Customer retention for banks: 5 ways to boost loyalty and lifetime value
It’s a well-known fact that retaining your existing customers is a more cost-effective strategy than acquiring new ones. This is especially true in the highly competitive financial sector, where customers are increasingly inclined to switch to the bank that offers the best customer experience. Holding onto existing customers isn’t just cheaper, however. Strong customer retention also comes with other big benefits, which we’ll explore in this blog post.
Read on to get insight into the significance of customer retention for banks and learn how to leverage digital experience intelligence to improve customer retention, loyalty and lifetime value (CLV).
Key takeaways
It costs less to retain existing customers than it does to attract new ones.
Long customer relationships foster brand advocacy that reduces the cost of new customer acquisition.
Loyal, happy customers are more receptive to cross-selling and up-selling opportunities.
What is customer retention for banks?
Put simply, customer retention is about making sure your banking customers keep coming back for more. An effective customer retention strategy prioritizes building a strong relationship with customers, providing exceptional service and creating value for individuals based on their behaviors and preferences. When you get these elements right for your customers, they’re much more likely to choose to stay with your bank instead of moving to a competitor.
Why is customer retention for banks so important?
There’s a close link between customer retention and customer loyalty. Someone who has chosen to be your customer for a long time is more likely to have formed a strong emotional attachment to your brand. That attachment is the result of positive customer experiences and satisfaction; in a nutshell, good customer retention can be seen as a positive reflection of your commitment to quality service.
Cultivating these long-lasting, positive relationships is key to increasing the lifetime value of your customers. That’s because when your bank retains customers over a long period, you have the opportunity to generate more revenue through the products and services you offer. Happy, loyal, long-term customers are likely to open new accounts, make more transactions, engage with more of the services you offer and invest in additional financial products over time. In fact, increasing your customer retention rate by 5% can increase your company profits by as much as 25-125%.
Customer retention is cheaper than acquisition
Holding onto your existing customers costs less than attracting brand-new ones. There are several reasons for this. One is the decreased cost of marketing to people who are already educated about your brand and services. Another is the reduced time and effort involved in making a sale to someone who already knows and trusts the financial products and services you have to offer.
Studies have shown that acquiring new customers can cost five times more than satisfying and retaining current customers. At the same time, increasing your customer retention rate by just 2% has the same effect on profits as cutting costs by 10%—showing just how powerful a retention-focused strategy can be.
👉🏻 Looking for tips on customer acquisition? Check out these 10 proven strategies for customer acquisition in banking.
Loyal customers will become advocates for your bank
Creating positive customer experiences that make people feel valued builds trust and results in long-term loyalty that benefits both parties. Customers who feel loyal to your bank are more likely to become brand advocates, meaning they will feel comfortable referring their friends and family to you. This word-of-mouth marketing can help you to acquire new customers at a lower cost. That’s because social proof of this kind is powerful, helping to increase the likelihood of converting new prospects.
👀 Get strategies on how to deliver exceptional customer experience in banking.
Increased revenue from existing customers
The longer someone remains with your bank, the more opportunities you’ll have to increase their value as a customer. Customers who are satisfied with their experience are more likely to return to your bank when they need a mortgage or loan, and a longer relationship means they will turn to your bank when financial needs arise. Throughout a long customer relationship, you’ll also have the chance to introduce additional products or services, creating additional opportunities to increase the revenue generated per customer.
5 proven customer retention strategies for banks
In the ever-evolving landscape of banking, customer retention is a critical pillar of success. To bolster loyalty and amplify CLV, banks need to understand their customers and tailor their experiences.
80% of banking customers say they will switch banks due to poor customer experience.
56% of customers who leave a bank feel their bank didn’t make an effort to keep them.
77% of customers say they favor brands that ask for and accept customer feedback.
About 50% of customers who leave a bank do so within the first 90 days of opening their accounts.
Companies that excel at personalization generate 40% more revenue from those activities than companies that are doing an average job.
In this section, we uncover five customer retention strategies for banks:
Understand who your customers are
Offer tailored and personalized customer experiences
Ensure seamless CX
Gather and listen to customer feedback
Cross-sell and upsell products and services to create more value
1. Understand who your customers are
Use customer data to understand preferences and needs and to identify patterns and trends in behavior. Advanced digital experience intelligence (DXI) insights equip your bank with a fuller, more detailed understanding of customers. By enabling you to see, analyze and contextualize how customers behave while interacting with your banking website and mobile app, DXI reveals insights, trends and patterns that help you prioritize high-impact improvements to the customer experience. A smoother, more intuitive and engaging customer experience will likely result in improved customer satisfaction, loyalty and retention.
