I’ve got a problem with much of today’s bank marketing. Instead of building loyalty and differentiating the brand, too many initiatives are geared to acquiring new accounts at any cost.
It’s Not Easy Being a Bank
Today, banks face serious headwinds. We’ve seen multiple bank failures in recent weeks. There’s a lingering perception that banks helped cause the global financial crisis but escaped punishment more severe than paying fines. One of the longest established banks, Wells Fargo, has suffered from multiple scandals involving mismanagement and illegal activity.
In the most recent Axios Harris corporate reputation poll, only four banks made the list of the top 100 firms. Just one, JPMorgan Chase, was in the top half, squeaking in at #48. Wells Fargo came in at #92… below Uber and My Pillow!
The same survey showed banks are also facing trust issues. The top two firms trusted by people to keep their data private were tech firms, Apple and Amazon, not banks. While some bank brands ranked well for trust, it’s significant they were behind a pair of tech firms at a time when trust in technology brands has declined.
Changing Bank Competition
To compound the problems faced by bank marketers, competition for customers is heating up. Challenger banks, fintech firms, and even tech firms now offer products and services previously only available from traditional banks.
How Banks Acquire Customers
My biggest complaint about bank marketing is the over-reliance on attracting new customers with bribes.
The incentives offered for new accounts often exceed $500, and one I saw recently offered $3,000! This may work in the short term, but is it really the best approach?
While I’m sure the banks making these offers have data that shows they will recoup the lavish payouts over time, cash incentives don’t demonstrate much creativity. Furthermore, they don’t align new customers with the brand. If two banks offer a customer incentives of, say, $500 for one and $700 for the other, will the customer choose the preferred brand or the bigger payout?
Customer Loyalty
Banks, like every other company, want loyal customers. Loyal customers are the most profitable, don’t have ongoing acquisition costs, and are more likely to recommend the brand to others.
All loyal customers aren’t equal, though. Some customers stay with a brand because of switching costs. To change banks, a customer must expend effort to set up automatic payments, payroll deposits, and so on. Unless customers are seriously upset, they tend to stay with their existing relationship.
True loyalty, though, is emotional. It’s created by multiple factors. A customer can have positive beliefs about the brand. It’s likable and/or trustworthy. There may be a human connection, such as occurs at a bank branch.
Surprisingly, the most important loyalty driver may be minimizing customer effort. Gartner research shows a low-effort customer experience is key to building loyalty.
Focus on Product
One way banks can attract and keep customers is to focus on the product itself. I looked at a basic savings account and found that two big brands, JP Morgan Chase and Bank of America, were offering an annual return of 0.01%. Wells Fargo did marginally better, with a rate of 0.15%. All of these accounts were subject to fees that would more than offset the earned interest if specific conditions and/or minimums weren’t met.
Apple, meanwhile, just began offering a savings account with an annual rate of 4.15% with no fees or minimums. That’s more than 400 times higher than the big banks.
What will this do to trust in the big bank brands? They are telling their customers, in essence, “We can only afford to pay you 0.01% annually.” Even that minimal rate has conditions. Meanwhile, one of the most trusted brands on the planet is telling customers they will pay a massively higher rate… without all the fine print. A bank customer who discovers they have been receiving a too-low interest rate for years might well react angrily.
Focus on Customer Experience
Not long ago, I tried to call my local branch of a big brand bank. Instead of reaching the branch, I ended up in a voice menu system. I heard about the things I could do online. I was offered a variety of options to do things like check balances by phone. On that call, I never did reach the branch – I ended up in a call center somewhere.
While this sort of service seems typical not just for banks but other businesses as well, it’s not universal or inevitable.
In Texas, Frost Bank reaches customers with a different promise: “Two rings and a human.” They are telling new and current customers that if they need to talk to a human, they can do it. Not only can they do it, but they can do it right away. Customers won’t have to wade through voice menu options that “have recently changed.” They won’t have to be told how they can get their account information online or by phone. They will get a human within two rings.
This might sound expensive, but it doesn’t preclude Frost from paying interest on savings accounts. In fact, their basic account yields a full 1% annually. That’s not a fantastic rate compared to Apple, but it’s exactly one hundred times higher than some of their big bank competitors.
Offering an easier, lower friction customer experience attracts and keeps customers.
Contrasting Loyalty
The choices bank marketers make will affect not just customer acquisition but long term loyalty and word of mouth. Here are three rhetorical questions:
Which product will yield more loyal customers?
- Paying a nominal 0.01% interest rate.
- Paying a market interest rate (say, 4%) .
Which type of account will yield more loyal customers?
- An account with lots of fine print about minimums and possible fees.
- An account with no fees or minimums and simple terms.
Which customer acquisition method will yield higher loyalty?
- Paying a cash incentive to new customers.
- Attracting customers who appreciate an easy, personal experience.
In each case, clearly, the second option will build more trust and more loyalty.
Change Is Hard
Changing an ingrained way of doing business is difficult, but I have two recommendations for bank marketers:
Strive for a Frictionless Experience
Making things easier for your customers pays long-term loyalty dividends. If customers want to talk to a person, don’t put up roadblocks – make it easy.
It’s equally important to make your digital experience seamless. Both mobile apps and websites should be simple and easy to use for every customer. Often, the customers who call your branch or call center do so only after trying to do something themselves unsuccessfully. Either what they wanted to do was impossible or they couldn’t figure out how to do it. Most customers will solve problems on their own if it’s easy enough.
In short, make everything easy for your customers. A friction audit may discover aspects of your customer experience that are more effortful for some customers than you realize.
Put the Customer at the Center
Amazon is one of the most successful companies in history, and the key to that success has been their operating philosophy since founding: “Put the customer at the center of everything.”
Companies of all kinds, not just banks, often make tradeoffs that are good for operations but don’t reflect customer preferences. Putting a self-service voice menu system in front of a call center queue can reduce the number of representatives needed but can also increase customer frustration if they can’t bypass it.
Putting your customer at the center of every decision will never lead you astray.
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