New Strategies for Customer Loyalty in a Changed Market Environment

  • Timm Wege, Vice President Business Development at SWK Bank, Mainz

  • 22.05.2024 02:30 pm
  • #customer #banking #finserv

The entire financial services industry has been in a state of upheaval for some time now - services are being reorganised and combined in new ways. Customers today have more choice than ever before. Technology has fundamentally changed people's perceptions, with many new offers on a wide variety of channels vying for customers' attention. This does not necessarily contribute to an increase in customer loyalty, but rather leads to continuous shifts in loyalty dynamics.

A Harvard Business School study found that increasing customer retention rates by just 5% can increase a company's profits by up to 95%. So how can banks and financial service providers anticipate what their customers want, ideally before they even know it? Can they turn raw data into actionable insights? What do they do when their customers want something they don't offer? How can you use ecosystems to expand your product range while maintaining control? How can you fundamentally promote customer loyalty?

Is there still any customer loyalty in banking?

To a certain extent, customer loyalty in the banking sector is indeed dead, especially when it comes to standardised products such as consumer loans or deposits. This is mainly driven by the user experience that consumers have learnt on platforms such as Amazon and which has been adopted by financial platforms such as smava, Check24 or Raisin. "If I'm looking for something, I google it, if I want to "buy" something, I use a comparison portal." A common mistake is to believe that banks, financial service providers or other companies "own" their customers. Instead, they need to build trust with their customers every day that they are working with the right provider. If banks and financial service providers offer standardised products, they must be the process leader and therefore the cost leader in the market in order to retain customers and win new ones. Contrast this with comparison portals: they have to offer the best overall solution for the customer. Or manufacturers of luxury goods who differentiate themselves through product quality.

The most effective strategies for increasing customer loyalty in the financial services sector

It is fundamentally important to stick to the rule: "Don't fight the obvious." If the customer likes to compare, then banks and financial service providers should look for an opportunity to become part of the comparator ecosystem, for example by working with comparison portals. This does present some problems, but they can be solved. And if the customer wants to switch providers for a standardised product, then banks and financial service providers should become part of the value chain of other providers, for example by offering their infrastructure to other banks as "banking as a service" - as SWK Bank does, for example. In this way, the customer has access to the ecosystem via various channels.

Addressing undiscovered customer needs to promote customer loyalty

It is important to talk to the customer. The telephone continues to be the most important tool in this regard, as sales representatives from banks and financial service providers confirm time and again. So if a bank or financial services provider wants to upsell or cross-sell, it needs customer-orientated people who enjoy talking on the phone.

The importance of ecosystem partnerships for customer loyalty

This approach can be summarised under the keyword "embedded finance" or "value-added concepts". The question is what the underlying purpose is: If it is a universal bank trying to keep its customers in a "one-stop shopping" environment, then working with other providers in "white label partnerships" is a good option to avoid the complexity of in-house development or a "buy-and-build approach". If, on the other hand, only a few standardised products are offered, it is difficult to burden the front ends with additional products and to establish or transform the brand in a completely new perception. SWK Bank, for example, has not pursued this path.

Advances in artificial intelligence and predictive analytics are influencing strategies for personalised customer experiences and customer loyalty

There are now many exciting solutions in the field of artificial intelligence and predictive analytics. One of the most effective tools is certainly the "oldschool" chatbot, which has been massively enhanced by AI. Another notable solution is based on "speech-to-text" functionalities, in which, for example, the telephone conversation with the customer is analysed in real time and the sales employee immediately receives AI-based support for customer questions, suggestions for suitable products or pre-filled forms, for example for address changes, on their screen during the call.

AI plug-ins for the market-leading CRM systems are now also well established. These plug-ins enable sales staff to find the ideal time and the ideal products to proactively approach the customer.

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