2. Offer tailored and personalized customer experiences
Personalizing the customer experience is an effective way to create value for individuals and ensure their interactions with your bank feel authentic and satisfying. Digital experience intelligence makes it easy to identify common behavioral patterns associated with specific outcomes. For example, customers interested in opening a checking account may routinely access the same pages, menus or content before moving forward with opening the account. Understanding these patterns enables banks to create flows that suggest the products, services and content most relevant to customers based on their own activity, making the customer experience feel more valuable and personalized.
You can also use behavioral analytics to provide more proactive customer support and assistance. By understanding customer actions, it’s possible to identify people who appear to be struggling along their journey and initiate a real-time support dialogue. These instances of friction in the customer experience can also be reviewed in the aggregate to help you refine the design of your app or website and prevent other users from being impacted in the future.
3. Ensure seamless CX
Digital banking experiences should be seamless, as any disruption or frustration threatens to undermine the trust you’ve worked to establish with your customers.
Slow load times and app crashes can have a significant impact on user satisfaction, so it’s important to ensure your digital experiences are as responsive as possible. DXI provides an in-depth view of your banking website and app’s technical performance, allowing you to spot and address these issues before they escalate.
Beyond the technical health of your banking app or website, usability is key. With a DXI platform like Glassbox, it’s possible to watch session replays of customer journeys. These provide incredible insight into the struggles experienced by customers and can be viewed alongside customer journey analytics that indicates at exactly which point frustrated customers abandoned their journey. Advanced insights from DXI can also tell you why customers abandoned your website or app. This information allows product teams to respond at pace, resolving UX issues before they lead to lost sales opportunities.
4. Gather and listen to customer feedback
Providing a direct path for your customers to provide feedback about their experiences is essential. Leveraging voice of the customer (VoC) tools, including surveys, interviews and other feedback mechanisms, will provide you with a deep understanding of your customer’s needs, preferences and pain points. This feedback is instrumental in guiding you toward making improvements that will increase customer loyalty, retention, and, ultimately, lifetime value.
When you combine the context offered by VoC tools with the data-driven insights offered by a DXI platform, you unlock next-level customer understanding that enables you to prioritize high-impact, feedback-driven improvements that will enhance customer satisfaction and lead to greater loyalty and retention.
5. Cross-sell and upsell products and services to create more value
Cross-selling and up-selling products isn’t just a way to enhance the lifetime value of your customers; it can also form part of your strategy to increase loyalty and retention. The key to this is ensuring that the product and service opportunities you present to your customers are highly relevant and targeted based on an individual’s actions and interests, thereby clearly demonstrating their value.
Advanced insights from a DXI platform play a central role in this process by giving you greater certainty about a customer’s intentions based on how they interact with your mobile app or website. With a firm grasp of what particular patterns of behavior mean about your customer’s interests and goals, you can create highly targeted customer journeys that yield greater conversions while making customers feel valued and understood.
💡Expert tip: A digital experience intelligence platform provides rich insights that give you a complete picture of what your customers are doing and the critical data to uncover why they behave the way they do.
Improve customer retention with Glassbox
Digital experience intelligence is a powerful catalyst for understanding your customer's needs and preferences and acting on their feedback. By doing so, you can foster loyalty, improve the customer experience and drive up retention—opening the way to new and increased revenue opportunities. If you’d like to create happier, more engaged banking customers that accelerate the growth of your business, be sure to check out the financial services solutions Glassbox has to offer.
FAQs
1. What is customer retention for banks?
Customer retention for banks refers to the strategies and practices employed by banks to keep their existing customers loyal and engaged over an extended period. It involves building and nurturing long-term relationships with customers to ensure they continue using the bank's products and services rather than switching to a competitor.
2. Why is customer retention for banks important?
Three reasons customer retention for banks is important are:
Customer retention is cheaper than acquiring new customers
Loyal customers will become advocates for your bank
Customers will return to your bank when a new need arises, such as a mortgage or a loan
3. What are customer retention strategies for banks?
Five customer retention strategies for banks are:
Understand who your customers are
Offer tailored and personalized customer experiences
Ensure seamless CX
Gather and listen to customer feedback
Cross-sell and upsell products and services to create more value
