THE CUSTOMER ACQUISITION CHALLENGE: HOW BANKS CAN LEVERAGE ANALYTICS TO COMPETE

The market for financial products is more crowded now than ever, making it challenging to capture new customers and meet performance goals. Many financial institutions (FIs) are offering increasingly generous, eye-catching rewards promotions, as evidenced by the $22.6 billion issuers spent on credit card rewards in 2016.

Grayson Clarke
Grayson Clarke

As banks invest heavily and compete fiercely to acquire customers and create enduring relationships, they also must carefully develop strategies to acquire the right customers – that is, build the relationships that will add the most value in the long-term. However, this is often easier said than done, as FIs face several key challenges in customer acquisition.

First, it can be difficult to accurately project account value. In order to invest strategically, banks must understand the incremental impact of their promotions on the overall bottom line, which can be challenging to measure. For example, will investing in competitive signup promotions and rewards offers pay off? As value varies widely by account, the answer to this question may not be readily apparent.

Further, the true value of an account doesn’t become clear until months or years after the initial signup, making it difficult to immediately comprehend a new customer’s true value.  A lack of clear insight can be paralyzing, and lead organizations to make only reactive decisions or small changes at the margins.

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So how can banks forecast account value to better inform targeting for campaigns – reaching not just the customers that will respond, but those that will respond profitably? A robust analytics program is instrumental for FIs to unlock the potential of their data and identify actionable insights to inform their acquisition strategies.

For most banks, the sheer volume of campaigns – spanning multiple products, channels and offers each month – and the complexity of analyzing them effectively makes it impossible to rigorously measure the individual impact of each. Even fewer banks can aggregate analysis across campaigns to uncover insights into overall customer journeys and engagement strategies.

Optimizing campaign investments is particularly challenging due to the dozens or even hundreds of potential offer and product combinations. Refining customer acquisition strategy entails fine-tuning each of the different outreach levers involved. To execute campaigns effectively, banks must make a series of decisions, including:

  • Which customers and prospects to target
  • What the right offer and structure combination is for each tier, card type, and customer segment
  • What actions should be taken given changes in volume goals, budgets, and spend targets

These levers can also be applied to different offers and promotions, including:

  • Introductory and regular APR rates
  • Signup bonus terms, including minimum spending requirements, spending requirement terms, and airline miles vs. cash rewards
  • Annual and balance transfer fees

Developing or enhancing analytic capabilities allows banks to hone in on the right levers to pull with the right customers. Leveraging insights from past campaign performance through test vs. control analysis with well-matched sample groupsenables banks to predict future behavior, while uncovering financial risks before they can negatively impact the bottom line.

In addition to each of these considerations for refining and optimizing individual campaigns, FIs must also consider which mix of campaigns and offers will yield the greatest ROI. For example, should a credit card issuer offer 25,000, 40,000, or 50,000 points for new customers next month? What should the spend minimum be? Should that vary by card type, customer segment and channel?To check all of these boxes, organizations need a scalable analytics solution to incorporate findings and data from different acquisition campaigns.

With the stakes higher than ever for banks to optimize their acquisition strategy and reach the right customers with the right offers, investing in analytics is critical. Leveraging data-driven insights to inform outreach will empower banks to make better decisions, drive higher acquisition ROI and react to ever-evolving market dynamics ahead of the competition.

Author Bio: Grayson Clarke, Senior Vice President at APT

Grayson Clarke, Senior Vice President at APT, helps leading organizations create significant value across a wide variety of business issues. As a leader in APT’s financial services practice, Mr. Clarke helps these companies achieve data-driven insights to enhance decision-making.Prior to joining APT,Mr. Clarkeworked at Capital One, where he led the Venture Card business and was head of Credit Card Strategy. He has been quoted extensively in publications including The New York Times and American Banker. He holds a Master of Business Administration from Harvard Business School and Bachelor of Science in Mechanical Engineering from Virginia Tech.

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