Strategies for Profitable Customer Acquisition in Banks

Customer acquisition has been one of the major challenges facing banks of late. Banks have very few profitable customers to source and many banks competing. Hence, the strategy to have the best customer on their books is making many banks to come out with innovative customer-centric acquisition strategies targeted at improving the quality but not quantity. It necessitates banks to have a proper acquisition strategy in place so that the right customer is brought into the bank’s fold. This will involve in defining who the best customer is and how to acquire them at least cost.

During acquisition of customers, it is normal practice to target the mass market in the hope that some of them will become customers without giving a thought that end of the day most of the customers may turn out to be non profitable ones. The customers were easy to acquire but expensive to maintain over a period of time. The costs associated were usually very high and a short term view of adding quantity and not quality was the motto.

Therefore, it is important to have proper analytical models to target the right profile of people who can turn out to be profitable.

Model Existing Profitable Customers

Characteristics similar to existing profitable customers in the bank can be one model to target the right prospects. These customers normally tend to spend a lot using their credit cards and also tend to keep a hefty balance in their account.

A simple example of this can be of existing customers who work for a major MNC above a particular designation and have turned out to be profitable. The aim is to target similar profile of people from that company and other similar sized companies who are in the similar line of business whom the bank feels will be profitable to have on their books. This way the bank has the option of acquiring customers whom they want and at a much lower marketing and other acquisition related costs.

Again, the mode of communication to be used with the prospective customer plays a crucial role. Customers are very sensitive to how they are being approached and this need to be handled carefully. This will ensure the bank in getting the type of customer it wants and maybe at lower costs than that of mass marketing and direct marketing where costs can be high with no guarantee of conversion and getting profitable customers.

Referrals from Current Customers

Getting referrals from an existing profitable customer is another good way to reach out similar profile people. Word-of-mouth promotion, whether positive or negative, is widely recognized as a major factor in marketing banks products. Banks would like to target referrals from their existing profitable customers and an example of this can be targeting a referral campaign for set of customers who have been consistently profitable and come from a similar background with interests in game of golf. Referrals from these customers will most likely be from the similar segment. This can also be supplemented by sponsoring certain golf events and building awareness of the brand.

All referrals may not be converts, but getting to talk/mail to that segment of customer which the bank wishes to target is critical. These potential customers may turn out to be profitable ones and need to be handled in a careful way. The acquisition costs for these customers will be low when compared to normal acquisition. The customer who has referred can also be rewarded for referring customers and this goes a long way in building brand/product loyalty without affecting the total acquisition cost. While doing targeted referrals care should be done taken to see that it does not put off their existing customers who may not have been asked for a referral and needs to be handled tactfully.

Needs-Based Marketing

During the targeted marketing care to be taken to see that the right product/pricing strategy is adopted. Products from different banks look almost similar and it is important to see that the customer sees value in going for the bank’s product. Pricing may not be the only differentiator as customers have their own likes and dislikes. Some of them will be keen on having rewards, others airlines miles, some membership to golf clubs, some others accounts which do not charge overdraft fees etc. So targeted marketing based on customer needs plays a very critical role.

Existing bank customers also can turn out to be excellent acquisition targets for newer products if their needs can be understood. This entails not actually getting new customers but in a way creating value to the customer by providing timely solutions to their requirements. Banks have a greater insight into these customers’ needs and can deliver appealing products with lesser acquisition costs and enhance customer loyalty as well.

For example if we look at a customer who has a wealth management relationship with the bank, they are high net worth individuals and would expect value out of the relationship. These customers are the crème of the population and will be wooed by all sundry to have relationship with them. Building a trusting relationship is necessary to develop future value propositions. Customers will be looking for solutions about their investment/spending strategies and it is imperative that a continuous dialog is maintained to create value and newer product sales to the customer.

So understanding the customer need and selling the right product at the right time is critical. This will involve looking at customer not from a product silo perspective but as a single customer with multiple products spread across the different streams. Banks will need an integrated system to allow a common view of customers across the base and should have relevant data to cull out the profitability. The risks involved in this are minimal with a known customer and will help in deepening relationship with current customer.

Staff Training

Last but not the least, acquiring a customer is a team game and the entire staff from top to bottom plays an important role in some or other aspect of the customer acquisition value chain. Here training plays an important role.

When a prospective customer comes into the bank or is approached by the sales staff, it is critical that the employees who will be dealing with those prospects are well trained. Proper training programs need to be devised to cover the entire spectrum of the banks staff with special emphasis given to the actual employees who will deal at the front end. Product functionality along with pricing and what value it can add to the customer needs to form the basis of the training plan. Added stress on soft skills along with how to handle customer objections and competition can also be part of the training.

Multi-Channel Insight

Banks acquiring customers using multiple channels over a period of time would have had a lot of data to see which one channel is performing better and then better it to see that the desired results are achieved to boost their revenue and return. A proper acquisition strategy should be in place to see whom to target and what product to target and how to target the same is important.

Constant interaction between teams across the bank will result in designing a winnable product which can be of benefit and add value to the customer. Customers need to see value in the relationship being built and it is responsibility of banks for value creation for a profitable relationship. The relationship with a customer is always evolving; banks need to keep in tune with the changes in the market.

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