Actionable Insights From APT's Retail Practice

Strengthening Relationships with Analytics

November 23rd, 2015 | Posted by retailblogadmin in Uncategorized

Gallup recently published a poll comparing a variety of statistics between national and community banks, which illuminates a few surprising facts. One apparent paradox is that while community banks are more successful at engaging their customers, they lag behind national banks in capturing share of wallet. While customers at national banks keep 71% of their financial products with their primary banks, customers at regional banks only keep 66%.

If these statistics were referencing the growth in new customer acquisitions or average total margin per product, then they would make sense. National banks are able to provide a higher level of convenience to attract new customers and generate other operational efficiencies through their scale. However, community banks have a distinct advantage in their ability to emphasize personal relationships and high-quality service to their customers. In fact, according to the American Consumer Satisfaction Index, regional banks score much higher than national banks in terms of customer satisfaction.  Why then, do customers not reciprocate this loyalty by purchasing more products at their primary regional bank, given that they’re already more engaged?

There are probably a few reasons for this discrepancy, but one way community banks can strategically address the issue is by more effectively using their customer data to anticipate customers’ needs. Banks of all sizes collect similar data on their customers, but national banks more effectively utilize this information to drive share of wallet. Banks that smartly leverage this data are able to tailor their offering and predict their customers’ needs in a way that a longstanding relationship cannot always achieve on its own.

Community banks should focus on enhancing the personal relationships with their customers by committing to a strategy that actively seeks to leverage insights from existing customer information.  Such a plan should include the following elements:

  • Leverage customer data to increase cross-sell: Customers will naturally respond differently to various marketing tactics and channels of communication. By understanding which customer characteristics (e.g. tenure, balance, in-branch transaction history) correspond with sales of certain products, banks can determine the best suggested products and mix of outreach for each customer to maximize lifetime value.
  • Incorporate omnichannel data: As more customers move to online channels, regional banks need to understand the effects of their programs across all relevant channels. For instance, a bank might deploy display ads to promote credit cards, but if the ads don’t generate sufficient clicks or conversions, the marketing team might deem the program unsuccessful. However, if they were to measure the impact across channels, they might find that customers who saw the ad ended up signing up for the card in the branch.
  • Test as much as possible: Community banks should strive to employ the scientific method to reduce the risk of innovation. Testing can separate out results directly attributable to a new program from the “noise” introduced by other initiatives, changes in the economy, competitor actions, or natural variations in customer behavior. For instance, if a bank remodeled a branch and saw a corresponding 5% rise in profits, a rigorous testing method clarifies whether that increase was directly caused by the remodel, or if something else accounted for the positive impact. Being armed with this information is vital to implementing successful rollout strategies for high-stakes initiatives.

These tips, combined with the strong relationships that regional and community banks already have with their customers, can only build customer loyalty and improve the bank’s positioning in their customers’ wallets.

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