How to leverage customer insights to retain customers in the banking industry

How to Leverage Customer Insights in Banking

With the recent economic downturn and continuous rise in unemployment, banks are working hard to keep their customers by offering new products and promotions.

Traditionally, improving retention meant providing features or services that align with customer values. However, to acquire today’s customers and gain their loyalty, you cannot just give new offers, services or discounts. One of the most important aspects of retaining a customer is understanding what they value about your institution.

Ask this question to members of your company: How much value does customer insight and experience bring to your business?

If you or other banking executives can’t answer that, it’s time to go deeper into what you can specifically do with customer insights to improve retention and boost ROI. In this article, we describe best practices for collecting customer insights (CI), how these practices improve on the old methods, and how to gain actionable next steps from these insights.

How does your company use customer insights?

Every interaction you have with your customers carries valuable insight into what people want and how they feel.

However, most businesses are drowning in data and can't use it effectively to their benefit.

According to a 2020 study by CX Network

72% of customer feedback insights either hardly or never reach the business units that could use them.

When it comes to deriving insight from customer data, the banking and finance industry is no different.

Banks use various kinds of customer information—they collect and verify client information to conduct transactions. Anything that deals with money requires trust and confidence from both parties.

How else can banks use this information, though? Does your company use customer insights and feedback to improve your banking services?

With COVID-19 still ongoing, it is crucial for banking and finance executives to reintroduce their services to their customers online. Whether customers will choose to stay with them depends entirely on their customer experience strategies.

A problem arises when organisations rely solely on gut-feel decisions, based on basic quantitative information, without understanding where those feelings come from or validating them with detailed insights. You need insights at every stage of your customer journey if you're going to provide them with a banking experience that will stick because it’s specific to their wants and needs.

Such data can expose deeper customer motivations, detailed feedback, and other complex insights that might not be uncovered from quantitative data alone. Businesses are very much aware of this—the 2020 GreenBook Research Industry Trends report shows that the use of in-depth interviews and focus groups (two principal qualitative methods) in customer insight research increased by 12% and 20% respectively in 2020.

If you bring together insights from both qualitative and quantitative data from every stage, then your institution can confidently identify what affects your customers most deeply and reach them more efficiently with targeted messages that make a difference.

An example of targeted messaging with social impact is this advertisement by Citibank USA. Because June is Pride Month, Citibank offers transfolk the opportunity to use their chosen names on their Citi Cards. This form of social inclusion may be controversial, but it made the bank’s image more favourable and visible.

So, why should banks care about retaining customers?

Customer retention is important for any business. A study by Bain and Company with Harvard Business School illustrated that increasing customer retention by just 5% can improve profits by anywhere between 25 and 95%.

This applies just as well to banks and finance. Research indicates that the annual customer attrition rate for retail financial institutions is as high as 15%, and the average cost of new customer acquisition is $500. Meanwhile, as many as 56% of bank customers who leave their banks say that their banks did not put any effort into customer retention.

It’s clear that the banking industry has a long way to go in improving customer retention.

Understanding the customer journey will be a crucial factor in improving the customer experience.

However, the customer is more empowered than ever before, and businesses that ignore this trend are at risk of being left behind. To maintain relevance in today's marketplaces, you must listen to what your customers want. Customer insights let you do this.

In the past year, COVID-19 has been a catalyst for digital change in the US. For example, 14% of adults have banked on their computers for the first time because of lockdowns. By digitally transforming your banking practices and services, you can therefore better reach both new and existing customers.

And it’s not just the first-timers you need to pay attention to. Data by Accenture shows that over half of all banking customers want a banking experience that allows them to seamlessly flow between digital and physical channels—in essence, an omnichannel experience.

The transition to online and digital banking could not have been possible if not for customer feedback and the rise of social media. When you connect with your clients on a human (read: emotional) level, they know they’re talking with someone who cares about them. 80% of customers like to feel wanted and important. So investing more in customer experience raises the chances of successful conversion and retention.

When it comes to your CX strategy, the bottom line is whether customers feel like your brand is respecting them during each transaction (or otherwise). You can learn from consumer insights to see if there are ways your bank can communicate with its clients better, so it doesn’t get left behind when these trends shift.

What are some best practices when using customer insights?

In the old days, the most common practices of customer insight research involved highly manual collection methods. Businesses would acquire quantitative data through customer surveys, and qualitative data via focus group discussions and customer interviews.

