Times are tough for the average consumer these days, and financial institutions are directly feeling those impacts. While banks would love to expand their customer base, it’s an expensive proposition. New customer acquisition cost banks an average of $200 per person, while the cost to retain an existing customer is a mere $20. With tighter budgets, financial institutions are looking to do more with the customers they already have.
Personalized offers are a great way for banks to demonstrate that they care about customer’s unique banking needs. And these offers also allow them to do more with the customers they already have. David Nohe, CEO of FinGoal states, “When times are tight, everybody's looking at how to do more with the customers they already have.”
As new customer acquisition becomes more difficult, customer retention and growth becomes crucial. But it’s easier to change banks than ever before. In fact, nearly 45% of Americans are looking to change banks. It’s no longer sufficient for banks to maintain customers, but they’re striving to be top of wallet for their customers. Becoming the primary financial institution (PFI) builds loyalty and drives down the possibility of their customers switching banks.
But building their share of wallet and lifetime customer value in the modern banking landscape has not proved easy. Customers are discerning and online banking makes it much easier to shop around for the best products. In fact, the average American holds 8.5 financial products.
In this market, cross selling becomes key for customer growth.
Success rates and ease of cross selling to existing customers is much more promising than marketing to new customers – nearly 50% easier, according to Forbes. In fact, PWC estimates an even higher success rate of 70% when targeting existing customers.
Although financial institutions are aware of cross selling benefits, many struggle to maximize this potential. Traditionally, banks produced marketing blasts featuring a key product generically targeting all customers. While this is an easy approach, it usually results in low conversion rates and may frustrate customers who feel misunderstood if the offers aren’t relevant.
Many financial institutions know they need to implement personalized offers across their banking experience, but less than 10% of the industry actually implemented advanced personalization technology according to the Digital Banking Report.
Meanwhile, customer frustration is only growing. As personalization scales across all areas of our daily lives, customers have come to expect personalization from their financial products. 71% percent of consumers expect companies to deliver personalized interactions, and 76% percent get frustrated when this doesn’t happen.
As financial institutions tune in to this trend, they’re looking for simple ways to incorporate personalized offers.
The newest method of cross-selling utilizes one of the most valuable assets banks hold – user data. Financial institutions sit on top of vast amounts of user data that could inform them of a user’s lifestyle, preferences, and needs, along with their current financial standing. The value of this data has long been overlooked, despite the extensive opportunities it affords.
With user transaction data alone, banks can build rich user profiles or personas that review unique customer needs and interests. These personas can inform the user experience and provide personalization across the banking platform. Personas can inform what offers your surface, when you communicate them, and tailor the images and messaging used to reach that particular user. This new approach to cross-selling is easy to personalize at scale, and allows institutions to only surface relevant offers based on the individual's circumstances.
Companies who invest more in personalization see 20 times the return on their investment. Targeted product offers result in higher conversion and increased wallet share. Not only are financial institutions satisfied with these results, but 71% of consumers prefer personalized ads, as opposed to generic offerings that don’t resonate with them. By providing personalized offers, financial institutions see increased ROI’s and higher customer satisfaction.
Take Maria, just another member at her local community bank. From her transactions, Maria’s bank found indicators that she has started a new local yoga business – a $1700 transaction at Giam Yoga Wholesale, $450 on Legal Zoom expenses, and a $1700 income from Square. Instead of presenting Maria an offer to refinance her home (when she is actually a renter) or granting her pre-approval on an auto loan (even though she just recently purchased a car in full).