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Reinvigorating loyalty in banking

By Steve Grout, Director of Loyalty at Collinson, a global customer benefits and loyalty company

The concept of loyalty in the banking sector has been questioned a lot lately. Changes to legislation, including the EU’s Payment Services Directives, have seen more emphasis placed on the consumer and provided incentives to switch banks.

More recently, the topic of a ‘loyalty tax’ has been discussed by media. A recent study by Citizen’s Advice, found that staying loyal to current providers leaves people £877 worse off each year; almost £500 of which comes from banks (on average, £439 for a mortgage and £48 for a cash ISA account). As a result, CASS found the number of current account customers ditching their old bank and switching to a new one jumped towards the end of last year.

With competition for customers’ hearts and minds increasing, keeping customers loyal is more important now than ever before for banks. However, our recent consumer research found that just 26% of consumers feel that their bank values their loyalty. There is no question that loyalty can be extremely powerful in the sector – banks simply need to get back to basics to achieve it.

Treat your customer as an individual

Today’s customers are increasingly inundated with communications; their inboxes are overflowing with e-marketing. Social media also plays a role in brand apathy, with increasingly blurred lines between social and paid content, from companies, influencers and celebrities alike. At the same time, customers are living notoriously busy lives. They don’t have spare hours in the day to filter through the junk.

In order to cut through the noise and stand out from the crowd, banks need to capitalise on the time they do have with their customers by showing them that they are more than just a number on a piece of paper. It’s vital for banks to personalise interactions – otherwise communications are more likely to drive customers to a competitor than increase brand loyalty.

It is worth noting, however, that personalisation is never just personalised communications. It’s about the entire experience – not only do customers need personalised communications, but the offers, services, products and rewards offered have to feel right for the customer.

Our research found that a third (33%) of consumers don’t feel that the loyalty initiatives or communications they receive from their bank are personalised to them. Meanwhile a quarter (25%) said they will not engage with organisations that fail to personalise their customer experience or communications, highlighting how today’s customers demand to be treated as individuals, and failure to deliver targeted, personalised experiences may actually decrease customer loyalty.

Use the tools at your fingertips

Too often, banks focus on the immediate returns; the quick fixes to please customers. However, there is no immediacy where loyalty is concerned. People don’t suddenly start to feel loyal towards a brand overnight, it takes times and effort.

Part of the issue is banks’ failure to use their data to understand their customers and why they are loyal. Two thirds (66%) of businesses surveyed in our globally commissioned research conducted by Forrester Consulting do not understand why their customers are loyal to their business. On top of that, over half (53%) do collect customer data and augment it with third-party sources to build a clearer picture of customers.

All financial institutions, whether traditional players or new entrants to the field, hold transaction history and spending behaviour data on their customers – the key to maximising this data is educating stakeholders and breaking down silos internally.

By combining internal data with data from regulated third-party organisations, such as other banks, personal finance and fintech app providers, banks will have the insights they need to deliver a more personalised experience for the customer – the right product recommendations and loyalty initiatives communicated in the right time and place.

What does success look like?

Loyalty initiatives are doomed to fail if you don’t have a clear picture of what you’re trying to achieve. Despite this, almost seven out of 10 (67%) banking loyalty experts said they do not have a framework in place to measure loyalty in the context of overall business performance. Whilst this may sound surprising, understanding what success looks like for a business as a standalone requirement can often be a challenge – as ‘success’ can often vary wildly by region, team and department. Loyalty is no different, and as various business units can feed into this function, the opportunity for discrepancy in metrics, goals and targets is understandable in reality.

Loyalty needs to be a top-down and company-wide commitment. It must be part of a customer-centric approach and all business units need to be aligned and clear on the strategy to develop deep lasting relationships with customers. This includes creating formalised processes to drive loyalty across company departments. Employing a dedicated resource can be a valuable investment and can visibly demonstrate your company’s commitment to loyalty.

Getting back on track

In a world of constant change, consumers want to be able to rely on their favourite brands. A truly personalised experience is one that delivers individuals not only the information, services and products, but does so at the time and place the customer wants and needs it. This is as true for banks as it is for other brands. Those banks that do use the tools and data they have available to demonstrate that they understand and value their customer, will be rewarded with loyalty.