How Can Banks Improve Customer Loyalty in the Digital Age?

You can achieve greater success by improving customer loyalty. Yet it can be especially difficult for banks in the digital age. Customers have more choices and may switch to competitors offering better service or products. Like other businesses, banks can combat this by focusing on boosting customer loyalty to keep new and existing customers coming back for more.

Acquiring new retail banking customers is expensive and averages $301 per new acquisition. But you must hope they’ll like your bank and services enough to stay. Unfortunately, 34% of new customers who switch banks will switch back within a year.

You can do a few things starting today to improve customer loyalty at your banking institution.

Improve Customer Service Through Employee Training

Employee training might not be the first thing to come to mind when building customer loyalty, but it is one of the key differentiators among banks. In our research covering hundreds of thousands of households, we see that banks with well-trained staff lose 42% fewer customers than those with poorly trained staff. This is because poorly trained staff are much less responsive, much more likely to give customers the runaround, and much more likely to make irksome mistakes.

Having poorly trained staff is, unfortunately, not uncommon among banks. Of the 5,417 banking institutions we currently track, customers at 43% of them think the staff is undertrained. Unsurprisingly, this number skyrockets to 74% among online-only banks.

Do you know how your banking institution rates among your customers? (Contact us to find out.)

Create Better Products

Sometimes implementing better products is warranted to improve the quality of your banking customers’ experiences. Other times it can cost a bundle and have little benefit. The key is knowing when to build better and when to hold off. Start by understanding your customers’ pain points. Do they truly need the latest bells and whistles, or is it just “FOMO” on the part of senior leadership? 67% of all households and 75% of all businesses already say their bank has all the products and services they need.

To focus on providing your customers with the products and services to meet their needs and address their challenges, it is important to know exactly what they are looking for.

In some markets, there is an unusually high demand for auto loan products, like in several counties in Georgia. In other markets like Chicago and Sacramento, ATM quality is a major point of frustration so banks should focus there. In still other markets, there is a particularly high demand for quality mobile banking among residents and businesses. You need to know the local needs to succeed.

The goal isn’t to have the most high-tech machine but to offer products and services that truly meet customers’ needs—and to outperform your direct competition in addressing those specific needs.

Charge Appropriately

Rewarding new or existing customers is a great way to boost customer loyalty, just don’t get so carried away with perks that they become counterintuitive to your goals.

Lower fees are welcome for anyone, especially during today’s downward economy, but they won’t make sense for every bank or branch. As a matter of fact, according to our latest surveys, 34% of banks should NEVER LOWER THEIR FEES because their customers are already overwhelmingly satisfied with the current fees. Sure, you will always get complaints from some people, but if the vast majority of your customers are happy with your fee structure, don’t give away the farm. Knowing where your customers stand on the matter can provide the insight needed to make the right decision, and perhaps save millions of dollars.

Leverage Technology

There’s no getting around our technologically advanced world, but that’s a good thing. Technology can improve customer loyalty by giving them more ways to interact with your institution, especially for those looking for a mobile banking experience.

But many community banks think they just can’t keep up with the big banks in technology, at least not without spending tens of millions of dollars to upgrade their digital tools. Fortunately, many of those community banks are wrong. For example, we recently asked over 280,000 homes and businesses to rate the mobile app at their current bank. It turned out that 41% of all community banks got ratings almost as good, or better than the huge national banks like Chase, Wells Fargo, Truist, Bank of America, etc. So, size does not determine success. If there are thousands of community banks competing well against the mega banks, it means you can too, without overspending.

Mobile banking apps are more popular now than ever, but who are you designing them for? It may surprise you that women are much more likely to use digital banking technology than men, they understand the technology better than men, and this gender gap is growing. So again, who should you be designing your mobile app and online tools for?

Show Up Consistently Where They Are Online

In a crowded market, improving customer loyalty can help you capture more revenue. When you focus on the quality of your products and services, don’t forget to get social with your customers. Engage, entertain, inspire, and encourage your banking customers where they hang out online. You’ll get rewarded for your effort by focusing on the topics that matter most to them.

The average household tenure with a banking institution is 17 years and the average lifetime value for each household is $3,852. It is therefore very important to stay as engaged as possible with your customers at many points of contact

Conclusion

Customer loyalty is key to your bank’s success today and in the future, and it all boils down to adding more value to keep customers from switching. Follow the tips mentioned above to increase customer retention and achieve tremendous success.

Remember, loyal customers naturally recruit new customers at a fraction of the cost of marketing to new customers. And your bank will gain so much more value by focusing on building a loyal following than equating growth with recent customer gains.

Sources

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