Effective customer retention strategies for banks can distinguish successful financial services organizations from unprofitable ones. As the popular adage goes: retaining a customer is much cheaper than acquiring a new one. This holds true for banks and financial institutions, too.
According to research:
- The average customer attrition rate among retail financial institutions per year is 15%.
- Approximately half of the customers who churn don’t make it past the first 90 days after opening their accounts.
- $200 is the average acquisition cost of a new customer.
- The typical customer generates only $150 in revenue each year.
Key takeaway: The relationship with a customer does not become profitable for banks until well into the second year, highlighting the need for an effective customer retention strategy.
Customer Retention in Banking: How to Meet Expectations
How do you attract and retain bank customers?
Your organization’s ability to meet consumer needs and expectations can help you establish new relationships. More importantly, it helps position your bank to retain current customers and increase wallet share.
A few statistics shed light on how customer experience management — more so than digital strengths, products and pricing, rewards programs, or coverage options — could be the key for banks that prioritize customer retention.
- 54% of consumers say that customer experience in most financial brands needs improvement.
- According to Accenture, more than half of banking customers have expressed a desire for an omnichannel banking experience, where they could switch seamlessly between physical and digital channels.
- 56% of customers who told their bank they are leaving say their bank made no effort in keeping them.
- Banks that let their customer experience decline risk losing up to 12.5% of their share of deposits. At the same time, banks with high customer experience metrics increased their share of deposits by 16.5%.
Customer Retention Strategies for Banks: Ideas to Improve Customer Experience
To retain customers, reduce churn, and drive growth, banks should provide an effective, meaningful, and effortless experience. Therefore, to improve customer retention in banking, organizations must focus on becoming more customer-centric and delivering experiences that wow, delight, and inspire loyalty.
Here are some ideas you can implement as you come up with customer retention strategies for banks.
Increase Personalization Through Newsletter Campaigns and Customer Communications
Staying engaged and in regular communication with your banking customers beyond their branch visits can make a big impact on your customer retention efforts.
Starting a newsletter campaign is an easy tactic that helps foster trust-based relationships with customers, encourage brand preference, and inspire loyalty. It also shows customers how much your company appreciates their business, and build the kind of goodwill essential to getting recommendations and referrals.
What should be on your newsletter? Meaningful topics include industry trends, banking safety practices, customer success stories, new digital offerings, or even statistics or infographics about loans, debts, retirement funds, etc. Just remember that the content doesn’t have to be promotional.
You can also link to your brand’s social media profiles and occasionally send out customer satisfaction surveys. (More on this later.) Mailchimp, Hubspot, and Constant Contact are among the handful of customer newsletter tools you can use for your organization.
Outside of newsletters, your team can also set up automated messages and customer communications, such as birthday greetings, appointment reminders, and event invites. By delivering a combination of human empathy and personalization, you can leverage digital communications channels to drive greater levels of engagement with customers and create a stronger brand promise.
Capture Valuable Feedback Through Customer Satisfaction Surveys
Customer satisfaction surveys are a great tool for collecting valuable information from your customers. By requesting feedback through surveys, your team can:
- Find out what customers really think and 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 satisfaction and learn how to build customer loyalty
- Identify brand advocates and promoters who are likely to recommend you to others
- Gain valuable insights essential to improving your products and services
Asking the right questions enables your business to understand customers better and deliver improved customer experiences. When you’re distributing customer satisfaction surveys, one of the most important parts is being able to analyze and act on the information provided by your customers. This isn’t easy if you’re managing multiple bank locations.
To ensure that you’re effectively listening to customers and making the most out of their feedback, work with a technology partner who will help you meet your business goals and extract meaningful insight from data. Customer feedback system and survey tools you can use include Google Forms, SurveyMonkey, and ReviewTrackers’ Ask Tool.
Demonstrate Thought Leadership Through Financial Wellness Programs
A lot of companies today are implementing 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 one of the most common customer retention strategies in the banking industry. It’s also a great way to demonstrate thought leadership and communicate your brand promise to prospects.
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.
Retain Customers by Managing and Responding to 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, have a system in place for tuning into banking review sites and engaging with customers who leave unsolicited feedback. Learning how to respond to negative reviews as well as positive feedback demonstrates to existing customers (outside of the actual reviewer) that you care and are listening to what they have to say.
Your organization can also harness reviews by sharing them on social media, incorporating them into your company website, and celebrating the customers who consider themselves your brand’s biggest fans. This helps you build powerful social proof that will inspire shopper confidence and foster customer loyalty to your business.
Nurture Customer Loyalty By Building a Service Culture
Trust is a key component of customer retention. In banking and financial services, trust has to be earned, especially given how most banking customers consider banking relations as merely transactional.
To nurture loyalty, build a customer service culture that goes beyond providing transactional convenience. According to research, 86% of buyers are willing to pay more for great customer service. Examples of service-focused customer retention strategies for banks include staying connected post-sales, offering VIP programs, using AI and chatbots to deliver digital banking support, and — simple as this sounds — acknowledging customers by name and making them feel heard at all times.
Focus on Delivering Superior Customer Experiences
It’s important to grow your customer relationships beyond providing transactional convenience and really hone in on delivering the best possible 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.