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Getting in tune with customers: strategies for financial institutions to reduce risk by embracing customer-centricity

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3 min read
Paying with a card using a POS machine

Key Takeaways

The marketing team and the risk team at a financial institution (FI) couldn’t be more different. But lately, they’re singing the same tune: Know your customers. A combination of market shocks, shifts, and technology are highlighting the opportunity – and the way – to get marketing and risk singing in harmony.

Off-key.

2023 was hardly a melodious year for FIs, with problems faced by Silicon Valley Bank (SVB), First Republic, and others making headlines. A lack of insight on their customers contributed to SVB’s troubles. Most of their customers looked alike, meaning a problem for one customer was likely to be a problem for many – and a catastrophe for the bank.  

Small- and mid-size banks, including regional and mission-driven institutions, often face the same problem. Their products are highly targeted to a specific audience, making it more difficult for them to diversify their customer base to be less exposed to shocks.

When diversifying away from this risk is hard, banks need innovative approaches to manage it. Customers managing their own financial risk isn’t helping. As customers spread their products across institutions, it is getting more difficult and costly for banks to keep the full range of their business and deposits.

🎵 K-Y-C. Easy as 1-2-3. 🎵

Marketing teams have long been singing the “know your customers (KYC)” tune. Risk and treasury have now joined in, needing to know when deposits and loans might be lost and how to save them. They need marketers’ support to collect the right data, extract relevant insights, and be ready to use them.  

Being relevant matters. To keep customers happy (and to keep them, period), FIs need to know customers as individuals and treat them as such. Consulting firm Bain uses the Net Promoter Score as a measure of customer satisfaction. They found customers who feel their bank knows them as individuals have an NPS 123 points higher than customers who don’t. For context, the average NPS customers give their bank, on a scale from -100 to +100, is 23.

Having incentives that customers value also matters. Kognitiv’s Global Loyalty Insights research found that when customers are considering switching credit cards for a better interest rate, over 75% said that the right offer would keep them from churning. Delivering relevant messages and incentives at the right time will keep and grow customers’ business. Even if it’s in a stadium, you want them to feel like you’re singing just to them.

And a one, and a two…

So, how do you make that happen? Along with the classics – knowing what’s important to your customers, tracking how their behaviors, needs, and preferences are changing, and delivering timely and personalized marketing – here are three slightly different takes, based on the current environment, on where to start and how to bring the rest of the band on board.

  • Re-evaluate what’s valuable. Changes in interest rates, charge-off patterns, the need for deposits, and your risk tolerance likely have changed what makes a customer valuable to you. If so, you should reassess which customers you want to acquire and retain. A change in your target customer should also prompt a review of what data, products, and loyalty tools you need to engage them.  
  • Take another run at relationship banking. A multi-product customer is more sticky and more valuable. But product silos will make customers feel like you don’t know them. The case for a customer-centered strategy may be clearer now than in the recent past. Start by understanding the products customers hold and the value of each. Size your opportunities, and then try to understand how much is addressable: when a product offer is relevant and for which segments of customers.
  • Make room on the calendar. Yes, the marketing calendar is set. But be flexible and make room to respond to customer needs. It’s not new but add testing to see what is working today and for which customers. If your calendar is locked, consider adding test groups to your audience lists – varying your audience for a given message, instead of the other way around.

The most important thing is to keep your focus on your customers – they’re your audience, and hopefully soon your fans. Use the challenges in the market to get your teams aligned & singing together. With all the noise out there, it’s the best way to make your message heard.  

A quick sales pitch: In defense of Autotune.

At Kognitiv, we simplify earning and growing customer loyalty. We keep your marketing on-tempo and on-key. We do this with a proprietary Kognition AI/ML engine that automatically trains on your customer data and shows you which customers need your attention, why, and how to best engage them in real time. Our products are simple and intuitive to use, and they plug into your existing marketing stack, so you don’t have to change your ecosystem. With our AI-native intelligence, activation, and loyalty platform you can market like a big bank without the big-bank budget.  

If that sounds like music to your ears, contact us for a demo or to talk with our strategy team: contact us.

Ready to move to 1:1 customer engagement? Let’s chatOur suite of AI-native customer intelligence and activation software can help you build deeper relationships with your customers and grow a loyal customer base.

  • Track, predict, and optimize your customers’ lifecycles with Kognitiv Pulse. Learn more.
  • Enable 1:1 personalization at scale with Kognitiv Ignite. Learn more.
  • Launch and manage a successful loyalty program with Kognitiv Inspire. Learn more.
  • Intelligently acquire and engage customers across paid channels with Kognitiv Amplify. Learn more.

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