Customer attrition has become one of the top issues for banks. It costs significantly more to acquire new customers than retain existing ones, and it costs far more to re-acquire defected customers. In fact, several empirical studies and models have proven that attrition remains one of the biggest destructors of enterprise value for banks and other consumer intensive companies. Attrition has an equal or greater impact on Customer Lifetime Value (CLTV) when compared to one of the most regarded KPI’s (Key Performance Indicator) such as ARPU (Average Revenue Per User).
In a recent study, banking customers were asked which quality is most important when selecting a bank, 42% said customer service. That is well above the other options chosen – 24% bank location, 22% efficient online services and 11% financial rates/loans. In today’s networked economy, every poor customer experience, or seemingly unfair fee, can snowball into a shift in customer sentiment, risk of attrition and major revenue loss. A recent Forbes magazine article on “Top 10 Reasons Why CEO’s Don’t Understand their Customers” states — “C-level executives estimated that the lack of positive, consistent and brand-relevant customer experience could cause them to lose out on a staggering 20% in annual revenue”. We are talking about hundreds of millions of dollars in revenues lost for any sizable bank.
On the other hand, over 40% of leading banks’ customers possesses only one banking product. This segment represents both an opportunity and a risk. Customers with only one product are an opportunity if the banks understand their needs, their sentiments, behavior, and preferences to be able to target them with very personalized cross-sell and up-sell marketing offers. The bank’s ability to move them to multi-product customers not only increases revenues but also reduces their propensity to switch to a competitor. At the same time, customers with only one product are a risk since their barrier to switch is low. Essentially, understanding your customer’s needs, preferences, sentiments, behavior and propensity to switch has become paramount for banks and their fight against attrition.
Also take into consideration technology companies that are becoming greater competition. Google Wallet, Iphone Apple Pay, PayPal and more are offering services that take the transaction and money out of the bank’s hands. They are companies that put the customer at the center of their equation, offering more personal, fast, intuitive and relevant services to their customers.
However, banks have more data on their customers than these competitors. They need to make use of that data to build better relationships, in order to grow the customer experience and gain greater CLTV. Many banks have not been able to wrap their arms around what to do with that data to gain better customer relationships. Bank limitations include:
There is a lot of incomplete information about the customer that is being generated across multiple channels and it becomes very difficult to account for this incomplete information and turn it into meaningful insights.
Big Data and machine learning technologies can help you solve these challenges and allows you to leverage both structured and unstructured data from multiple channels such as bank visits, customer call logs, web interactions, transactional data such as credit card histories, and social media interactions. They allow you tap into all of your data, in real time, providing clear insight into early warning signals or customer sentiments to insure timely retention offers and preservation of enterprise value. Now you can eliminate the data silos, connect the dots of a customer’s interactions across multiple channels and build a comprehensive holistic customer profile (Customer DNA) to gain a real-time, trending and complete customer view.
Know your customers better, understand their Customer DNA so you can act on a potential attrition well before your customer considers it. Potential attrition predictors found in a Customer DNA include:
Once you have a holistic view of your customers, and their interactions with the bank, you can begin to identify the drivers of attrition and execute retention campaigns long before a real attrition issue can begin.
It is time to focus on your customer relationships. Increasing engagement with appropriate messages, products, and services tailored to each of your customers, is what they have come to expect. Now you need to deliver.
Click on the resources below for more information on reducing attrition at your bank today!
Learn how you can know each of your customers at the DNA level to begin to better address attrition today.
NGDATA helps data-rich companies in financial services, media/publishing and telecom to drive connected experiences. Our next generation customer data platform, Lily Enterprise™, puts people at the center of every business via Lily’s Customer DNA, which continuously learns from behavior to deliver compelling experiences.Learn More...