February 12, 2020
Uncovering the Financial Impact and ROI of Customer Engagement
Written by Rachel Hirshfeld
Banks are increasingly recognizing the importance of customer engagement — delivering a highly personalized digital experience that helps customers improve the way they manage their day-to-day finances — as part of their go-to-market strategies. But, what does customer engagement really mean? Why is it so important? And how will it generate a meaningful ROI?
Consider, for a moment, the difference between friends and acquaintances. Acquaintances are generally people you call if you want to ask a simple question or favor, but the relationship ends there. Friends, on the other hand, are people with whom you foster deep and meaningful relationships. They inquire about your life, invest the time in getting to know you and offer advise — trying to help and guide you in any way that they can.
Unfortunately, though, many banks, companies and business are more like acquaintances, passively trying to help customers solve problems, but falling short when it comes to offering meaningful insights into their thoughts, minds and behavioral patterns. While they are able to help customers reactively solve problems, they are unable to proactively offer the right piece of information or advice at the exact moment customers need it. Ultimately, they are unable to anticipate customers’ needs before they become problems.
In banking, true customer engagement — or “friendship” — is vital. Banks must understand their customers on a personal level and offer tailor-made, data-driven and proactive insights. Indeed, it is only once customers view banks as truly helpful and trustworthy “friends” that they will be more open and willing to take advice on issues that will deeply impact their financial futures.
How Does Customer Engagement Impact Profitability?
While customer engagement and personalization are great ideas in theory, you may be asking yourself how they will actually increase your bank’s ROI and bottom line.
Constellation Research found that companies that improve engagement can increase cross-sell revenue by 22%, up-sell revenue by 38% and order size by 5 to 85%.
Additionally, a Gallup research report further highlighted that customer engagement increases revenue, wallet share and product penetration. According to the report, customers who are fully engaged bring $402 in additional revenue per year to their primary bank, 14% greater wallet share in investments and 10% greater wallet share in deposit balances. Fully engaged customers also average 1.14 additional product categories with their primary bank than do customers who are “actively disengaged.”
Notably, deposit-related products rose from 2.73 to 3.20, an increase of 17%.
Engagement also implies ongoing relationships with customers. Even if an engagement is personalized and proactive, banks will need to go beyond offering individual insights to an approach that combines the ideal mix of insights, alerts, advice and automation in order to achieve enduring engagement. It is in this way that banks will lead their customers on a journey towards achieving financial wellness, while at the same time increasing their own bottom lines.
For example, auto-deposit programs analyze users’ monthly expenditures (such as the monthly amount spent on food, clothing or travel) and forecast future expenses (such as saving for college or placing a down payment on a home). In doing so, banks are able to identify funds that can be moved from checking accounts into designated savings accounts.
By proactively assisting customers in effortlessly transferring money to savings accounts, customers can accrue a substantial amount of otherwise unsaved money, while banks can increase their ROI by growing deposits.
Other types of programs include automated debt reduction and auto-investments. For example, auto-debt reduction programs analyze customers’ financial situations to find available funds that can be applied towards an existing loan balance – either automatically or by suggesting recommendations for the customer to act upon. When customers can trust their banks, they will be more likely to engage with them. As a result, banks will see a boost in their ROI through increased product adoption.
Redefining the Banking Experience
With the surge of digital technologies, banks today have an unprecedented opportunity to redefine the banking experience and re-establish what banking means for their customers — both in terms of retaining current customers and attracting new ones.
With the world’s biggest banks already implementing some level of financial data categorization and transaction enrichment to help their customers better understand their finances, improving the customer experience is no longer enough. In order to continue competing in the major leagues, banks need to implement new and innovative technologies.
Using artificial intelligence, machine learning and predictive analytics, Personetics’ business solutions enable banks to position themselves at the center of their customers’ financial journeys, understand their needs in a personalized way, while at the same time increasing their own bottom lines and ROIs.
For more information about how to optimize your investments and increase the value to your bank’s bottom line, register for our webinar on Wednesday, February 26, 2020 at 12:00 EST / 18:00 CET.