What can banks learn from the retail sector? And how can they apply those lessons to create a value-building customer experience? During a recent Banking Exchange Roundtable, a group of industry experts, including Deluxe’s own Kesna Lawrence, pondered that question.
“There’s a lot that banks can learn from retailers,” says Lawrence, chief data scientist at Deluxe. “Retailers are amazingly effective at leveraging data to control virtually every interaction with their customers.”
Retailers use data to know what customers buy when they buy, and how customers interact with their brand. The data helps them create timely, relevant messaging and a stronger relationship with consumers. Banks have ample data that could allow them to do the same thing, Lawrence notes. “If they use it to message appropriately, they can achieve greater conversion and higher consumer engagement.”
More alike than you think
You may struggle to reconcile the idea that the banking industry, which lives and dies by service, has much in common with retail, which is all about product and perception. But in reality, the industries have more in common than you might think.
“Unlike retailers, banks have a few product sets that address fundamental life events, like buying a home, opening up a joint account … or trying to save for your child’s future,” Rob Cook, vice president, retail marketing, BMO Harris Bank, Chicago, said during the roundtable. “This is not a high-transaction retail environment, but more of a higher-level service environment.”
Still, said Drew McMonigle, vice president, head of product development and product marketing, NBH Bank, Kansas City, Missouri, there are also many parallels between banking and retail. In other industries, such as cellular, customers are buying both a product and a service, which is essentially what banks do, too. The difference, McMonigle observed, is that retail strives to make the purchase process easy and fun.
“Banking is retail. You’re buying a product, so make it fun to buy it.”
Retail tactics worth mimicking
Data is essential to effective relationship-building between banks and consumers.
Although banks certainly have a wealth of data at their disposal and have even begun improving how they segment, manage and apply that information, many financial institutions would still benefit from borrowing a few tactics from retail marketers.
One area where retail excels is in signal capture. Every digital action a customer takes in relation to a brand, whether intentional or unintentional, signals something about the customer. For example, a woman who purchases spring clothes from her favorite online retailer in the dead of winter may be planning a tropical vacation. The retailer may recognize that signal and reach out to her with a special offer on luggage or sandals.
If bank marketers can perfect their signal-capture skills to compare with how well retail does the same task, they will be able to build loyalty and create more mutually enriching customer-bank relationships. We recently put together a report discussing how bank and credit union marketers can bring marketing signals into their marketing strategy, I suggest you download it if you want to learn more about using signals in your marketing.
Banks have been improving their ability to communicate across the channels customers use for interacting with their financial institution. Most financial institutions now have mobile apps in addition to corporate and branch websites, and social media marketing is gaining in popularity.
However, there’s still work to be done in ensuring these interactions are truly omnichannel experiences. Customers need to have a uniformly positive, convenient, and service-oriented experience regardless of what channel they choose for communication. What’s more, they need to be able to initiate a transaction through one channel and seamlessly switch to another that’s more convenient midway through the process.
Retailers are at the forefront of creating this level of omnichannel experience, and they’ve set the bar high. Consumers have come to expect ease of omnichannel interactions from all businesses they interact with, including their financial institutions.
Much of what we know about creating a best-in-class loyalty program is drawn from the retail sector’s real-world experience: communication across multiple channels, quality content, and engaging competition. The concept of loyalty programs started in the retail sector, and retailers remain the best at leveraging rewards to build customer loyalty.
Retailers track behaviors, such as purchases or store visits, and use that data to determine when a reward is appropriate. They can also use information on purchasing behaviors to determine what type of rewards to offer. More relevant rewards enhance a program’s value to consumers — and, by correlation, their loyalty.
So far, banks have done a credible job of getting customers to enroll in loyalty programs, but have struggled to deepen engagement. Greater engagement is the key to turning a program member into an avid brand advocate, yet many who enroll in bank loyalty programs interact minimally if at all with the program. Research by Forrester seems to indicate that banks may be leaning too heavily on savings and discounts to enroll new program members while failing to consistently deliver the relevant rewards that keep members engaged and enthusiastic.
Data-driven marketing leading the way
Smart, effective use of data drives the success of retail marketing initiatives. Financial institutions certainly have access to a wealth of data with enormous marketing potential. However, too many banks continue to struggle with turning raw data into marketing actions.
“Other industries, including retail, consider how they can ensure they’re getting the appropriate return on the investment they’ve made in their data,” Lawrence says. “They weigh the value of the data against the risks. Banks tend to approach data by first considering how to avoid risk, and then they look at maximizing value.”