Customer Loyalty in Banks – Adopting the right strategies to satisfy and retain customers

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Customer Loyalty/Excellence has been a buzzword for a long time now with Banks. In the current tough economic environment, this has become even more imperative to retain the good customers and proper handling of customers becomes even more important to business success. It is always cost effective to have and grow an existing customer who is profitable than getting a new one. With institutions going through cost cutting measures due to financial pressures it becomes more important to closely monitor customer experience. Increasing the share in the customer’s wallet is the new mantra.

Banks loose customers either through voluntary attrition or involuntary attrition. Involuntary attrition has not been of a concern as this is one way to weed out the customers who may not be adding value to the organization either by way of spends or profitability. It is that silent attrition of the good customer which is really bothering the banks and the reason for this can be either due to not having proper monitoring tools to monitor customer grievance, lack of employee motivation leading to deficient service, issues in fees and charges etc. So it becomes even more important to have the right loyalty programs with all the monitoring tools and processes in place.

Couple of areas but not limited to have been discussed which can lead to an organization achieving its goals in managing customer expectation and enhanced loyalty.

360 view of the customer

Customers have multiple relationships with a bank and expect to be treated the same across the different business lines/channels. They expect consistent service across all departments, from marketing to sales, operations, finance, and other business. So it makes sense to have front office executives, call centre agents, sales staff to have access to a single database which gives them a single view of the customer across the different business lines. This will lead to customer being treated on par across the different channels and will need upgrade to the systems which operates in siloed approach to one with a consolidated view. Customers expect the same level of service across all the touch points and expect a fair and transparent treatment. Commitment from management in this regard and a realignment of processes and systems around the customer will be necessary.

Customer feedback

Take customer feedback across the channels as a blessing in disguise to improve any lacuna in service / product. Structured / Unstructured feedback using various forums should be encouraged as customers may not tend to give direct feedback but may use various social media networks, mails, discussion forums etc to highlight issues. Use technology as an enabler to collate data and derive the right metrics to understand customer issues and use them in improving the service which will work in enhancing the loyalty. This will lead to customers to be brand ambassadors of the institution and will go a long way in enhancing the brand value and increase in sales and corresponding profitability.
Web 2.0 can help financial services industries in a major way in this area as new product/service initiatives can be put up for reviews before actual launch as it enables social networking. It enables customers to share a platform for exchange of views/recommendations about the new product innovations/services and could provide inputs regarding areas of services to be improved upon.

Customer need

Customers tend to be finicky in what they want from the product and understanding their spending pattern plays an important role in customer loyalty. Customers expect institutions to know what they buy, where they buy and when they buy and then target the right product/offer at the right time. Build opportunities for repeat business. It is also an opportunity to strengthen relationship to help in cross sell/up sell. Existing customer having more products from the institution tend to stay loyal and are more referencable leading to newer customer acquisition at lower costs. Using technology (analytics) to monitor what customers request most and offer products or services that compliment other purchases will lead towards customer loyalty.

Relationship based Pricing

Existing customers feel that they are being ignored by banks when it comes to pricing as competitive rates are being offered to new customers only. This forces banks to have a pricing strategy. Customers who have multiple products with Banks across different lines of business (LOBs) expect transparency in product pricing. They tend to stay loyal and this loyalty needs to be taken care of. Relationship based pricing (RBP) is a new mantra which institutions are now trying to get into. RBP helps in evaluating the total income earned from the customer across all the LOBs and work out mutually profitable pricing. RBP helps banks to treat each customer differently, based on the overall relationship value, with innovative pricing strategies across enterprise. Banks can ensure that the benefits and rewards are provided based on total value the customer provides thereby enriching the customer loyalty.

Employee motivation

Employee morale and motivation plays an important role in customer loyalty. A demoralized employee tends not to listen to customer and in turn can turn away a good customer off. Empowerment of people, investment in soft skill/product and other relevant trainings and right technology to monitor the results need to be employed. Incentive schemes along with right compensation across the spectrum of staff from front office to marketing leading to documented evidence of improvement in customer retention and satisfaction leads to long term profitability and loyalty. This will also require management buy-in and commitment. In the long term loyal and motivated employees lead to more business and satisfied customer. Banks need to strive to make each employee a brand ambassador for the Bank.
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Rewards Management

Customers expect banks to be flexible and willing to change while offering rewards. Listening to them will go a long way in knowing what is wanted and what is not. Outdated products/service as a reward will not go down well with customers and addition of newer loyalty partners with innovative ideas will be welcome. Innovative ways of redeeming rewards like online redemption, redemption against purchases etc are the ones which will be liked. Proper segmentation of customers is required so that the right product/reward is targeted. Loyalty programs need to be constantly evolving based on the market conditions and technology needs to be used extensively in this regard.

Profitable and cost effective Customer Relationship Management has become a key strategic area with an increased focus on this issue by top management of Banks. The opportunity for banks has never been greater to assume a more customer centric responsibility. Continuous use of customer feedback, tuning loyalty programs, improving employee morale along with the relevant Enterprise wide technology platform to monitor all these will ensure in improving customer relationships with the active participation of management across the organizational functions. Management buy-in and participation across the different level in the hierarchy is important in improving customer relationships, helping to deepen brand loyalty and increase customer lifetime value. In the end loyalty equals increasing profits and a strong competitive edge which is the order of the day. Ultimately, best strategies in customer & loyalty management reflect in higher customer satisfaction indices and improved bottom line for the Bank.

Disclosure: The opinions expressed herein are my own and do not reflect those of the company

Girish P B
TCS
Girish is a Consultant with expertise in Retail Banking(Cards & Loans) and has extensively worked in the areas of People Management, Operational Management , Contact Centre Management-Voice & Non-Voice, Client Servicing and Relationship Management.

1 COMMENT

  1. I like how employee motivation impacts the customer loyalty. Most companies spend less money on this…

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