How banks can use data to stop hemorrhaging customer lifetime value

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The retail banking world has viscerally felt the direct impact of customer disengagement. Many decision-makers at these institutions believe that it’s harder and much more expensive to reengage with a disengaged customer than it is to engage a new one. This is further complicated by the fact that these businesses are struggling to deliver relevant and engaging content to their customers, despite having a wealth of customer data available to tap into.

While decision-makers at these organizations recognize the importance of customer engagement, they continue to withstand alarming opt-out rates — nearly 75% reported that their customers are increasingly opting out of marketing communications year over year. 

Can this growing opt-out rate be reversed? Perhaps — by building data-driven and contextually relevant content that engages and nurtures customers for life. But hurdles exist, such as product-driven marketing, underspending on existing customer engagement and disparate communication strategies. These three factors all work to undermine the engagement required to drive growth.

To understand how to bolster communications strategies, it’s important for banks and other industries suffering from dormancy or disruption to first understand where the problems currently live. 

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Where the customer lifetime value hang-ups are

For banks, the missing link is the bridge between content and channel; delivering content that is not only relevant, but timely and accessible. Taking a “spray and pray” approach to developing and sending out mass communications — instead of composing a unique and contextually relevant experience for each customer — can spell trouble. Using content not tailored to each customer’s needs can also run the risk of those customers opting out of marketing communications from the bank, or churning out of the funnel altogether.

Take, for example, a banking customer who has recently changed jobs but has not re-enrolled in direct deposit. If that customer was already enrolled in direct deposit with their previous employer, they don’t need to receive communication about the benefits of direct deposit — rather, they would appreciate a reminder that enrolling in direct deposit is quick and painless. The wrong kind of engagement causes customers to disengage with brands, opt out of receiving any future communications or seek out alternatives that may meet their needs more specifically.

This lack of effective engagement may be attributed to organizational silos and a lack of inside-out visibility into where customers are in their lifecycles. Businesses have cited “complex rules around ownership and customer relationships” as one of the challenges in developing and sustaining a single cross-organization communication strategy.

Further complicating the equation, banks tend to prioritize new-customer acquisition over existing-customer engagement. In going this route, banks and credit unions don’t give enough attention to those who have already been engaged, which is directly leading to opt-outs and disengagement and sinks the overall customer lifetime value (CLV) of the company. The focus must be on the people, as opposed to products and services. 

Opt-outs are growing by double digits year over year, making right now the opportune time to bridge the digital engagement gap and up-level communication and content strategies. Rather than view the gulf between relevant content and the customers it serves as a challenge, banks should consider pivoting their mindsets and view the moment as an opportunity to up-level content strategies and create more meaningful experiences that keep customers coming back.

How to bridge the gap between content and customer

Despite an explosion of data and analytics tools in the market, organizations in the financial services industry continue to fail to translate that data into meaningful experiences on a reliable channel. Many of the engagement strategies employed today often put the onus of usage and education on the customer, rather than creating a low-friction customer experience (CX). One example of this is a bank imploring a customer to use their app or web portal to find relevant information and education on their own, rather than delivering the content to them directly. 

To develop a comprehensive customer engagement strategy, organizations should analyze how people consume media and content and tailor their efforts to those behaviors. Another way that ineffective engagement happens is by not activating the channels that customers prefer. 

People today spend much of their time scrolling through curated social media and news-style feeds that directly deliver content they want to see when they want to see it. Using data and logic through an algorithm ensures that what is being served up is personal, relevant and meaningful — thus fostering trust. By using channels that are more closely aligned with the way people consume content, rather than oft-ignored channels like email or SMS, banks can light up a customer at the right time with the right messaging.

One way to do this is to adopt a digital-for-all approach toward growing customer lifetime value by investing in a customer engagement platform that will consequently grow CX. Retail banks that identify CX as one of their top challenges must align their priorities with their actions and put in the work to improve CX by assessing the tools that currently exist within the organization and connecting the customer engagement dots that are missing due to internal silos and fragmented content output. 

These tools not only help spread relevant content more easily; they also improve customer trust and satisfaction. Having a cohesive communications strategy in place through a customer engagement platform can improve active engagement and retention among current customers and drives the growth banks are looking for. 

Customer dormancy, disengagement and opt-outs are on the rise, and banks must take note. These organizations know they have a problem with re-engaging disengaged customers and having irrelevant, product-heavy communications can further complicate the problem. 

In a world where 82% of consumers want their financial institutions to serve them digitally, now is the time for those in the space to evolve their content and digital engagement strategies. In doing so, banks can reverse deteriorating trends, reinvigorate the value they provide to their customers and maximize the value of their customer lifetime values.

Tal Klein is CMO of Relay Network.

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