Financial industry focuses on customer engagement in retention programs
Financial industry focuses on customer ?engagement in retention programs
Financial services companies are making investments in direct marketing programs that aim to boost loyalty among their customers — many of whom have become suspicious and angry with the industry for their part in the financial crisis. While some banks have publicly disclosed payback of TARP funds and launched image-restoring campaigns, loyalty in the industry continues to fall, even as other metrics rise.
For example, a J.D. Power and Associates study shows that the overall satisfaction of retail banking customers is holding steady. However, the 2010 study found customers perceived banks as being more profit- driven than customer-driven versus the prior year, says Rockwell Clancy, VP of financial services at J.D. Power and Associates.
"Customer satisfaction and perception of the brand ultimately drive what we call commitment or others call engagement," Clancy says. "The byproduct of that is advocacy and loyalty."
He also adds, "While we've seen satisfaction level off, the perception of financial services companies being 'in it for them instead of in it for me' has risen. That has definitely had a negative impact on loyalty."
Yet, from creating new rewards programs for customers struggling with their mortgage payments to cultivating relationships with specific demographic groups, financial service players are working to boost loyalty in terms of both customer retention and incremental revenue.
John Owens, head of marketing at ING Direct USA, says loyalty is "critical" in the industry "because of a lot of the products are commoditized and switching costs are relatively low. You have to create loyalty at the emotional level."
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ING Direct aims to create an emotional connection with customers through Facebook, Twitter and its "We, The Savers" blog. "A lot of companies use social media as a customer service ]channel, but we want to use it as a way to stimulate thought and conversation about saving [money]," says Owens.
Internal research shows its social media followers are three to four times more likely to have certain ING products. However, Owens says it is difficult to figure out if customers have become more engaged because they're following ING on social media or because they were already fans of the brand.
"The folks who follow us are more engaged, have more products with us and are more loyal," adds Owens.
ING has also done significant testing to determine the frequency of direct mail offers to which customers will be most receptive. "With e-mail, we find we need to keep it to no more than one contact every two weeks, and it should be something different every two weeks," says Owens. "With direct mail, we find three to four weeks is where we want to be. Anything more frequent is overwhelming, and the response rates are not as good."
As secondary players have moved more aggressively to compete against major banks, credit unions have also devoted more dollars to getting more business from existing customers.
"Banks have to follow a lot more consumer regulations now, and behave the way credit unions have always behaved," says Stephen Black, VP of marketing and community affairs for BECU, Washington's largest community credit union by assets. "So we have a great window of opportunity."
BECU is in the first year of a three-year program that aims to increase the percentage of its almost 700,000 members who are "engaged." It identifies engaged customers based on the number of products they're with (making it more likely BECU is their primary financial institution).