In a Customer-Driven Age, Financial Firms Are Struggling to Achieve Loyalty

We live in an age where consumers are choice-rich, patience-poor, and have high expectations for the experiences they are provided. They desire to be understood and recognized by the brands they interact with on a daily basis. This is especially true when it comes to financial institutions. Many financial brands offer rewards and benefits to drive customer engagement and loyalty, but continuing these relationships proves to be one of the most challenging tasks.

A brand’s popularity is largely rooted in the products and/or services it offers. More often than not, customers identify with brands that prove they are committed to earning their business. However, these customer relationships aren’t just achieved by offering a number of rewards; rather it depends on how a brand meets the growing needs of its customers. When delivered correctly, loyalty can be a very powerful tool to positively influence your customers’ behavior and your bottom line. But it’s hard to achieve this consistent loyalty because it typically depends on coordination across multiple business units—marketing, brand, IT, partnerships, and finance. These units play an integral role in setting and delivering against an organization’s loyalty strategy.

As expectations for enhanced customer experiences continue to rise, financial institutions are finding it harder to break through the noise and remain top of mind, putting them at risk of losing customers. In fact, according to the American Enterprise Institute, only 30 percent of consumers in the United States have “a great deal” or “quite a lot”’ of confidence in their financial institutions. In the end, if a brand cannot accurately identify expectations and foster relationships among their customers, they are likely to fail.

Results Are in: Financial Services Have Difficulty Understanding Their Customers

A commissioned study conducted by Forrester Consulting on behalf of Collinson surveyed senior loyalty experts from businesses in the financial services, retail, travel, and hospitality sectors, and it revealed that the majority of global financial organizations do not understand what drives their customer relationships. More specifically, two-thirds (66 percent) of financial services organizations with revenues exceeding $300 million are unaware of why their customers are loyal to their brand. What is even more astounding is that almost seven out of 10 (67 percent) financial services brands do not have a framework in place to measure this loyalty in the context of overall business performance. In fact, more than half (55 percent) do not have a loyalty strategy in place that clearly defines a brand’s business objectives and goals.

This lack of accurate measurement is particularly worrisome as 62 percent of decision makers within financial services institutions are planning to increase investment in loyalty technology over the next 12 months. Yet many organizations are taking a disjointed approach to building customer relationships, with over half (53 percent) failing to collect sufficient data that is essential to gain deeper understandings of who their customers are. When considering this complex, fast-changing environment, it’s no wonder that true brand loyalty can sometimes seem out of reach. But there also seems to be a common disconnect among organizations in that they’re failing to measure the right information to determine whether their loyalty strategies are working. This puts not only customer relationships at risk, but also profitability.

Identifying Your Customers’ Needs

While many organizations approach loyalty backward, there is still opportunity for financial services brands to better align with their customers’ growing needs. First off, program operators must recognize customers' unique behaviors in today’s digitally driven society—they have higher expectations and are often encouraged to make financial decisions based on multiple choices. While brands are able to attract and retain customers that can identify with their services, they must also be able to provide these customers with relevant and personalized experiences in the form of rewards, recognition benefits, and communication opportunities.

Equally as important, financial services brands must emphasize customer loyalty at every stage of the customer life cycle—from the first moment of customer engagement all the way through their purchase and beyond. Doing so allows organizations to build deeper understandings of their customers’ needs, especially what drives their monetary habits. Once this is accomplished, organizations can better create tailored experiences that will keep their customers coming back.

Achieving Long-Term Loyalty

For an organization to be successful, the consistent development of customer relationships needs to be embedded across all aspects of the business. When approached correctly, these relationships can turn into long-term loyalty, a powerful tool that can then influence customers’ spending habits and help financial services companies grow their bottom line. But to accomplish this, organizations must be willing to proactively analyze what they’re measuring to determine whether their strategies are succeeding. From here they can determine what needs to be adjusted for a better return on investment. Without a solid understanding of one’s loyalty base, even the most innovative companies will fail to effectively deliver their business strategy. Those who get this right stand out from the competition and ultimately develop deeper, more meaningful relationships with customers.

Phil Seward is the senior vice president of loyalty strategy for the Americas at Collinson, a global loyalty and benefits company. Combining agency and client-side experience, he is responsible for driving devoted customer relationships for Collinson’s clients across the U.S. and Latin America.