Pini Yakuel, CEO of Optimove, discusses the importance of traditional banks embracing personalised customer marketing strategies to ensure they remain competitive.
In the last four years, challenger banks in the UK have collectively attracted in excess of GBP 1 billion in funding and over 2.5M customers. The competition is poised to get even bigger once Open Banking gets into full swing, as customers will be able to grant third-parties access to their accounts and financial data, allowing agile tech companies to offer direct financial services, and give increased visibility to consumers.
Against this backdrop, Goldman Sachs is set to launch Marcus, an online retail bank, in the UK. Aiming to position itself between traditional banks and fintech start-ups, this branchless bank will initially offer the highest interest rate in the country. However, the bank is still in need of a long term customer retention strategy, as seismic changes could take place in its offering, with one example being the rate may being subject to change when the bank launches nationwide.
One in two UK consumers would be happy to share transaction data with third parties if offered a more personalised service, whilst one in three would be happy to use banking services from technology companies, because of the personalisation they offer. 30%+ of Marketing Performance Improvement in Financial Services stems from Personalization, according to BCG. By looking at customer data to find out what value means to each person, marketing strategies can become significantly more effective by creating emotionally-intelligent communications, making every customer feel relevant/valuable.
The potential customer data has to offer is unsurmountable. Using demographic, account and behavioural information about their customers, banks can parse the customer base into distinct categories, based on things like account size, time spent as an account holder, investments, transactions and many more. Once a category with key common purchasing and/or demographic traits is identified and isolated, marketers can develop a variety of different, personalised marketing strategies to it. Whilst demographic data is helpful, only when it is combined with behavioural data, can it provides a true picture. In the retail sector, customers’ shopping preferences are dynamic and change over time, which means sweeping segmentation is not enough. Similarly, banks can better strategize by understanding the practice of dynamic micro-segmentation, which recognises how customer behaviours and preferences change over time, and takes these changes into account as explanatory variables.
Challenger banks have already started tapping into this potential and building a loyal customer base. With personalised rewards, such as tailored discounts or making individual suggestions on how to better manage their money, these new financial service providers do their utmost to build a personal relationship with each customer, often at the expense of established banks. They present themselves as being on the side of the consumer, passing on the savings made by their more agile, low-cost online services, and championing consumer rights by calling out and cutting the higher fees charged by large banks. This has been a powerful formula for these new businesses to win custom from the more established players in the industry.
However, despite the success of the fintech approach, established banks still retain the balance of power – for the time being. One of the main advantages large established banks have is exactly that – that they are large and established. Despite lingering trust issues from the financial crisis ten years ago, established banks’ reputations are by-and-large well-known and respected, and seem more trustworthy than new online brands that consumers are less familiar with. Perhaps more crucially, their size and history means that they enjoy a large customer base from which to generate revenue – and this customer base currently doesn’t move much.
This is the power Goldman Sachs needs to tap into, and build upon to beat the competition they face from the latest fintech players.
Communicating offers, rewards and discounts tailored to each customer’s distinct needs opens up a flow of mutually beneficial interactions with each customer, enabling banks to converse with them in a personalised, emotionally-intelligent way. The key to driving customer engagement is to offer a real value return that will keep them coming back to that brand. As well as improving customer service in-branch and on the phone, traditional banks have much to learn from retailers’ marketing strategies if they are to keep up with the personalised offerings offered by rival fintech services.
By experimenting with these different approaches, marketers create an optimum combination of marketing strategies and channels for each segment, to boost revenue. AI programmes can sort through the results, making observations on which strategies are most successful and which parts within every group are most responsive to different strategies. This reveals subsections of each segment, who respond in similar ways to particular marketing strategies, giving banks a deeper understanding of individual customer behaviours, preferences and needs.