When it comes to maintaining and growing customer relationships, too many banks are failing to integrate their strategies. Instead, they focus their resources in just one area.
Customer acquisition, retention and cross-selling strategies aren’t new ideas for bank marketers. Most banks execute acquisition campaigns to drive in more deposits. Most banks implement onboarding and cross-sell initiatives to improve retention. But research and experience often show that banks apply these strategies in isolation.
Rarely do they investigate the links between these strategies or conduct data analyses to determine the impact each strategy has on the another—or which deserves the larger investment at any particular time. Because of limited resources, countless banks allocate budget dollars to only one of these three strategies. By choosing one at the expense of the others, banks often create new issues.
For example, many banks implement customer acquisition programs without an effective onboarding program in place to retain newly acquired customers—leading to high attrition rates. Others start bombarding customers with irrelevant offers in the first 90 days in an attempt to lock customers into the relationship.
It’s a counterproductive cross-sell approach for increasing accounts per household: It doesn’t cultivate the dialogue required to identify and meet new customers’ needs.
To make matters worse, many campaigns acquire price-sensitive or rate shoppers that help generate higher customer churn rates—customers who don’t value long-term relationships and often don’t have the potential to become profitable. As a result, many banks continue to spend their limited marketing dollars acquiring customers simply to replace the ones leaving through the back door.
In theory, the best way to optimize customer lifetime value is to recognize that each approach has an impact on the other, and to make sure that each complements the other. This means developing a two-prong interactive marketing strategy that:
- Optimizes the acquisition of, retention of, and selling of additional products to your bank’s customers, and
- Maximizes the value to your bank of the customer relationship throughout its life cycle
The biggest challenge in that? To find the right mix of these strategies with the dollars available. To sustain profitable long-term growth, banks need to develop strategies that simultaneously manage customers throughout the customer life cycle.
Data analytics can help banks make more informed decisions about how to:
- Optimize the mix and investment levels of customer acquisition, retention and cross-sell strategies to increase the customer’s lifetime value.
- Determine the impact one strategy has on the other strategies.
- Manage their dynamic customer life cycles.
- Organize processes around acquisition, retention and cross-selling to maximize the profitability of each over the customer life cycle.
- Create synergies between marketing initiatives—making each more effective.
- Establish consistency and continuity across marketing campaigns.
- Save time, money and reduce marketing costs.
- Utilize customer feedback to reinforce relationships and identify needs.
In a world of limited resources, banks believe they must decide where to invest—in acquisition, retention or cross-selling. However, the best solution is to understand each strategy, for both its effects on the others and its contribution to total customer value over time. It’s time to stop focusing on one area and start allocating resources to each of these strategies simultaneously. In doing so, banks can better optimize the lifetime value of their customers.