It’s no secret that marketing is a crucial tool for banks to attract and retain customers. However, banks often become too focused on acquiring new accounts at any cost, neglecting the importance of building customer loyalty and differentiating their brand.
But why is this such a problem? Well, the truth is that this approach leads to a range of marketing pitfalls that can hinder a bank’s progress. Customers are looking for more than just attractive sign-up bonuses and low fees. They want to feel connected to their bank and know their needs are being met meaningfully.
So, how can banks overcome these pitfalls and create a marketing approach that attracts and retains customers in the long term? Let us dive deep into some of the most common bank marketing pitfalls and strategies to overcome them.
In recent years, the banking industry has faced a series of challenges to its reputation. Bank failures, misconduct scandals, and the perception that banks escaped severe punishment after the global financial crisis have contributed to a lack of public trust. Even banks with long-standing histories, like Wells Fargo, have faced numerous scandals due to mismanagement and illicit actions.
According to a recent Axios Harris corporate reputation poll, only four banks made it onto the list of the top 100 firms, with JPMorgan Chase being the only one in the top half at #48. Wells Fargo came in at a low #92, below companies such as Uber and My Pillow. Moreover, tech firms such as Apple and Amazon were named the top two firms trusted by people to keep their data private, ahead of banks. This is a significant shift as trust in technology brands has declined.
In addition to reputation and trust challenges, banks face increased customer competition. Products and services that were once limited to traditional banks are now being offered by challenger banks, fintech firms, and even tech companies. This has forced banks to re-evaluate their marketing strategies and find new ways to differentiate themselves from competitors.
Banks, like any other business, aim to have loyal customers. However, not all loyal customers are equal. Some customers stay with a bank due to switching costs, while true loyalty is created through many strategies. For example, customers can have positive beliefs about the brand thanks to likability, trustworthiness, or even a connection with a bank branch. In addition, banks can build true customer loyalty by minimizing customer effort, which research has shown is crucial in building loyalty.
Banks attract and keep customers by focusing on their products. Some big brands, such as JP Morgan Chase and Bank of America, offer a small annual return of 0.01% on their basic savings accounts. Wells Fargo does only slightly better, with a rate of 0.15%, but the accounts are subject to fees that can more than offset the earned interest if certain conditions and minimums are not met. On the other hand, Apple recently started offering a savings account with an annual rate of 4.15%, with no fees or minimums. This is more than 400 times higher than what the big banks offer. Banks that pay too-low interest rates risk losing customers, especially when customers discover they have received a below-average interest rate for years.
Offering a more accessible and lower-friction customer experience is another way to attract and keep bank customers. Many banks, like other businesses, have voice menu systems that frustrate customers trying to reach their local branches. Frost Bank in Texas promises “Two rings and a human” when customers need to talk to someone. They offer a way for customers to reach a human immediately without wading through multiple options in a call center. A smoother, more seamless customer experience can go a long way in retaining customers and attracting new ones.
A frictionless customer experience pays off in long-term loyalty. Customers want to be able to talk to a person without roadblocks. In addition, mobile apps and websites should be user-friendly. Customers who call your branch or call center do so after failing to do something themselves. Most customers will solve problems on their own if it’s easy enough. A friction audit will highlight the aspects of your customer experience that require more effort.
Amazon, considered one of the most successful companies in history, operates on customer oriented strategy. Banks, like all companies, often make tradeoffs that benefit operations but not customer preferences. Self-service voice menu systems, for example, can reduce the number of representatives needed but can also increase customer frustration if they can’t bypass them.
Customers demand personalized experiences. They want to be treated as individuals. Tailor your communication to their needs and provide offers catering to their interests. Customers are more likely to switch banks if they receive better, more personalized recommendations elsewhere. Implementing a data-driven approach to personalize your customer experience is key to customer retention.
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