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Customer Retention in Financial Sector: Challenges and solutions

Victanis Advisory Services GmbH
2019-11-20
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With the rise of clients shifting from financial sector to insurance and insurance to retail, the financial sector has to invest in customer retention providing more than financial services.

Challenges in Customer retention

While Client on-boarding and customer satisfaction processes are in place, a comprehensive view of customers’ behavior across all business line with a link to results is still lacking.

Personalization will be the prime driver of marketing success within 5 years. The companies need to develop to stay ahead of the curve are:

Use advances in technology, data and analytics to create a much more personal and “human” experience across all business lines.

Empathy—the ability to relate to and understand another person’s emotions—is the basis of strong relationships. Understanding social cues and adapting to them is how people build trust. That’s not easy to do digitally or at scale.

Machine learning is changing that, or at least getting much better at reading and reacting to emotional cues. More sophisticated algorithms are allowing programs to interpret new kinds of data (visual, auditory)

Use Ecosystems to personalize the customer journey

Creating connections between different actors of the customer journey (financial analyst, retail staff, cash machine behavior..) represents a big opportunity in the next level of personalization and will contribute to provide more seamless and consistent consumer experiences across all stages of their decision journey.

Creating unbreakable connections with customers is not just related to product, promotion and channel issues, it is an alignment of holistic solutions and the customer experience lifecycle. Providing satisfactory products and services is fundamental to fully engaging your customers in the demanding digital world. Further, creating an emotional connection with customers at crucial moments will give you the edge in improving your customer acquisition and retention rate.

Solutions to improve Customer satisfaction

Develop the means to understand the needs of high-value customers on an ongoing basis.

Develop systems that can pool and analyze structured and unstructured data, algorithms that can identify behavioral patterns and customer propensity, and analysis capabilities to feed that information into easy-touch dashboards.

Setting up a centralized customer-data platform (CDP) to unify paid and owned data from across channels is essential to these efforts. Unlike traditional CRM solutions, CDPs provide built-in machine-learning automation that can cleanse internal and external data, connect a single customer across devices, cookies, and ad networks, and enable real-time campaign execution across touch points and channels. The best ones are also easy to use.

Individualizing outreach across channels also requires companies to develop and interact with new sorts of data, from voice to visual. The best are already actively experimenting with these technologies by developing use cases to understand how to best use them.

Making this technological leap forward requires marketing and IT to join forces. A product-management team, with representation from both IT and marketing, should be established to build and refresh the organization’s road map, develop use cases, track pilot performance, and compile a robust library of standards and lessons learned. Cyber security systems should be able to keep pace with the expansion of personalized experiences.

Find and train translators

Personalizing spaces, moments, and ecosystems will require very different skill sets from those of the traditional marketing operation today.

Build up agile capabilities: Given the iterative, cross-disciplinary nature of personalization efforts, traditional silo marketing teams won’t work.

Cyber security systems should be able to keep pace with the expansion of professionalized experiences.

It is important to differentiate common customers to valued customers and be able to give a complete picture across different business lines.

Four Best practices

  • Comprehensive view of custom & link to results
  • Acquisition from on-boarding - Profile – Network – Experience
  • Break customers base into scores of micro segments
  • Use cutting edge algorithms – predict customer behaviour

Our Approach to a successful Customer retention strategy

A global understanding of your business mixed with ample benchmarks and success stories is key.

We are able to advise our clients on the best strategy to improve customer retention. Our approach? Review of processes, practical implementation to build a customer experience with measurable results.

Our references both in Financial and insurance sector gave to our client a competitive advantage

1) Conduct a “Stage 0” strategy intensive around the topic of inorganic innovation. Get clarity and alignment among the senior executives on your management team on precisely what part of the value chain you should prioritize for inorganic innovation and why;

2) Invite an expert to come in and speak to your leadership team. Get your team on board with you and excited about the transformative stakeholder value creating impact of inorganic innovation;

3) Set up a workshop or an internal executive roundtable. Get an expert to conduct this for you. Just getting started is the key.

