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Bank Customer Retention: Why It Matters
You’ve probably heard this more than a dozen times: retaining a customer is so much cheaper than acquiring a new one.
This holds true for banks and financial services providers, too. Here are some bank customer retention statistics to consider:
- According to Customer Think, the costs of acquiring a banking customer are estimated to be around $200 while the typical customer generates only $150 in revenue each year. That means the relationship does not become profitable for the bank until well into the second year.
- In banking, the annual churn rates on new customers hover in the 20 to 25 percent range during the first year, with half not making it past the first 90 days after opening their accounts.
A few more statistics reveal how customer experience — more so than digital strengths, rewards program, or coverage options — could be the key for banks that prioritize customer retention.
- 80 percent of consumers would switch financial institutions for a better experience.
- According to Kantar, banks that lead in the customer experience index have a recommendation rate that is 1.9 times higher than banks at the lower end of the index, their share of deposits is 1.9 times higher, and their customers are 2.1 times more willing to take up new products and services from their bank.
- Banks that let their customer experience decline risk losing up to 12.5 percent of their share of deposits; at the same time banks with high customer experience metrics increased their share of deposits by 16.5 percent.
As these numbers suggest, providing an effective, easy, meaningful, and effortless experience is one of the keys to reducing customer churn. Therefore, to improve customer retention in banking, organizations must focus on becoming more customer-centric — and delivering experiences that wow, delight, and inspire loyalty.
Customer Retention Strategies for Banks
Start a Customer Newsletter Campaign
Staying engaged and in regular communication with your banking customers beyond their branch visits can make a big impact on your customer retention efforts.
Start a customer newsletter campaign. By doing so, you can foster trust-based relationships that help encourage preference and inspire loyalty. It also allows you to show customers how much you appreciate their business, as well as build the kind of goodwill essential to getting recommendations and referrals.
What should be on your newsletter? The content doesn’t exactly have to be promotional. You can discuss industry trends, banking safety practices, or new digital offerings. You can also link to your social media profiles and occasionally send out customer satisfaction surveys. (More on this later.)
Outside of your newsletter, you can also send automated messages and notices, such as birthday greetings, appointment reminders, and event invites. This increases personalization and drives even more engagement.
Send Out Customer Satisfaction Surveys
Effective customer satisfaction surveys can make a positive impact on your bottom line. They’re great tool for collecting valuable information from your customers.
By requesting feedback through surveys, you can:
- Find out what customers really think and how they really feel about your bank and their banking experience
- Achieve a more accurate and complete understanding of the customer experience
- Identify, manage, and resolve any high-impact issues and weaknesses
- Evaluate loyalty and satisfaction
- Identify brand advocates and promoters who are likely to recommend you to others
- Gain valuable insights essential to improving your product or service
Get Involved in Financial Wellness Programs
A lot of companies today have their own financial wellness and counseling programs in order to promote the financial well-being of their employees.
For this, they will need experts, which is where your bank comes in. Getting involved in company financial wellness programs or counseling services is an excellent customer retention strategy for banks.
Whether you’re simply offering financial advice or partnering with company executives to set up workshops, lunch-and-learn sessions, or seminars, financial wellness is a great platform for retaining current clients and acquiring new ones.
As you get involved, don’t forget to hand out your brochures, contact information, application details, and other promotional materials.
Manage and Respond to Online Reviews
Online reviews can make or break your bank. In the age of Yelp and Google reviews, what customers say online can impact search engine performance, shape your bank’s brand reputation, and affect your ability to keep and retain customers.
This makes it critical for your bank to manage and respond to online reviews. As part of your bank customer retention strategy, tune into banking review sites and engage with customers who leave feedback.
This demonstrates to existing customers (outside of the actual reviewer) that you care and are listening to what they have to say. (Read this helpful guide for examples of how to respond to reviews.)
Apart from responding to reviews, banks can also harness positive reviews and 5-star ratings they may already have. Share your best reviews on social media. Add them to your website. (Review widgets should be a useful tool.) And celebrate and call out your bank customers who consider themselves as your biggest fans.
This helps you build powerful social proof that will inspire shopper confidence and foster customer loyalty to your business.
Focus on Delivering Superior Customer Experiences
It’s important to grow your customer relationships beyond providing transactional convenience and really focus on the customer experience. Make next-level service and support your bank’s investment priority. Reengineer your sales, service, and marketing strategies based on customer feedback. And tailor your communications in ways that offer customers a better understanding of how your products and services can meet their goals and expectations.
The financial services and insurance industries will always have a unique set of challenges and opportunities — not least in the area of customer retention. Using these tactics above, you can provide your customers with an effective, easy, meaningful, and effortless experience. This, in turn, will make your bank more profitable in the long term.