BID® Daily Newsletter
Jan 16, 2013

BID® Daily Newsletter

Jan 16, 2013

IT'S CHILD'S PLAY TO DRIVE MORE CUSTOMER LOYALTY


A recent Visa survey finds the Tooth Fairy put an average of $3 under children's pillows in 2012, a 15% increase over 2011. Meanwhile, a survey by the American Institute of CPAs finds the average allowance paid to kids of all ages is about $15 per week; 61% of parents pay an allowance and about 50% begin to do so when their child hits age 8. Good grades were also rewarded, with parents saying they paid an average of $16.60 for each good grade, in addition to the regular allowance. Between the Tooth Fairy and allowance, kids have it pretty good. On the parent side of things, a false conclusion was based on the marriage and divorce rates per 1,000 people back in the 1970s. It found the oft-quoted 50% of all first marriages ended in divorce. The problem was that this analysis was highly flawed and the real number is closer to 30%. Interestingly, it is also estimated 30% to 60% of married individuals will have an affair at some point during their marriage. Clearly, divorce rates aren't as high as some would believe (so the bedrock is there), but loyalty is a critical part of any healthy marriage. Likewise, customer loyalty is critical to the health of a community bank. In fact, studies find loyal customers buy more banking products, remain customers longer, cost less to serve and are a good source of referrals. Bain estimates the cumulative effect of a typical affluent customer who promotes the bank delivers about $10,000 more in net present value over their lifetime (and some of the strongest deposit growth) than one who is a detractor. Obviously happy customers are more loyal than unhappy ones. But what types of products and services can help banks cement customer relationships? For starters, think reward programs. Customers not only really like cash-back offers on credit or debit cards and price reductions on products and services, but they have also come to expect them. A recent Ernst & Young study found that 60% of people believe customers who actively use three or more products from a bank should be rewarded with lower fees or higher deposit rates. Of course, loyalty programs cost money, but the potential benefits may still make such programs financially rewarding for your bank. Consider also the affect mobile banking can have on customer stickiness. Mobile ties customers to their bank, wherever they go, as has been the case with online banking. What's more, banks have an opportunity to stand out with their mobile offerings until it becomes more commoditized, which is at least several years off. Desirable features such as remote deposit capture, person-to- person payment functionality and digital wallets may all work. Another way to increase loyalty is to engage with clients in the way they want to be engaged. A recent study by Cisco found that to win over more tech-savvy people, banks should offer more frequent interaction with advisers and ensure a higher-quality customer experience. A good way to do this is through videoconferencing (like Skype) and social media. It's telling that Cisco found 57% of wealthy people under age 55 would consider moving some assets to banks that offer videoconferencing, as a way to connect with experts when they need help. Of course, community banks tend to have a leg up when it comes to customer loyalty. A study by J.D. Power found community banks benefit from the backlash against big banks over bank fees, poor service and unmet expectations. However, just because community banks overall score well on loyalty and do better than big banks, one cannot become complacent. Remain vigilant about promoting customer loyalty, monitor the changing environment around you and take steps to keep moving. Do these things and you can reach under your pillow every morning to capture the customers and profits that the Bank Fairy has left for you.
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