Savvy Banks Market Like Retailers

Banks can learn a lot from casinos. And department stores. And e-commerce merchants. Have I lost you?

When it comes to creating a digitally driven, omnichannel banking experience that can be personalized for each customer, many banks remain mired in a 20th-century mind-set. Translation? They are lagging behind retailers and—more importantly—their more savvy financial industry counterparts in attracting and cultivating loyal customers.

According to a recent retail banking study commissioned by IBM, only 30 percent of banks have an integrated marketing strategy that includes digital elements—and a third of them have no digital strategy at all. They are ignoring the needs of today's on-demand consumers, who expect every shopping experience to be as robust, pristine, and simple as what they are getting from both online and brick-and-mortar retailers. And banks that don't change their ways risk extinction.

Going Digital Can Feel Daunting

Even banks that see the need to update their digital capabilities by recharging their IT batteries have been slow to move, for a variety of understandable reasons. Perhaps the most obvious is the sheer scale of such a seemingly Sisyphean endeavor. Often, financial institutions are hamstrung by legacy systems that are large, complicated, and unwieldy, making the cost of the resources required to tackle an overhaul—in technology and human expertise—quite large and unattractive.

Furthermore, some banks have typically applied a marketing-to-the-masses, noncustomized approach to curating products and services—as well as campaigns to promote them. That traditional methodology of treating customers similarly may have worked for many decades, but today's consumer—especially up-and-coming Millennials—expect personalized efforts that acknowledge their specific needs and preferences. Banks can only capitalize on those customers through finely tuned, digitally focused, Big Data–driven marketing.

Finally, and a corollary to the previous point, most financial institutions lack expertise in this area. Banks of all sizes have typically not tapped into the emerging pool of data scientists and digital marketers necessary to understand, create, and implement digitally driven customer experiences. That's why many are now looking to retail and other industries to find the right talent for the job.

A Bevy of Benefits

All that said, an increasing number of banks—especially smaller niche institutions that have long focused on personal banking as a differentiator—are pursuing more personalized, omnichannel marketing. They, too, are eliciting the envy of their peers because the benefits of such an approach can be immediate—and quite tangible.

By eliminating banking's traditional one-size-fits-all product and service silos, they are better able to deliver a truly individualized experience across all marketing channels. Not surprisingly, banks who manage to deliver on the promise of digital are seeing customer satisfaction scores soar.

And higher customer satisfaction leads to revenue growth. A happy customer is more likely to sample new products and services, and that means more deposits and income in a hypercompetitive marketplace. 

Keeping customers happy every time they engage with the bank has always been important. However, it is especially critical now, as today's consumer is rarely wed to a brand forever. But young Millennials, the least loyal of modern consumers, will stay with a brand—even a bank—if the customer experience is consistently satisfying and tailored to their needs. And that may make churn reduction the biggest benefit of the omnichannel experience.

A loyal customer, especially one who is digitally engaged through social media and other communications channels, is valuable in other ways, too. According to the J.D. Power 2015 U.S. Retail Banking Satisfaction Study, highly satisfied Millennial customers are five times more likely to say they "definitely will" recommend their bank than those with medium or low satisfaction scores. Plus, a third of Millennials will visit blogs to search for unfiltered commentary about a brand before making a purchase.

Clearly, there's nothing like free word-of-mouth marketing—as long as it's positive.

One Data-Driven Step at a Time

So, where to begin? Few executives with P&L responsibilities will have the appetite for a wholesale IT and marketing overhaul. Thus, it's best to start with a simple, narrowly defined project that can be implemented quickly. A portion of the savings gained or revenues realized can help fund the next digitally inclined project.

One example is Mexican bank Banorte, which has redesigned its IT systems to gain insights into the banking behaviors of specific customers. This has enabled Banorte to regain the feel of the community-oriented institution it once was before rapidly expanding its number of branches in recent years.

Of course, it behooves any enterprise-wide marketing initiative to be fully integrated with other programs and platforms. Even if on just a limited basis to begin with, the blending of digital and conventional marketing channels will help ensure a desirable experience across every product, service and marketing channel—which is exactly what consumers expect from merchants.

Digging deeper into existing data is a smart place to begin. Banks, credit card companies, and other financial institutions are awash in data—they just haven't been optimizing their use of it. By working harder to glean insights from existing data, they can begin to take a more targeted and personalized approach to marketing.

Another idea is for banks to get more bang for their investment bucks. Most institutions are already pouring money into IT infrastructure upgrades, due in large part to regulatory compliance mandates related to security, privacy, and other issues. Adding some heightened digital capabilities to the upgrade is a savvy use of IT investment budgets.

Today's on-demand consumer expects all businesses with an online and/or mobile presence to cater to his or her particular needs. Banks that understand that dynamic, and are willing to go beyond traditional approaches, can create digitally driven, omnichannel, personalized banking experiences that will keep customers coming back for more. Just like a retailer.

Sri Chawla is associate partner, Banking and Payments Leader, Commerce Consulting at IBM. She has over 20 years of consulting and industry experience in the financial services sector.  

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