By Ryan Harbry
Customer loyalty is a big deal: repeat revenue, predictable profitability, sustainable customer satisfaction, just to name a few. So, how then does a banking organization get a higher percentage of customers to frequent them again and again? Choosing to remain faithful even when there are so many other places offering the same thing?
Think about it. What keeps you loyal to your airline, your credit card, or your preferred coffee shop? Each of these industries has an abundance of competition, plus the product or service they provide is commoditized.
Maybe a family member works there. Maybe you prefer to support local businesses. Many reasons could be behind the choice to stick with one business over another. However, I would suggest that these represent only the tip of the iceberg. Underneath the surface there is another reason that far outweighs everything else to a large degree – rewards.
Rewards engage the consumer with value, enticing them into an experience, encouraging and rewarding behavior in a way that has a meaningful psychological impact.
For example, I fly Delta. Apart from their rewards program, I would otherwise choose Southwest (who seems more fun and less stuffy to me) or comb the internet for the cheapest flight I could find. However their rewards, which I have spent years investing in, have me so locked into the company that I never look elsewhere. This exact scenario also plays itself out in my life regarding Hilton Hotels. I just automatically seek them out as I’m a travelin' man, after all.
Starbuck has me returning again and again due to their rewards program. I otherwise would be inclined to buy my cup of Joe from somewhere more local. Nevertheless my Starbucks App hs so many reward stars… an entire galaxy exists.
If we're honest, community financial institutions are late to the game when it comes to offering relevant rewards. They should consider implementing rewards for two major reasons: to attract, engage, and retain customers and to minimize attrition of your most profitable customers. This is important because, on average, the top 10% of customers command approximately two-thirds of a financial institution's overall relationships and revenue.
"With big relationships come big rewards" is a message that will ring loudly in the ears of your financial institution’s account holders. This strategy will increase engagement, enhance and differentiate their user experience, and keep a higher percentage of customers doing business with your institution, knowing that there exists little loyalty in financial services.
Don't bank on the outdated belief that since switching institutions is hard, more people will lazily stay and not pursue other banking relationships. Today, opening an account elsewhere, especially with very large banks, is easier than ever (go try it at banks like Chase or Capital One). Their technology and marketing/acquisition budget requires community financial institutions invest in rewards to grow loyalty, hopefully at levels similar to airlines, hotels and coffee shops.
Ryan Harbry is regional director of sales and consulting at StrategyCorps. For more information about how your financial institution can generate replacement revenue to subsidize unprofitable relationships, connect with him on LinkedIn, send him an email, or give him a call at 404.819.1438.