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Next Best Action is the Next Best Move for Mid-Sized Banks

The focus needs to shift to what customers want to buy

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  • Written by  Mike Osborn Managing Director, digm
Next Best Action is the Next Best Move for Mid-Sized Banks

It’s no secret that banks and credit unions will need to be customer-centric to compete and, ultimately, survive. The focus needs to shift to what customers want to buy, not what financial institutions want to sell them. Financial institutions must find a balance between what is going to create value for them and what customers want and are likely to buy. Easier said than done, though, for mid-sized institutions with fewer resources than their larger counterparts. Meanwhile, they are facing these bigger competitors, plus fintechs and more demanding customers than ever before. They need to be smarter, marshalling their resources for maximum impact, one win at a time. For many, focusing on Next Best Action is their next best move.

Next Best Action

Next Best Action marketing basically flips traditional marketing, putting the customers at the center and aiming offers and actions at their individual needs in the moment. For many FSIs, particularly mid-sized institutions, this is a new way of approaching customer interaction. But it can offer a more realistic route to a better customer experience – and improved ROI – for those without a major data infrastructure powering their customer relationships. It can be done strategically with specific segments to complement – and often exceed – acquisition goals by deepening existing customer relationships.

The goal is not to replace inbound marketing but to find the balance to grow a profitable customer portfolio. To cut through the clutter and reach those customers with the message most relevant to their needs, when they need it. Using a modeling approach based on customer needs or behaviors, the FI determines the likelihood that a customer is going to have a need for a specific product. Once it is determined that the customer will likely buy, the goal is to establish the value to the bank. Using analytics, the FI sets up thresholds and assigns a certain ranking, then makes the offers, through traditional channels, direct mail, in the branch, phone calls, etc.


FI marketers looking for solid evidence that proves it works can apply it to cross-selling. Let’s say those marketers’ specific goal was to increase their cross-sell ratio from 3.5 to 4.6. This a scenario where Next Best Action really shines, pointing to the exact opportunity to match customers with products and services that best fit their needs, even before they know it’s available. These FIs can develop some simple cross-sell models, working with what they have. The more data they acquire over time, the more platforms improve, and customer satisfaction starts climbing. Meanwhile, with every win, even if they are simple, they are building a business case for senior management to invest more in data infrastructure.

Look at the efficiency of Next Best Action, compared to a new customer acquisition blitz. The cost-per-account will vary according to the type of customer, but if marketers look at that cost reduced by 20% by cross-selling, then develop a communications program that balances both, it’s a win across the board. More revenue, better ROI and a program that puts the right offers in front of people at the right time.

Both approaches are proving very successful – and manageable – for institutions with fewer internal resources to compete with bigger institutions, targeting specific segments without an organization-wide data and policy overhaul.

Action Obstacles

Given what they are up against, why aren’t more FIs of this size taking the next step to Next Best Action?

Often, the issue starts at the top. Word is, the goals are to sell home equity products, wealth management, or another service. Product-centric orders set the tone for the entire organization. The bank marketer’s performance bonus is based on the number of products sold. The importance of looking at things from the customer perspective may be generally understood, but that can be hard to reconcile when it’s tied to a paycheck or keeping a job. The key is keeping that value balance between the customer and the bank. This doesn’t need to be an all-or-nothing campaign.

Another challenge is that mid-sized FIs too often imagine the need for a fully functional customer data hub that transforms how they do business with each customer in their entire customer base. Then they consider the cost, time and resources needed to pull off this monster operation. No wonder they often just double-down on the same-old, same-old. But Next Best Action gives them more options than that; they can pull in project-specific expertise to implement this new marketing plan and show management their evidence of success.

Moving Forward

In addition to chalking up results, Next Best Action can play an important role in creating better customer experiences, which can be particularly valuable for an organization that was firing away at product and service sales to new customers, focusing more on the volume of pitches and quotas than the quality of that match with customer needs and wants.

It doesn’t take too many of those mismatches to sour a customer relationship today. Mid-sized banks aren’t just competing against other FIs, they are competing against superior targeting and customer experience anywhere customers have come to expect communications and offers tailored to their needs. They expect it and will go elsewhere if disappointed.

In the past, FIs were able to create “sticky” relationships that gave them room to breathe. No more. Competitors have consciously made it easy to leave, enticing them away one service at a time. Next Best Action is a resource-smart way to fight that attrition with offers that anticipate and deliver products and services on the customer’s terms – which are the terms that really matter now.

Mike Osborn is the managing director and founder of digm

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