However, these methodologies have various limitations:

  • They require customer participation, which can take time that not many people are willing to give.

  • Qualitative methods are prone to being influenced by the biases and prejudices of the observers.

  • Manual market research methods are expensive to carry out, and take a lot of time and effort to analyze

In an age of AI and automation, the new way to do customer insights right is to bring together customer data from every available source, and automatically generate deep, contextual insights into your customers.

Here’s how to combine data from multiple sources to make laser-focused business decisions for your bank.

Quantitative Data

You probably gather more than enough of these by conducting post-transaction surveys after contacting your customer service team. For example, you likely ask questions such as:

  • On a scale of 1-5 (with 1 being the lowest), how likely are you to recommend our banking services to your friends and family?

  • On the same scale, how would you rate the service you’ve received?

The above questions are included in the Customer Satisfaction Score (CSAT). This score is meant to assess a customer’s level of satisfaction with your business after a transaction or customer service interaction. This information can give you an idea about your customers’ spending patterns and their interactions with your bank's website or mobile application.

It’s easiest to collect quantitative data because it can be entirely automated. You can set up an online form for customers to fill out, then AI will analyse and summarise that information for you.

However, quantitative data can only measure surface-level responses.

It doesn’t really give you an in-depth understanding of your customers’ thoughts and experiences, and it isn’t enough to create actionable consumer insights. You need qualitative data for that.

Qualitative Data

If you want to get a deeper and more subjective understanding of what your customers think of your banking services, collecting qualitative data can provide you with unique insights.

As each customer may have different experiences and expectations from your bank, identify the specific factors that matter most to your growth and success. Ask them open-ended questions about their transaction experience, such as:

  • Why? (Always include this open-ended question after asking for a numerical CSAT rating).

  • How would you describe the service provided by our bank tellers?

  • Was there anything you needed to clarify further regarding your account or our services?

Gathering and analyzing all this qualitative data seems like it will require a return to traditional manual methods. However, more advanced customer insight platforms are equipped with natural language processing that can automatically understand survey responses, combine data from multiple sources, and integrate with multiple CRM platforms for a truly holistic look at customer sentiment.

These types of platforms will be able to help you expand the scope of your qualitative survey data, as well as garner deeper insights from them than ever before.

Gathering Qualitative Data From Outside Sources

Besides going through collecting qualitative data directly from customer interactions, you can use automated methods to get large amounts of customer insight data from external sources, such as social media.

On top of directly asking customers what they think, you could have a customer insights team scour the internet for social media posts about your bank and financial services. By asking the right questions and looking for relevant keywords on social media, you could obtain actionable insights from your clients. You’ll have a general idea of what they’re looking for in a bank, plus customers will feel empowered to speak their minds.

Due to the pervasiveness of social media, almost all businesses have their own social media pages--again, the banking industry is no different. You can use your social media pages to track brand mentions and monitor hashtags, but even this doesn’t necessarily give you the full picture of all the customer insights available.

Some customers prefer to voice their opinions online, with or without tagging your bank’s page. You’ll likely find some customers posting about your banking services on Twitter and Facebook, and even on Reddit or Quora.

For example, a quick search containing “Bank of America” on Twitter shows a customer complaint that the company probably wouldn’t see if they didn’t regularly check this platform. If BoA weren't regularly monitoring  their Twitter page, they could have lost this particular client if they didn’t immediately respond to their concern.

It may seem like a daunting task to sift through all the posts. However, you can make the process easier through social media listening, the practice of automatically identifying customer sentiment via social channels. Ultimately, the customer feedback you receive from these channels is an essential part of your bank’s process for developing and refining the best possible customer experience (CX).

What if you could generate actionable insights without manual coding?

To help banks grow their revenue, improve service quality, and increase marketing efficiency, it’s best to implement a robust, yet user-friendly solution for analysing customer insights.

Luckily, this doesn’t have to be a resource-heavy, time-consuming process.

With a smart customer insights platform, you won’t have to spend tons of hours poring over customer feedback, and you won’t have to manually-coding any of your customer feedback. AI-powered tools generate dynamic customer segments based on both quantitative data and qualitative content.

No more guesswork. AI-driven software uses natural language processing (NLP) to analyse all the data gathered, identifying customer sentiment in text and processing survey data automatically. If you use CI tools like these, you can be confident in your ability to deliver factual and relevant customer insight analyses that yield actionable next steps for your bank to follow.

The result? A better customer experience and more loyal, long-term customers.

Share to: