Even the most junior marketers have heard the adage at least once: it costs more to acquire a new customer than to retain an existing one.
This holds true in financial services.
Customer Think explains that the costs of acquiring a banking customer are around $200—but that customer only generates about $150 in revenue each year. It stands to reason that if you want your institution to make any money, you’ve got to keep your customers around for a while.
The good news is that if you’re acquiring the high-value customers, onboarding them and growing them through relevant upsell and cross-sell offers, you’re already well positioned to retain your customers over time.
It’s all about building relationships through highly personalized interactions, throughout the customer’s lifecycle.
According to the Digital Banking Report, effective personalization can lead to significant business growth:
- Reduce customer churn rates by 10–30%
- Lift customer engagement scores by 2–3x
- Lead to annual revenue uplifts of 10%
On the other hand, if you acquire customers who are looking for short-term incentives, or if you haven’t fully activated and engaged your customers from the start, you’re probably still seeing a lot of attrition. You must continue to provide personalized value to each customer as their needs evolve.
Know your customers to build lifelong relationships
Retention is important in every industry, but losing a customer in financial services is about a lot more than someone not buying a new pair of shoes. For financial marketers, you're losing the entire downstream of financial interactions throughout your customers' lives, from their first credit card to setting up college savings accounts for their kids.
To stay relevant to your current and potential customers—anticipating their needs as they evolve and change throughout their lifetime—you need to build a deep understanding of each customer within and beyond your brand.
This is done through effective identity management for financial brands, which requires the following steps:
- Understand your customers as a segment of one. Segmented messaging becomes one-size-fits-none when segments are too big. Knowing and understanding each customer as an individual allows you to deliver relevant messages during key decision-making moments.
- Ensure privacy and compliance. Keep your digital marketing initiatives free of personally identifiable information (PII) to make sure information remains protected in all instances.
- Use customer data to strengthen your connections—and establish new ones. You can reach new and existing customers, but what else do you know about them? Complement customer data with known online activity and devices for a more complete picture of each customer.
- Personalize the customer lifecycle. With the right data, you’ll know when your customers’ needs change, and you’ll deliver relevant messages about the next financial product they’re ready for.
- Ensure efficient marketing spend. To deliver the right messages to the right people, you need an always-on approach that optimizes every interaction in real time. You can only achieve this with machine learning.
- Measure, optimize and measure again. Predetermined seasonality and product pushes don’t take the individual into account. You need a partner that can build a fluid, flexible plan and measure everything in a closed-loop environment—so there's no more guessing.
Identity management in action
We met our fictional friend Mason in our earlier posts on acquisition and onboarding.
He is 22 years old, single, makes $50k per year and lives in Seattle. He is looking forward to traveling after his recent college graduation. He has a basic savings account but no credit card. He reads the news online and checks the weather on his Android phone every morning.
His bank identified him as an ideal prospect for a credit card with travel rewards. Using identity management, they were able to deliver him messaging that offered 2x travel points on purchases and an easy online application and management interface. They reinforced these communications consistently with emails, digital ads on his favorite news sites and pop-up ads in his weather app.
The bank’s efforts to connect with Mason worked, and they acquired him as a customer. He applied for the co-branded travel card and was approved—but after a few weeks, he still hadn’t activated the card.
The bank was able to serve him new ads with messaging to activate his card to start earning points. Of course, they appeared in the channels he frequents—like his news app—and Mason ended up activating his card, thanks to these personalized onboarding efforts.
Mason will continue to need financial services throughout his life, such as financing for a car and condo, and saving for college and retirement. There are so many growth and cross-sell opportunities for the bank if the brand can show up for Mason during these life changes.
If the bank can consistently anticipate his needs and offer solutions that make the most sense for him, they’ll retain a valuable customer.
This is what retention is all about—and it’s all possible with a deep understanding of every single individual you interact with.