How can banks entice and retain customers during times of change?

25 April 2017Karen Wheeler, UK Country Manager, Affinion

Retail Financial Services



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Customers have never had more choice, and never been less loyal. It’s a fact - especially when it comes to selecting the providers, brands and services necessary to manage their day-to-day lives. And nowhere is this truer than in the banking industry. UK consumers are bombarded by providers on a daily basis; whether it’s with big-budget advertising campaigns or attractive cash-incentives for switching current accounts, banks are competing for attention. For example, as part of a growing trend, HSBC, First Direct, The Co-operative and Halifax have been offering various £50-£200 cash incentives to attract switchers, or in the case of M&S, gift card enticements. For this reason, it’s no wonder that it’s harder than ever for banks to attract and keep customers loyal.

 But as banks struggle to retain their customers, the arrival of new Open Banking APIs are set to complicate matters further. With the first implementations having gone live last month, the initiative is expected to make it easier for customers to switch provider than ever before. On top of this, there’s new competition for high street banks in the form of FinTechs, who have been quick to adapt to the times and incorporate digital innovation. So, when you consider how integral banking is to everyday life in the UK, the British Bankers Association revealed customers logged onto banking apps 4 billion times in 2015 – it’s important that providers understand the factors which influence their choice of bank from the get-go. Only this way can they then retain them.  

 A global view of customer engagement 

With this in mind, we recently commissioned global research with Oxford Brookes University to uncover what influences customers to choose their banks – and what makes them stay. The aim of the study was to develop a comprehensive model that maps the path a customer takes from first interaction with a brand, to the point at which a company has becoming a meaningful part of a consumer’s life. 

The resulting Customer Engagement Model helps companies understand the rational and emotional attitudes of their customers which can help then inform the development of product propositions, marketing programmes and user experiences to increase their connection with the customer. The evolution of customer engagement is not linear, but dependent on a complex mix of motives, attitudes, experiences, satisfaction – all coming together to influence the customer’s overall assessment of the products and services they choose and buy. 

We also investigated customers’ relationships with their bank, mobile phone provider and favourite retailer to build a picture to compare and contrast how engagement varies by industry. Perhaps unsurprising given its association with leisure time, retail came top for customer engagement, with banks in the middle and telcos lagging behind in last place. 

So, what do banks need to understand about how customers form their brand perceptions, and how can they build on this to enhance engagement and, ultimately, promote feelings of loyalty and advocacy? 

Emotional versus rational – which is more important? 

The study shows that the journey of customer engagement begins with a very rational decision but, as we move further towards commitment and loyalty, emotions play the bigger role and achieving engagement becomes more difficult. It seems the rational part of the decision-making process is crucial to the initial stages of investigating, considering and comparing providers (where are the branches located? How do the interest rates compare?) – but emotional factors are also critical. 

For banks, in the battle of ‘head versus heart’, it seems the heart wins – the influence of family and friends were revealed to be the most important factors when it comes to customers choosing a financial provider. In fact, banks were the highest-scoring industry in our study for customer recommendation to family and friends. Consumers perceive their relationships with money to be important and, consequently, care about where they put their money and pay close attention to what banks say and communicate. 

Banks often do not skimp when it comes to investing in their marketing and advertising campaigns. But our study found that, crucially, family influence is more powerful than advertising when customers are deciding who to bank with more than half of customers (55%) following their parents and other relatives when deciding where to bank. This reveals a ‘hand me down’ mentality that could mean the difference between having a customer for life – or not at all. 

Why does customer engagement matter for banks?  

So, why is it important for banks to understand the emotional components of the decision making process? Because our research showed that customers exhibiting the highest scoring levels of engagement are consistently emotional in nature and the lowest scoring statements are rationally driven. Critically, the most engaged customers are more likely to stay with a brand for longer, spend more and recommend to family and friends – the ultimate aim for any business. 

Advocacy is the highest point in the evolution of the path to customer engagement, but the most significant in terms of customer value because it can only come from a customer who is completely immersed in the relationship. It is also the hardest outcome to achieve as it is dependent on the overall experience, interactions and perception the customer has built of the business up until that point. Satisfaction and trust are boxes banks need to tick before customers will think about recommending them to others. 

If one thing is clear, it’s that the power of the customer marketer should not be underestimated. They’re an invaluable tool and a means for banks to attract new customers. By nurturing, and developing deeper relationships with their existing customer base, a bank can extend their influence in their lives which could lead to loyalty and recommendation. In an industry where the heart triumphs over the head, engagement is key and advocacy should be the primary goal for banks who wish to entice new customers.