shops and more, your environment gives customers one more reason to choose you as their financial partner. When digitally-enabled tools meet personal service in a thoughtfully designed space, you may not only be the financial but rather the local business people are talking about. To become a point of pride, a financial decision they've gotten right, you'll earn their business for the long run.