How to gain and retain customers in the ‘next normal’

By Stephenie Williams

The massive economic harm inflicted by the coronavirus lockdowns on consumer finances has been stunning. Months of frantic financial uncertainty have prompted consumers to conduct a form of “service relationship triage,” in which they evaluate the relationships that truly provide value to them, and which they will leave behind in their transition to economic recovery and financial well-being.

The sudden shift in consumer attitudes and behavior has raised the broader question of what this means for financial institutions, leading them to the pursuit of critical answers.

Some questions can be answered more definitively than others. But it is very clear that in order to compete for and retain the newly enlightened and thoughtful consumer, financial institutions must focus their attention on providing the loans that will help them restore lifestyles to pre-pandemic levels, as well as assist them in building a stronger cushion of future savings to be better prepared for the next unexpected financial crisis.

But there is a brand new hurdle to overcome. According to Lightico’s “Customer Survey: Impact of COVID-19 on Consumer Banking,” consumers are hesitant to return to bank branches. A whopping 82% of customers are concerned about going into their bank. That, of course, means fewer of the face-to-face interactions that are vital to building successful banking relationships. Frustrating, certainly.

To do nothing, of course, is not an option. A proven and practical strategy for overcoming this hurdle is to deliver a cross-channel brand experience that is compelling, consistent and continuous.

 

A renewed dedication to savings

Recent studies show that most Americans lack savings to pay for emergencies:

  • 38% of consumers had less than $1,000 saved to cover expenses in the event of a job loss (GoBankingRates survey)
  • 65% of younger millennials (ages 18 to 24) can’t cover six months’ worth of living expenses, followed by 60% of older millennials (ages 25 to 34) (GoBankingRates)
  • Only 27% had $10,000 or more in savings (GoBankingRates)
  • Average savings is $8,863 (Federal Reserve data, 2019)

The impact of those numbers, no doubt, has been magnified by the events of 2020. It is not far-fetched to assume that consumers will seek advice on how to increase their savings. Financial institutions that choose a consultative approach by taking the time to find out exactly what their savings goals are and helping to achieve them, tend to build lasting and meaningful relationships with greater results.

Growing core deposits: A three-pronged approach

Now more than ever, low-cost deposit acquisition should be every financial institution’s No. 1 priority. Having a sustainable surplus of core deposits is vital in a lending environment that is more challenging and competitive than ever. The three-pronged approach, with equal weight given to each part, includes:

1Attract new money from new customers
Be clear on who you are targeting and saturate the market with a highly visible, omnichannel marketing approach. In light of the enormous levels of email clutter caused by the response to the coronavirus, we recommend a campaign that focuses on an old standard — direct mail.

Then, measure the response and adjust the plan to provide your audience with more relevant content. To achieve precision targeting, leverage consumer profiles and data analytics to uncover affluent prospects with high balances and attract them with deposit incentive offers that increase response rates. Conversely, you can drive fee income by targeting customers who use their debit cards frequently.

Once you have perfected your strategy, do not make the mistake of going silent. Engage only sporadically and you risk losing prospects to the growing legion of swooping competitors, both traditional and disruptive.

2Grow deposit balances from existing customers
We all know the cost to acquire exceeds the cost to retain, making it measurably important to never take the needs of your existing customer base for granted, or they are likely to leave. An effective strategy to deepen existing relationships is to identify low-service customers and aggressively cross-sell them new products and services.

Take a generational approach to how you engage your customers. For instance, educate younger segments on the value of saving (a challenge for this generation) — and show them how. And for your more mature segments, encourage customers to consolidate and centrally manage their financial assets.

3Retain your most at-risk customers
Among the reasons customers choose to switch financial institutions is that, if they have a single service, it is relatively easy to go for the better rate. Understanding the numbers behind attrition provides you with the insight you need to gain the loyalty of at-risk, single-service rate-motivated customers.

Though it may feel counterintuitive, connecting with at-risk customers through lifestyle-based messaging, and not product-specific messaging, has proven to be an effective strategy.

Also, the importance of delivering a frictionless customer experience and making it easy to work with your institution cannot be overemphasized. Even the most stable and connected customers will consider leaving after a bad experience.

Prepare for the post-pandemic lending shift

Consumers are looking forward to getting back on their feet. And with a strong desire to quickly return to pre-pandemic lifestyles, they will soon be borrowing like never before — if not already.

While mortgage applications continue to hold steady throughout the pandemic (in the week ending May 8, purchase applications rose 10.6%), home equity lines continued their multi-year, pre-pandemic fall to levels that have caused some of the nation’s largest banks to no longer offer them.

Personal loans are also thriving. Growing at a faster rate than auto, mortgage, credit card and student loan debt, personal loans have experienced an 11% year-over-year increase from 2018, with more than 38 million accounts nationwide today.

Growing at a faster rate than auto, mortgage, credit card and student loan debt, personal loans have experienced an 11% year-over-year increase from 2018The average new auto loan worked out to a shocking $32,187 during the first quarter of 2019

Auto loans are speeding ahead. The average new auto loan worked out to a shocking $32,187 during the first quarter of 2019, according to data from Experian Automotive, and 8% of respondents in an Experian survey conducted during the COVID-19 crisis said they still planned to apply for a new auto loan in the next six months.

Not surprisingly, effective loan marketing strategies parallel those of deposit acquisition: acquire, grow, and retain. Sending the right offer to the right customer at the right time increases the likelihood of response.

Consider implementing a single-loan, pre-approval campaign to acquire new loan customers. Grow existing relationships utilizing a credit pre-screened, multi-loan pre-approval solution that reaches existing customers through online and mobile banking. Marketing single and multiple-loan products to qualified consumers, not only increases your institution’s overall loan potential, but also lowers its cost per loan — plus, it delivers a positive customer experience.

There’s a science behind every approach.

If you want to attract, grow and retain high-value customers, you must be able to engage them on their terms. If you do it successfully, you become the resource they turn to again and again.

Stephenie Williams is the executive director of Acquisition Solutions for Harland Clarke. She has more than 20 years of experience in direct marketing, strategic planning, product management and promotions in the financial services, retail and automotive industries.