Changing customer behavior, more stringent regulations, newer channels enabled by innovative technology and fierce competition from new entrants all pose immense threats to banks. However, many banks are struggling to form strategies to contend with these challenges, and even those that do find that their platforms and systems limiting.
The major challenge for banks distils down to one key criterion: how to better engage with and serve customers and deepen these relationships, which ultimately leads to greater retention, sustainable revenue and improved profitability.
Also, in a market that is inundated with highly commoditized products and services, customers are increasingly demanding a personalized and relevant banking experience. To effectively foster loyal, profitable relationships, banks should consider a renewed focus on customer centricity and competitive differentiation. The ability to design and quickly roll out customized relationship-based products and meaningful reward programs have become all but mandatory.
In market situations where customers are open to change, well-informed and are able to self-select products, services and methods of consumption, loyalty programs give banks an unprecedented opportunity to engage and influence customer behavior. Furthermore, considering the customer relationship in a holistic manner, effective loyalty programs also offer considerable long-term revenue potential for the bank. In conjunction with a centralized product catalog, loyalty programs can be used to create enterprise-wide propositions that extend across lines of business.
Relationship pricing and loyalty programs can also provide a real window into a bank’s customers’ behaviour, which creates new opportunities to trial and implement tailored products and differentiated services. As customers demonstrate the desired behaviours – for example, utilizing the cheapest, most profitable product options and increasing the footprint of products they use – not only will the bank enjoy increased customer ‘stickiness‘ and wallet share, but also the behavioral data collected by the bank can be used to redesign and roll out the actual products and services, resulting in a leap in competitive advantage.
The end result is stronger customer loyalty with reduced churn, increased revenue per customer and expanded wallet share. In the future, banks that can offer differentiated product and services propositions, rewarding customers for utilizing more products or changing their behavior through relationship-based pricing and loyalty programs, will be best equipped to retain and grow revenues – mainly at the expense of those that do not.
Zafin webinar series – A ‘Sticky’ Client is a Profitable One: Loyalty’s Role in Propelling Retail Bank Revenue
By nurturing relationships with happy, profitable customers, loyalty programs are an essential component of any retail bank’s revenue enhancement toolkit.
Join us on September 4 for a one-hour webinar as our featured guests discuss emerging trends and best practices in strategic loyalty management.