4) Adopt a more specific and personal communication with customers. Email marketing has proven to be the most efficient way to improve customer retention in financial services

A recent study conducted by Victanis in Europe showed that more than two in five financial services customers say they rarely or never receive relevant marketing communications from financial services companies they’ve used before or are currently using,

Additionally, nearly a quarter (22%) of consumers say they hear from companies across channels including email, SMS, push notifications, social media and display ads too frequently, while 8% say they do not hear from companies on those same channels often enough.

Also, as fintech brands like Venmo, Stripe, Square, CashApp, etc. grow more popular with consumers and niche institutions (e.g., investment firms, credit unions, etc.) expand their services and offerings, the pressure is on for all financial services companies to improve communications strategies with current customers.

Best practices in email marketing to improve customer retention

Across industries, leading companies recognize the importance of customer retention and continue to invest heavily and the financial services sector this is no different. However, retention in the space is now tougher to maintain as customers encounter more options than ever in the financial marketplace.

On the plus side, the majority of customers say they are not considering switching to a new financial services company — a number that seems high on face value. However, when you consider the significant amount of research and processes that go into switching banks or other financial services companies, it’s shocking that 27% of consumers are considering switching provider.

Brands that leverage email marketing properly will continue to build lasting customer relationships while thwarting the new fintech players from capturing market share. Here are four ways top brands are improving customer retention with email today.

1. Incorporate educational content

Most provider use email marketing to communicate with customers, but these emails are often seen as self-promotion. Instead, create educational content that indirectly relates to your offerings and positions your company as a valuable resource for financial advice.

For instance, customers are looking at budget tips, guides to paying off student loans, or timelines for saving for retirement. Fidelity, for example, provides customers with an interactive timeline that projects how much money they would save by adjusting their contributions. Also, some like Capital One provides a “Learning Center” with answers to common questions customers may have.

2. Personalize email messages based on age

In the financial services industry, a consumer’s age significantly influences the services and information he or she needs. Use smart tools and dynamic content modules to deliver the right content to your customers as they reach certain ages. For instance, a 30-year-old might be interested in content about how to save for buying his or her first home. Relevant content based on age builds trust among customers and keeps them coming back for more content and services.

It’s also important to remember that consumers’ financial situations change significantly as they age. Life changes, such as a new job, a marriage or a changing family situation, directly impact the offerings a consumer needs from his or her financial services provider. Companies should embrace customer lifecycle and journey mapping strategies to ensure they understand when consumers are likely to change institutions and use that as an opportunity to re-engage.

3. Be convenient

Convenience is a major factor in consumers’ decisions to engage with any brand or organization and financial services companies are no exception. Using a bank or financial institution should be an easy part of everyday life for consumers. If it’s not, they’ll switch to a provider that offers greater convenience.

What does this have to do with email? Financial brands can use email to not only communicate convenient offerings (e.g., easy cash transfers using PayPal) but also to keep customers up to date with the status of their accounts so they don’t have to log in elsewhere, switch apps or call their bank for updates. Venmo, for instance, sends emails after a customer sends or receives money, with a link to easily access the transaction within the app.

4. Show you care about their preferences

One way to keep customers around is by showing that you truly care about what they want from your company when it comes to marketing communications. Consumers don’t want to feel like a number and asking about their individual preferences gives them the VIP treatment.

Use preference centers to directly ask customers how frequently they want to hear from you, their interests, financial goals, upcoming life events, and/or on which channels they want to interact with your company — whether by email, text messages, your app or through other channels.

As new financial services and fintech brands capture the attention of consumers and reshape their expectations for financial organizations, it’s time to rethink your strategies for improving retention. Email can be a great way to form lasting relationships with customers that keep them engaged as they navigate new and exciting life moments.

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