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).
Currently, 15% of its customers are truly engaged, Black says. "Our engagement figure fluctuates daily, but our goal is to get up to 20% next year."
BECU aims to achieve this in part through more relevant offers targeted at members by using a data service provided by Pitney Bowes Business Insight.* It also increased its use of digital communications through e-mail.
American Express is driving loyalty among its small business customers with Open Forum, an online resource and social networking hub with useful tips and advice about running a successful enterprise.
The site launched in 2007, but really took off during the downturn with traffic now between 500,000 and 1.5 million unique visits daily, says Scott Roen, VP of the Open Forum at American Express.
The company has been investing in the Open Forum community, expanding into Facebook in November with an initiative called Small Business Saturday, which encourages followers to buy items at local shops more often.
"We have pretty good integration with Facebook, Twitter, LinkedIn and Open Forum itself, and that has really helped to drive a lot of our success," he says.
Open Forum also recently launched a series of webisodes called "RE: Brand," which pairs three small companies with boutique agencies in a reality-TV style brand makeover.
"RE:Brand is essentially the core of what Open Forum has been about from the beginning," says Roen. He says they'll likely follow up with another series that matches other members.
Without revealing numbers, he says Open Forum has had a "dramatic impact on its small business consumers as far as percent lift [in purchases made on Amex cards]." He adds that they also measure the success of the program by looking at brand and loyalty metrics.
Roen notes that the company found a dramatic difference in results between those engaged with Open Forum and those who are not. Still, despite the success of Open Forum, Roen says the company has not used the site for behavioral targeting of ads.
"We don't think that's the right approach now," he says. "Open Forum isn't about us, it's about trying to facilitate the conversation and really enable small business owners."
*CLARIFICATION: An earlier version of this article referenced Pitney Bowes as BECU's service provider. It was in fact Pitney Bowes Business Insight, a division of Pitney Bowes.