For most banks, acting on the personalization opportunity requires a major change in mindset. Once they set this priority, they commit to treating customers as individuals at every stage of the relationship. Their success will depend on a banking team’s ability to read the data and act on it, showing customers that they not only recognize them, they will adjust to their changing needs.
To successfully personalize in 2019 and beyond, banks need to undergo a sea change — organization-wide — of acceptance and commitment to act on three key tenets:
- The value of the current customer exceeds the value of the next new customer.
- Customers aren't built on a quarterly lifecycle.
- Customers deserve their own set of initiatives focused on relevant engagement that meets their needs.
1. The value of the current customer exceeds the value of the next new customer.
Traditionally, banks have focused on acquiring new customers as a primary growth strategy. But the rules have changed. Now, the smart money includes deepening customer relationships, being more relevant, being more engaged, and driving more reasons to bank with them.
Like attracting deposits.
With so many financial institutions completely or mostly loaned out on deposits, the pendulum has swung from finding loans to finding deposits to make those loans. The hunt is on for new-customer deposits, starting from scratch: get the customers in, onboard them, capture deposits, ramp up the relationship, then keep re-firing. And they still won’t have built up the trust that the bank could have established with existing customers — customers that could open an account tomorrow with money they move from another bank.
Loyalty takes time and effort to nurture, but it is a cheaper and smarter investment. If you’ve focused on their needs and won their trust, it is easier to expand and deepen the relationship. If you treat them like they're a new customer, blind to their needs, they will show you no loyalty. The surest route to success is to be connected, to be personal, to understand and predict customer needs so that you know what you're supposed to drive. What's relevant for that person?
2. Customers aren't built on a quarterly lifecycle.
Today, financial institutions build marketing plans and initiatives with a quarterly mindset. This approach only delivers personalization if the customer’s need happens to line up with the bank’s quarterly marketing effort. Do you want to service your customers’ needs or are you married to your quarterly plan? If I need a CD, but you are pushing savings products in Q1, which is more important to you?
At the most basic level, you need to split your new-customer acquisition marketing efforts with your existing customer engagement initiatives. Personalization is when you line up what you deliver with customer needs, not the opposite.
We need to interpret data with enough foresight to become relevant in the window of customer need — and banking opportunity. If we can deliver the message in that window, intentionally addressing that need, then we’ve accomplished, at least, some basic level of personalization. Right now, unlike such players as Amazon, banks are missing many of those engagement opportunities.
3. Customers deserve their own set of initiatives focused on relevant engagement that meets their needs.
There are two ways to grow banks’ portfolio of customer relationships:
First, they can blast everybody, and hope to call it a win despite all the waste. Gradually, customers realize that only a small percentage of the messages they receive mean something to them, so they pay less attention with every blast. All that irrelevance erodes confidence that the bank understands — or cares about — their needs. Every mis-targeted message decays customer trust — trust the bank may need later when trying to make a sale. Nobody expects to bat 100%, but banks need to at least show they recognize their customers. Too many HELOC offers go to people who don’t own homes or car loans to people that purchased a new vehicle two months ago. In these cases, you have put a spotlight on just how little you know about your customer. Ignorance breeds irrelevance.
But banks have all the data they need to be more targeted and connected than that. They know so much about their customers, just by virtue of that relationship, that to ignore that data shows a lack of caring and a definite lack of personalization.
And that is the second, more powerful way to grow the customer portfolio — personalization.
Banks must be able to see the need, respond to the need, and do their best to be part of the conversation. They’re not going to win every deal this way; it's like a sales funnel. They must find the right targets, make their best pitch, keep talking in their terms. If they keep it up, they create a lasting impact.
Personalization has been shown to have a cumulative effect. The more meaningful the bank is to the customer, the more meaningful the customer is to the bank. Being part of the conversation, making that connection time and time again, is ultimately the most important aspect of personalization — banks using the data in front of them to understand what customers want and how banks can help them get it. That is where financial institutions can build long term trust, long term connectivity, and ultimately grow a mutually profitable relationship.
Making it Happen
In the banking world, the kind of overhaul we’ve described isn’t easy, but it is critical. We are facing a time where financial institutions don’t just compete with other banks or credit unions. Community banks and credit unions may not have larger banks’ teams of analysts, but they are more nimble and can speed up the process. Large or small, financial institutions can kick-start the process with consumable events like utilizing the data to optimize deposit cross-selling. Or driving the electronic behavior of customers who are underperforming in different product sets. These actions don’t require a 25-person project team and a lengthy committee process. But they do require a commitment to the customer you already have.
As financial institutions are increasingly being forced to recognize, the personalization opportunity is there. 2019 is the time to act on it. These actions don’t require a 25-person project team and a lengthy committee process. But they do require a commitment to the customer you already have.
As financial institutions are increasingly being forced to recognize, the personalization opportunity is there. 2019 is the time to act on it.
Tyson Nargassans is CEO and founder of Saylent, providing financial institutions with data analytics software and services that improve profitability and product innovation by delivering smarter, deeper, actionable insights on the financial behaviors of consumers and businesses.