Bank loyalty extends beyond customer acquisition incentives

Banks do plenty to reward new customers, offering hefty cash bonuses for opening new accounts. And while cash incentives have become richer and more competitive over time, that tends to be where the rewards stop. Many industries, mainly retail and credit cards, work hard to consistently reward loyal customers with tangible, regular rewards. In banking, however, the rewards end after the point of acquisition.

Customer loyalty is the foundation of survival and success for any business. In turn, that need to increase loyalty has been a main driver of the increasing number of loyalty programs in existence. However, according to Mintel’s The Role of Loyalty in Financial Services US 2015 report, overall satisfaction – a key driver of loyalty – with financials services is low. Banks need to foster loyalty well past the acquisition incentive offer, and consider rewarding customers beyond the discounts they offer for multi-product relationships in an effort to instill greater loyalty and satisfaction.

Similar to the banking industry, loyalty programs have not proliferated in the telecom industry, but in August, Verizon introduced “Why Not Wednesday?” During the promotion, each Wednesday, the company offers its customers a new digital experience. While telecom and banking don’t seem to have much in common, they are similar in that they are both trying to sell consumers more services, rather than tangible goods, that make it difficult for customers to extricate themselves from the relationship. Verizon’s move recreates the traditional loyalty program, using it as a way to introduce new services to its customers on a regular basis. A similar program for banks might go a long way in improving satisfaction and can serve as a means to get customers into products and services that are truly beneficial to them, helping their financial lives.

58% of US consumers have not recommended financial service providers to their personal networks

Banks also have an opportunity to better use referral programs, currently used by only a handful of banks. Mintel research shows that the number of consumers who consider themselves likely to recommend their financial provider is far greater than the number who actually make a recommendation. This imbalance poses both a challenge and an opportunity. To capitalize on this, banks must find ways to encourage consumers to refer friends and family, and utilizing creative social media programs is an ideal channel in which to do this. By committing to a permanent effort to build loyalty through satisfying engagement, customers would repeat and increase their business, and more importantly, recommend the products and services to others who they can influence.

Another area of opportunity for banks is in assisting customers with debt: Millennials strapped with student loan debt, homeowners looking to take advantage of lower interest rates, or consumers looking to rein in credit card debt. Currently, banks offer specific refinancing products that fit a somewhat narrow profile. Customers that don’t fit that profile are denied the help that they need, leaving them with the impression that their bank isn’t really there to help. This forces customers to look elsewhere for help.

To overcome this, banks can capitalize on personal financial management tools to assist customers with managing and reducing their debt and overall finances. Customers could be rewarded for setting up a budget, meeting with a bank representative to create a financial plan, paying bills on time, or paying more than the minimum payment; the options are almost unlimited. Adoption of this approach by financial services could serve to reward customers for healthy financial behaviors, rather than spend behaviors, and instill loyalty in banking customers because their bank is helping them achieve their goals.

Loyalty does not develop overnight and it goes beyond a rewards program. Financial service providers that create a great customer experience will lay the foundation for strong customer loyalty. A truly great customer service experience seems to be falling short, and the new digital entrants into the industry are winning on this front. This has huge implications for the future of the industry as these new entrants gain popularity and set a new standard.

A great experience, however, means more than just excellent customer service; trust, integrity, and an understanding of a customer’s needs are all part of establishing loyalty. Customers that are satisfied with their experiences and become loyal can reward financial service providers with long-lasting relationships, repeat business, and even recommendations to their social and professional networks.

Susan Wolfe is the VP of Financial Services at Mintel Comperemedia. She focuses on the banking and investment industries, bringing over 20 years of experience in marketing and research to her role.