Customers are difficult to maintain and it costs a lot to acquire new customers than to retain an old one. Hence it becomes even more imperative to retain customers and try and see that one size fits all strategy does not work here. Every customer is unique and needs to be handled differently.
Some of the major reasons why customers defect are:
Customer acquisition has been one of the major challenges facing banks of late. Banks have very few profitable customers to source and many banks competing. Hence, the strategy to have the best customer on their books is making many banks to come out with innovative customer-centric acquisition strategies targeted at improving the quality but not quantity. It necessitates banks to have a proper acquisition strategy in place so that the right customer is brought into the bank’s fold. This will involve in defining who the best customer is and how to acquire them at least cost.
During acquisition of customers, it is normal practice to target the mass market in the hope that some of them will become customers without giving a thought that end of the day most of the customers may turn out to be non profitable ones. The customers were easy to acquire but expensive to maintain over a period of time. The costs associated were usually very high and a short term view of adding...
It is well understood that Customers are a very prized property and having a profitable customer is the most sought after by every Bank. So having a profitable customer is more important than having just a customer.
Realization is dawning that volumes won't lead to profitability but only increase in market share at the cost of profitability. Quality plays a more important role than quantity. It is in this endeavor to have a sustaining model to keep the customer engaged throughout their relationship with the Bank for growth and profits in the long run.
Managing customer life cycle at banks
Banks at various levels are engaged with the customers during the entire customer life cycle from acquisition to termination of the relationship and this needs to done in such a way that only the profitable ones are with you. It is a well known principal that 20% of the customers give 80% of the profits and value. So it becomes even more important to have/retain these...
The past 2 years have seen Banks being closed, merged, and funded by the US government to keep them afloat. The loan portfolio grew faster and cards were issued to consumers while adhering to minimal credit appraisal standards. As the economy went into a down turn and unemployment rates went up, banks were at the receiving end with default rates rising steadily. Customers were also at the receiving end with rates hiked, cards closed down and a lot of newer fees being introduced. In light of what happened, the US Congress passed the Credit Card Act 2009 and majority of its rules came into force from Feb 2010. Some of the salient features of the Act are:
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[*]Banks will no longer be able to raise interest rates during the first 12 months after opening an account – or hike rates on pre-existing balances altogether
[*]Credit-card payments, if exceeding the minimum, will be allocated to the higher-rate balances first
[*]Monthly statements will become easier...
Customer Loyalty/Excellence has been a buzzword for a long time now with Banks. In the current tough economic environment, this has become even more imperative to retain the good customers and proper handling of customers becomes even more important to business success. It is always cost effective to have and grow an existing customer who is profitable than getting a new one. With institutions going through cost cutting measures due to financial pressures it becomes more important to closely monitor customer experience. Increasing the share in the customer’s wallet is the new mantra.
Banks loose customers either through voluntary attrition or involuntary attrition. Involuntary attrition has not been of a concern as this is one way to weed out the customers who may not be adding value to the organization either by way of spends or profitability. It is that silent attrition of the good customer which is really bothering the banks and the reason for this can be either due to...
In today's highly competitive marketplace satisfying customers has never been more challenging. They are extremely demanding and insist on being treated as an individual with specific needs. They want to be made to feel that the offering is personally addressed to them.
To understand their motivations and behavior, banks have over the period invested in different tools which gave them some information, but not exactly the one the customer expected. Banks needed to address issues like, how can they ensure long-term loyalty from its high-value customers? How can they attract and retain different types of customers and what additional product to sell? What rewards to target at its profitable customer?
The core of predictive analytics relies on capturing relationships between explanatory variables and the predicted variables from past occurrences, and exploiting it to predict future outcomes.
Having the relevant data helped banks to target the...
Cross-selling is a concept all banks seem to be harping on, but is it worth all the hoopla?
Selling new products to existing customers has long been on most banks' agenda and has been constantly discussed in various internal/external meetings. Yet historically, few banks have had significant cross-selling success. When establishing cross-selling strategies, banks must remember that the ultimate goal is improving the bottom line.
Cross Sell
Selling of banks products/services to an already existing customer—is the broad definition of what cross sell means. It can be selling an existing checking account customer a credit card or selling an existing credit card customer a mortgage. Banks have been using cross sell as a marketing approach to expand their footprint and also increase their customer base.
